REO Plan Back To Task Force

NEW YORK–State insurance regulators meeting here have told a 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 where the Reinsurance Task Force was told to put some meat on the skeletal proposal to reform alien collateral risk requirements by applying them on a basis that does not take into account the country of domicile.

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, also Georgia's insurance commissioner, said the panel will spend the next months evaluating whether or not they can come up with a full REO plan by December.

And he stressed 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 stressed that was only one possible resolution to alien reinsurers' complaint that the United States unfairly imposes a 100 percent collateral requirement on reinsurers, regardless of an alien company's financial strength.

Mr. Oxendine stopped short of declaring that the REO is 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 rules- versus principles-based accounting, regulatory reliance on risk management systems, and 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.