On December 18, 2013, the National Association of Insurance Commissioners (NAIC) approved four jurisdictions as “Conditional Qualified Jurisdictions,” meeting its year-end goal for expedited review of certain jurisdictions. The four jurisdictions are Bermuda, Germany, Switzerland and the United Kingdom. The conditional approvals are part of continuing efforts to implement the “certified reinsurer” concept that allows highly rated reinsurers, domiciled in qualified jurisdictions, to take advantage of reduced reinsurance collateral requirements under the NAIC’s revised Credit for Reinsurance Model Law. The four jurisdictions will be conditionally placed on the NAIC List of Qualified Jurisdictions effective January 1, 2014 and reinsurers domiciled there will be eligible to be certified for reduced reinsurance collateral requirements in those U.S. jurisdictions that have adopted the revised Credit for Reinsurance Model Law. So far, 18 states have done so and 5 more currently have it under consideration.
The expedited review and conditional approval of these four jurisdictions was undertaken in light of their having been independently approved by several states before the NAIC’s adoption of the revised Credit for Reinsurance Model Law. The NAIC will proceed with its full review of these four jurisdictions during 2014, in addition to beginning discussions with other supervisory systems interested in being considered for inclusion on the NAIC List of Qualified Jurisdictions. Adopted by the NAIC in August 2013, the Process for Developing and Maintaining the NAIC List of Qualified Jurisdictions was developed to evaluate the reinsurance supervisory systems of non-U.S. jurisdictions for reinsurance collateral reduction purposes.
“Reinsurance collateral reform continues to play a prominent role in international discussions, as demonstrated in the EU-U.S. Dialogue,” said Jim Donelon, NAIC President and Louisiana Insurance Commissioner. The NAIC’s activity appears to be running in parallel with the Federal Insurance Office’s recent report on insurance industry modernization in which it called upon the Treasury Department and the U.S. Trade Representative to seek international covered agreements for reinsurance collateral requirements in order to help state regulators become more uniform in regulating reinsurers. Whether the Federal government will actually seek to supplant the NAIC in determining qualified jurisdictions, or incorporate the NAIC into the process, remains to be seen.