NAIC moves forward on collateral issue

North America

The National Association of Insurance Commissioners (NAIC) has approved a proposal to reform the way in which collateral requirements are imposed on foreign or alien reinsurers operating in the US. Currently foreign reinsurers are required to post funds in the US matching 100% of their gross liabilities. NAIC members narrowly voted in favour of a new proposal at its recent Winter Meeting in San Antonio. Under the new proposal, which is currently being looked at by the NAIC’s Financial Conditions Committee, state regulators would assign a rating to individual reinsurers and then base their collateral requirements on this rating. The underlying idea is that a high enough rating would do away with the need for 100% collateral requirements. The NAIC has set a target date of September 2007 for the adoption of the new measures. The International Underwriting Association of London (IUA) has welcomed the move. Dave Matcham, chief executive of the IUA, said discussions would continue on the detail, but that the vote represented a huge step forward.