Call to end duplicate solvency requirements

North America

The Reinsurance Association of America (RAA) has thrown its weight behind the move, supported by both the Republicans and the Democrats, to streamline the current US reinsurance regulations, particularly those areas which apply to the solvency requirements imposed on non-admitted insurers and reinsurers operating in the US. Currently, non-admitted foreign risk carriers are required to have letters of credit or funds on deposit in the US which fully cover the estimated liability of any business that they write in the US. This is in addition to any solvency requirements that the foreign company has to meet in its own domestic market. Testifying before the US House Judiciary Committee Subcommittee on Commercial and Administrative Law, RAA president and senior vice president and General Counsel Tracey Laws said that House Regulation (HR) 5637 seeks to modernise the regulation of non-admitted insurers and reinsurers without compromising strong solvency oversight. A section within HR 5637 provides that the state of domicile of a reinsurer shall be solely responsible for regulating the financial solvency of the reinsurer if the state is an NAIC accredited state or a state that has financial solvency regulations substantially similar to the requirements necessary for NAIC accreditation. “The Act eliminates duplicative solvency regulation of reinsurers by placing sole responsibility for solvency regulation on the reinsurer’s home state regulator,” Ms Laws said.