The Risk and Insurance Management Society Inc. said it was “encouraged” that the nation's insurance regulators have moved to change the 100 percent collateral requirement for foreign reinsurers.

Action by the National Association of Insurance Commissioners (NAIC) came at the organization's winter meeting this week when it approved a Reinsurance Regulatory Modernization Framework Proposal.

“NAIC's adoption of the framework is a small step forward in the process of developing a new regulatory regime for reinsurance; however, many details remain to be worked out,” RIMS noted.

The NAIC reinsurance task force proposal creates two classes of reinsurers in the United States. One class is for reinsurers domiciled in the United States and the second is for non-United States based port of entry (POE) reinsurers.

Features of the new framework include modified collateral requirements for eligible entities, new state-based reinsurance regulations based on supervisory recognition, single-state licensure for United States reinsurers and single-state certification for non-United States reinsurers from approved jurisdictions.

In addition to its own work on final details of the scheme, NAIC called for federal enabling legislation to give a state the authority to be the domicile state for a POE reinsurer.

RIMS said it is “hopeful that this modified regulatory framework, when fully implemented, will result in additional capacity and the equitable and efficient regulation of the reinsurance industry in a manner that meets the needs of commercial policyholders.”

Florida has already adopted a regulation that permits foreign reinsurers to operate without posting 100 percent collateral if they receive top rankings from financial rating agencies.

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