NAIC vote shows interest in collateral alternative

Lobbying efforts by London and European reinsurers to change the 100% collateral rule in the US are at their most crucial stage since the struggle began several decades ago. Significant strides were made earlier this year when the National Association of Insurance Commissioners’ (NAIC) executive committee instructed its Reinsurance Task Force to “develop alternatives to the current reinsurance regulatory framework, including the use of collateral within the US and abroad. Consider approaches that account for a reinsurers financial strength regardless of domicile, i.e., state or country”. But at a meeting held as part of the NAIC’s summer meeting, the task force adopted a motion that signals its growing interest in using the financial strength ratings of foreign reinsurers as an alternative to the existing rule that requires alien reinsurers to keep 100% of US gross premiums written in funds.