There needs to be more meat put on the bones of a skeletal proposal to reform alien collateral reinsurance requirements by applying them on a basis that does not take into account the country of domicile, state regulators announced last week.

Insurance regulators meeting here told the Reinsurance Task Force to work up more details on a plan to evaluate the financial strength of foreign reinsurers. The action came at the National Association of Insurance Commissioners opening session.

The NAIC's Financial Committee sent a proposal for a Reinsurance Evaluation Office back to the task force, with the charge of providing a more flushed-out framework as to how this new entity will judge the financial strength of all reinsurers.

In addition, the task force was charged with taking a broader look at reinsurance regulation in the United States to see that the changes will be beneficial.

Task Force Chairman John Oxendine, Georgia's insurance commissioner, said the panel will spend the next few months evaluating whether they can come up with a full REO plan by December, stressing that a broader approach is also needed.

“You just can't look at REO in a vacuum, but rather [judge if] it will fit into the whole reinsurance regulatory framework,” he said.

When the REO proposal was moved in the parent committee last December, it was emphasized that was only one possible resolution to alien reinsurers' complaint that the United States unfairly imposes a 100 percent collateral requirement on foreign carriers, regardless of the company's financial strength.

Mr. Oxendine stopped short of declaring the REO a fait accompli, but said it was more likely than not the proposal will go through in some form in the indefinite future. Among the broader issues the task force will study are:

o Rules-based versus principles-based accounting.

o Regulatory reliance on risk management systems.

o The issue of a single home regulator for U.S. insurers.

Florida Insurance Commissioner Kevin McCarty said the panel needed some sort of “road map” with such a broad charge or else risked getting bogged down.

Mr. Oxendine also said the task force should look at the Credit for Reinsurance Model Act to see whether it fits today's needs for sound reinsurance regulation.

Many states have so-called “deviations” from the current NAIC model, and commissioners will decide if they should be considered best practices and incorporated into a new model or if states should be urged to abandon them.

Special Reports /

NAIC Wants Skeletal Reinsurer Evaluation Program Fleshed Out

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