Eu Animated Presentation 3 03 2008

Supervisory Rules for Supervisory Rules for Foreign Reinsurance Foreign Reinsurance

UndertakingsUndertakings

By: Greg Arnold

Feb. 19, 2008

Course: Insurance RegulationIn the European UnionVisiting Professor Pierpaolo Marano

22

Preliminary BasicsPreliminary Basics

Institutions of theInstitutions of the

European UnionEuropean Union CouncilCouncil CommissionCommission ParliamentParliament Court of JusticeCourt of Justice Court of the Court of the

AccountingsAccountings

Sources of EU LawSources of EU Law

--The…--The… RecommendationsRecommendations RegulationsRegulations DirectivesDirectives EU TreatyEU Treaty

Supervisory Rules for Supervisory Rules for ForeignForeign Reinsurance Reinsurance

UndertakingsUndertakingsEU and U.S.EU and U.S.

44

Sources of Foreign Reinsurance Supervision Rules

EUFederal-Like Supervision

US State Supervision

55

Sources of Foreign Reinsurance Supervisory Rules

EUEuropean Parliament

and The CouncilReinsurance Directive (RID)

2005/68/ECActual Law

(Uniform Rules, 27 EU Member Countries, 30 EEA Countries)

USNational Association

of Insurance CommissionersNonadmitted Insurance Model Act (NIMA)

Recommended Model Laws

(Regulation by 51 Jurisdictions)

66

Reinsurance Directive 2005/68/ECReinsurance Directive 2005/68/ECInstitutional Arrangements – Third CountriesInstitutional Arrangements – Third Countries

TITLE III

CONDITIONS GOVERNING THE BUSINESS OF REINSURANCE

Cooperation Agreements With Third Countries (Cooperation Agreements With Third Countries (Article 26)Article 26)

TITLE VIREINSURANCE UNDERTAKINGS WHOSE HEAD OFFICES ARE OUTSIDE THE COMMUNITY AND CONDUCTING REINSURANCE

ACTIVITIES IN THE COMMUNITY

Third Country Reinsurance Undertakings (Article 49)Third Country Reinsurance Undertakings (Article 49)

Agreements With Third Countries (Article 50)Agreements With Third Countries (Article 50)

77

Article 26Article 26Cooperation Agreements with Third CountriesCooperation Agreements with Third Countries

Member States may conclude cooperation agreements providing forexchange of information with the competent authorities of thirdcountries or with authorities or bodies of third countries as defined inArticle 28(1) and (2) only if the information disclosed is subject toguarantees of professional secrecy at least equivalent to thosereferred to in this Section. Such exchange of information shall beintended for the performance of the supervisory task of theauthorities or bodies mentioned.

Where the information originates in another Member State, itmay not be disclosed without the express agreement of thecompetent authorities which have disclosed it and, whereappropriate, solely for the purposes for which thoseauthorities gave their agreement.

88

Article 49Article 49

Principle and Conditions for Conducting Reinsurance BusinessPrinciple and Conditions for Conducting Reinsurance Business

A Member State shall not apply to reinsurance undertakings having their head offices outside the Community and commencing or carrying out reinsurance activities in its territory provisions which result in a treatment more favourable than that accorded to reinsurance undertakings having their head office in that Member State.

99

Article 50Article 50

Agreements With Third CountriesAgreements With Third Countries

1. The Commission may submit proposals to the Council forthe negotiation of agreements with one or more thirdcountries regarding the means of exercising supervision over:

(a) reinsurance undertakings which have their head officessituated in a third country, and conduct reinsurancebusiness in the Community,

(b) reinsurance undertakings which have their head offices in theCommunity and conduct reinsurance business in the territory of athird country.

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Article 50, Cont’dArticle 50, Cont’d

2. The agreements referred to in paragraph 1 shall in particular seek to ensureunder conditions of equivalence of prudential regulation, effective marketaccess for reinsurance undertakings in the territory of each contracting partyand provide for mutual recognition of supervisory rules and practices onreinsurance. They shall also seek to ensure that:

(a) the competent authorities of the Member States are able to obtain theinformation necessary for the supervision of reinsurance undertakings whichhave their head offices situated in the Community and conduct businessin the territory of third countries concerned,

(b) the competent authorities of third countries are able to obtain the information

necessary for the supervision of reinsurance undertakings which have theirhead offices situated within their territories and conduct business in theCommunity.

3. Without prejudice to Articles 300(1) and (2) of the Treaty, the Commission shall with

the assistance of the European Insurance and Occupational Pensions Committee

examine the outcome of the negotiations referred to in paragraph 1 of this Article and

the resulting situation.

