NAIC Task Force Advances Credit For Reinsurance Reforms In Response To Covered Agreements

On a May 15 conference call, the Reinsurance Task Force of the National Association of Insurance Commissioners (NAIC) advanced model legislation on reciprocal treatment for reinsurers as between the United States, on the one hand, and the EU and the U.K., on the other.

The proposals amend the NAIC’s “credit for reinsurance” model statute and regulation, which govern the circumstances under which a U.S.-based insurer can record, as an asset on its balance sheet, reinsurance protection obtained from another carrier. The NAIC has been in the process of amending these rules to accommodate the 2017 “covered agreement” between the United States and the EU and the analogous 2018 pact between the United States and the U.K. (to apply if and when Brexit occurs). These agreements, generally, require each jurisdiction to treat a reinsurer from the other jurisdiction as such other jurisdiction would treat a reinsurer from its own jurisdiction, assuming conditions are met. In