NCOIL Ducks Decision On Foreign Collateral
The National Conference of Insurance Legislators (NCOIL) last week tackled the topic of collateral requirements for foreign reinsurers again, and once more avoided action.
At their summer meeting last week in Newport, R.I., the lawmakers heard from panels of domestic and foreign-based company representatives on the merits of reducing the collateral non-U.S. companies must post to operate here.
Three years ago the Troy, N.Y.-based organization gave preliminary approval to create a so-called "white list" of alien reinsurers who could qualify for collateral reductions of up to 50 percent.
But NCOIL put off final approval while the two opposing sides tried to hash out a compromise over the past three years.
Last week the lawmakers postponed any vote on the revived "white list" resolution until their annual meeting in November in order to get feedback from the National Association of Insurance Commissioners (NAIC), Kansas City, Mo., which will explore the issue at their fall quarterly meeting.
At the NAIC summer meeting last month, the Reinsurance Task Force approved putting together a white paper evaluating all options regarding the dispute that has simmered for the past several years.
The document will not be ready until at least December, so any NAIC action this fall seems remote, said the group's president, Diane Koken at the meeting.
In September, regulators will look at two proposals created by the so-called Ad Hoc group of commissioners who monitored the failed three-year talks. They would essentially subject all reinsurers, whether foreign or domestic, to the same protocols to prove their credit-worthiness.
At the NCOIL meeting the sharp conflicts remained between the alien and domestic insurers.
David Matcham, of the International Underwriting Association of London said it does not make sense to judge companies "by their zip code."
"Over the past 20 years it is clear that the biggest problems with reinsurance collection have been with the U.S. based reinsurers," he said.
But Scott Gilliam of the Cincinnati Insurance Companies said that it was U.S. regulation that provided the protection domestic insurers need when they purchase reinsurance.
He noted that foreign companies have the opportunity to register as U.S. subsidiaries if they want to escape collateral requirements.
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