Proposed new California regulations concerning credit for reinsurance have sparked insurance industry concerns that they may put domestic and certain licensed companies in that state at a competitive disadvantage.

Right now all states operate under the National Association of Insurance Commissioners credit for reinsurance model law, which is designed to prevent insurers from going insolvent due to reliance on financially shaky reinsurers.

But the proposed new California regulations will set stricter standards for both the state's domestic companies and those licensed companies that have 20 percent of their business in the state.

Mike Koziol of the Property Casualty Insurers Association of America said the proposed rule will put additional burdens and costs on doing business in California. "It will make it hard for domestics because they will be held to a higher standard than even some foreign (out of state) [companies] that want to do business in California," he said.

The California Department of Insurance held a workshop last September where industry representatives attempted to soften the new rules' impact on carriers. Mr. Koziol said while there was some improvement from an industry standpoint, the current draft does not represent much of a change.

CDI official Arlene Joyce said comments on the revisions are expected by June 17 and a new hearing will be set by the fall.

Mr. Koziol said he believes the regulations could take effect by the end of the year.

Special Reports /

New Calif. Re Rule Raises Concerns

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