At the recently concluded NAIC Fall National Meeting, the Reinsurance Task Force of the Financial Condition (E) Committee, released for public comment the highly anticipated draft of the NAIC Process for Developing and Maintaining the List of Qualified Jurisdictions
(“Process”). The stated purpose of the Process is to establish a method for evaluating the reinsurance supervisory systems of non-U.S. jurisdictions. The intent is to allow assuming insurers licensed and domiciled in a qualified jurisdiction to be considered a certified reinsurer for reinsurance collateral reduction purposes. The Process has over fifty (50) specific items that will need to be satisfied before a jurisdiction can be deemed qualified. Once a jurisdiction is deemed qualified, its licensed and domiciled reinsurers are eligible, on an individual basis, to be evaluated to determine if they satisfy the qualifications for collateral reduction. While each state ultimately determines which jurisdiction will be a “qualified jurisdiction”, the NAIC is charged with recommending jurisdictions for qualified jurisdiction status. Should a state not agree with or not follow the NAIC recommendation, it will need to document any deviations from the NAIC list. The Process proposes a flexible standard for qualification of a jurisdiction; “the NAIC must reasonably conclude that the jurisdiction’s reinsurance supervisory system achieves a level of effectiveness in financial solvency regulation that is deemed acceptable for purposes of reinsurance collateral reduction.” The Task Force proposes a qualification processes, including a self-evaluation by each foreign jurisdiction regulator. Priority jurisdictions for review are Bermuda, Germany, Switzerland and the United Kingdom. The Process is open for public comment
through January 16, 2013.