Reinsurance Update - Year End Summary of State Developments

Submitted by Cynthia Braman on Wed, 04/19/2017 - 11:49am

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By Seth Kernodle, Booke Instructor

Team MeetingThere is a lot of activity in the reinsurance area at year end 2016.  We just recently finished our 2016 update classes and have been discussing numerous reinsurance developments.

One big change that impacts 2016 Schedule F is the inclusion of an NAIC Reinsurer Equivalent Rating in a new electronic column of Part 3 (20), Part 5 (19) and Part 6 Section 1 (22).  This new rating is assigned to every reinsurer listed and will be used to determine the RBC charge that is applied to reinsurance recoverables. This is being done in RBC for informational purposes only and will not impact companies' 2016 RBC.  The purpose is to vary the RBC charge based on the rating of the reinsurer.

Most states have adopted the 2011 reinsurance model law and are now recognizing a new category of reinsurer , “certified”. Aon Benfield has developed an updated report on collateral reform in the U.S. which we have made available as a pdf below. This publication is designed to assist U.S. ceding insurers determine the appropriate statutory reporting and classification of reinsurance in the Annual Statement.

A previous Booke blog discussed proposed changes to Schedule F, which, if adopted, will result in the combining of Parts 3-8 into one part consisting of 78 columns.  This change is currently proposed for the 2018 Annual Statement.

Lastly, the Federal Insurance Office (FIO) is actively discussing collateral requirements for U.S. companies that do business in the European Union. These discussions have the potential of changing collateral requirements and as such, contingency planning is underway at the NAIC. The NAIC voted in 2016 to make the reinsurance model law an accreditation standard effective 2019 in an effort to achieve consistency across the states with respect to certified reinsurers. The NAIC has also implemented a “passporting” process to make the certification process easier once the model law has been adopted. This, in effect, allows a state to grant certified status to a reinsurer who has been certified in another state.

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