In his second bold regulatory proposal this month, New York Insurance Superintendent Eric Dinallo has again challenged the inertia paralyzing the nation's regulatory scene by pitching a plan to jettison the automatic 100 percent collateral requirement slapped on all foreign reinsurers. Instead, he is proposing a far less discriminatory plan based on a carrier's financial strength, as determined by at least two rating agencies. The knee-jerk reaction by some U.S. parties has been to blast the idea as “radical” and “potentially very risky,” but I think it's about time somebody acted to crack the ice and speed up the glacial pace on long overdue reform of this archaic restriction set by regulators nationwide.
The controversial suggestion comes as the National Association of Insurance Commissioners continues its seemingly endless, excruciating debate about whether to change its own model law, which for ages now has arbitrarily imposed massive collateral requirements on all foreign reinsurers, whether they are Lloyd's of London or some other well-respected market. (To get up to speed on the latest NAIC action on this issue, click here.)
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