More Bermuda Reinsurers Agree To Fla. Reduced Collateral Terms

NU Online News Service, March  3, 1:39 p.m. EST

Tokio Millennium Re Ltd. and Allied World Assurance Company are the seventh and eighth Bermuda-based reinsurers authorized to post reduced collateral requirements to operate in Florida.

Reinsurance companies based outside of the United States previously had to provide full collateral in Florida to do business there. But legislation passed in 2007 allows a foreign reinsurer to post reduced collateral as long as it is highly-rated and financially sound. U.S reinsurers post no collateral.

Tokio Millennium and Allied will post 20 percent of loss reserves on property catastrophe reinsurance in Florida.

 Insurance Commissioner Kevin McCarty said the agreements signify to the insurance industry that “Florida is a good place to conduct business.”

He added, “Reinsurers continue to provide a critical risk-sharing role in Florida’s complex property insurance market.”

There are a total of nine foreign reinsurers that have met the reduced collateral requirements. Germany-based Hannover Re was the first company to start in Florida under the new rule, followed by XL Re Ltd, the first Bermuda based reinsurer.

Tokio Millennium, a part of Tokio Marine Holdings Inc., had $1.2 billion in surplus in 2009 and Allied reported $3 billion in capital and surplus—each greatly exceeding the $100 million requirement outlined by state law. Each also has high ratings by at least two nationally recognized rating agencies, which is also a requirement.

Florida was the first state to reduce collateral requirements for foreign reinsurers. New York has since followed.

Tatsuhiko Hoshina, Tokio Millennium’s president and chief executive officer, said the company hopes to reach similar agreements in other states.

Tokio Millennium has also gotten approval from regulators to write in Australia. The branch will get treaty opportunities in Australia and New Zealand for Tokio Millennium to underwrite.

“Australia and New Zealand has recently suffered an unprecedented frequency and severity of losses,” said Russell Brooke, managing director of the branch, in a statement. “We believe that the timing of our approval to do business in Australia will be mutual beneficial.”