NU Online News Service, July 29, 12:52 p.m. EDT

NEW YORK—Lloyd's says it has received approval from the New York Insurance Department to post reduced collateral on reinsurance contracts.

Lloyd's is approved as a Secure-3 reinsurer, meaning its collateral requirements will be reduced from 100 percent to 20 percent.

Following Florida's lead, New York, and most recently New Jersey, passed laws allowing foreign reinsurers to post less collateral when doing business in these states, as long as the reinsurer is highly rated and financially sound.

In New York and New Jersey, reinsurers are required to carry $250 million in surplus. Florida requires $100 million.

Illinois, Indiana and Louisiana are considering similar reduced-collateral requirements that allow foreign reinsurers to post collateral for 20 percent of property and casualty reinsurance loss reserves in a state rather than 100 percent, which was the practice in every state. U.S reinsurers post no collateral.

In a speech given at Lloyd's New York City Dinner last night, Lloyd's Chairman Lord Peter Levene emphasizes the importance of foreign reinsurers to the United States.

"Businesses like Lloyd's act as a magnet for international capital, and we then redeploy it to the places which need it the most, when they are faced with a crisis," he says.

"This is nothing new," he adds. "We saw it 10 years ago, in this city, after the appalling attacks on the World Trade Center. Back then, it felt like the end of the world. But New York has not just survived, it has flourished. Wall Street remains Main Street to the world's financiers."

This is not due simply to insurance. "The greatest credit must go to the city and the gritty determination of you who live here," he notes. "But reinsurers helped."

Reinsurers, he explains, "picked up just under 70 percent of the insurance bill after 9/11. I am told that when the then-secretary of the Treasury asked who the major reinsurers were, he was told that nearly all of them were foreign, and he found it difficult to believe."

Levene says that while five out of the top six reinsurers are European, "did this matter to the people receiving the checks?"

Special Reports /

Lloyd’s Allowed to Post Reduced Collateral in N.Y.

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