NAIC Told Of Re Intermediaries' Intransigence

Mr. Hall, a former senior executive at several insurance companies, has served as an arbitrator, mediator expert witness in disputes between insurers and reinsurers, and a member of 60 arbitration panels.

Speaking before the NAIC's Reinsurance Task Force, Mr. Hall observed that most treaties in the world are drafted using reinsurance intermediaries.

"In fact," he said, "they bring attorneys together, design the reinsurance deal and draft the contract. And when the deal breaks down, a lot of times intermediaries are very important in determining what the intent of the transaction was to begin with and coming up with any documents that are not available."

But Mr. Hall told regulators that as an arbitrator, "a lot of times we ask intermediaries to explain what the transaction was, and, unfortunately, there are quite a number of intermediaries that simply refuse to provide information and refuse to comply with subpoenas from the arbitration panel."

Mr. Hall added that there is a gap in the Federal Arbitration Act which prevents arbitrators from getting these intermediaries to talk and find out what the deal really was.

"So we've been considering alternative ways to go at this," he said. "What I would suggest to regulators is, you might ask the interested parties to look and see if there is some sort of regulatory solution to this."

He emphasized that this is not merely a matter of assisting arbitration panels, but rather something more fundamental. "Are these people fit and proper, if in fact they walk away from transactions they put together, structured and drafted? I recommend that regulators ask interested parties to look for a regulatory solution for this problem."