NAIC Amends Proposal On Reinsurance Collateral Requirements

For many years, the primary reinsurance regulatory mechanism in the United States has been the regulation of credit given to ceding companies for reinsurance. The regulation of credit provided to ceding companies on their financial statements indirectly regulated foreign and domestic reinsurers, as ceding companies would only choose reinsurance that would provide them with financial statement credit. A significant part of this regulatory practice was the requirement that non-U.S. licensed reinsurers had to post collateral for 100 percent of the reinsurance obligations for ceding companies to receive credit. This requirement was imposed regardless of the financial strength of the non-U.S. reinsurer or the regulatory environment where the reinsurer was licensed.