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Insurance Mediation Directive, IMDInsurance Mediation Directive, IMDDirective 2002/92/EC of the European Parliament and of the Council of Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on Insurance Mediation, also known as the Insurance 9 December 2002 on Insurance Mediation, also known as the Insurance Mediation Directive, or simply IMD.Mediation Directive, or simply IMD.[1]

Under the IMD, Article 1, “Scope”, paragraph 3, “equal treatment” of Under the IMD, Article 1, “Scope”, paragraph 3, “equal treatment” of reinsurance intermediaries is “guaranteed.” In the Reinsurance reinsurance intermediaries is “guaranteed.” In the Reinsurance Directive, or RID, the “pledging of assets” by third-country reinsurers Directive, or RID, the “pledging of assets” by third-country reinsurers can be requested by an EU Member State. This is arguably not likely to can be requested by an EU Member State. This is arguably not likely to occur given the EU’s attempts at global harmonization of the occur given the EU’s attempts at global harmonization of the reinsurance business. Under the RID, EU Member States cannot offer reinsurance business. Under the RID, EU Member States cannot offer terms to third-country reinsurers on terms more favorable than those terms to third-country reinsurers on terms more favorable than those offered to Community members. That refers to reinsurance offered to Community members. That refers to reinsurance companies, not intermediaries. Thus, under the IMD, equal treatment companies, not intermediaries. Thus, under the IMD, equal treatment to intermediaries is guaranteed, with no mention of treatment of to intermediaries is guaranteed, with no mention of treatment of companies. Under the RID, equal treatment of companies is not companies. Under the RID, equal treatment of companies is not guaranteed. Any attempts by the EU to require pledging of assets by guaranteed. Any attempts by the EU to require pledging of assets by third countries could be met with claims of discrimination. If the third countries could be met with claims of discrimination. If the complainer is a U.S. reinsurance company, such complaints would be complainer is a U.S. reinsurance company, such complaints would be met with no sympathy – see the discussion of the collateral debate, met with no sympathy – see the discussion of the collateral debate, infra.infra.

[1] Available atAvailable at www.eur-lex.europa.cu/LexUriServ/LexUriServe.do? www.eur-lex.europa.cu/LexUriServ/LexUriServe.do?uri=CELEX:32002L0092:EN:NOT.uri=CELEX:32002L0092:EN:NOT.

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RID HighlightsRID Highlights

““I will highlight that the I will highlight that the Reinsurance Directive gives Reinsurance Directive gives reinsurers not based in an EU reinsurers not based in an EU Member state the opportunity Member state the opportunity to conduct business in the EU to conduct business in the EU without the need to establish without the need to establish a branch.” – Syllabusa branch.” – Syllabus

Art. 26: “Cooperation Art. 26: “Cooperation agreements…information agreements…information exchange”exchange”

--”guarantee of secrecy”--”guarantee of secrecy”

Art. 49: “…no more Art. 49: “…no more favourable than that accorded favourable than that accorded to reinsurance undertakings to reinsurance undertakings having their headhaving their head

office in that Member State.” office in that Member State.”

Compared with U.S. regime, Compared with U.S. regime, infra.infra.

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RID Highlights (Cont’d)RID Highlights (Cont’d)

Art. 50: “…negotiation of Art. 50: “…negotiation of agreements with…third agreements with…third countries regarding means countries regarding means of supervision over” “(a) of supervision over” “(a) reinsurance undertakings reinsurance undertakings which have their head which have their head offices situated in a third offices situated in a third country, and conduct country, and conduct reinsurance business reinsurance business within the Community within the Community

IMD – EU can require IMD – EU can require collateral (“pledging of collateral (“pledging of assets”) of third countries assets”) of third countries such as the U.S.such as the U.S.

Compared with U.S. regime, Compared with U.S. regime, infra.infra.

1414

Sources of Foreign Reinsurance Supervision









ImplementationInto National Law

UK

1515


UK

Financial Servicesand Markets Act

2000

The RID came into force Dec. 10, 2005 and was originally to be implemented by Dec. 10, 2007 (extended to October 2008). The UK

Financial Services Authority (“FSA”) states that most of the provisions of the RID had already been implemented by the UK prior to the planned

effective date. The next slides will discuss what was done for full implementation.

1616

Financial Servicesand Markets Act 2000

2006 Implementations (cont’d)

On 31 December 2006 the FSA introduced prudential changes for insurers which included the introduction of a principles-based approach to asset admissibility, the reduction of certain reinsurance solvency requirements and the authorization and supervision of insurance special purpose vehicles.

Source: Implementation of the Reinsurance Directive in the UK, Clyde & CO LLP Newsletter,

January 2008, available at http://www.runoffmarket.com/docs/a014/Run-off-Jan-2008.pdf.

1717

Financial Servicesand Markets Act 2000

2006 Implementations (cont’d)

The FSA’s proposed new measurers are discussed in its publication entitled Consultant Paper, Implementing the Reinsurance Directive, June 2006. The FSA implemented these new measures on December 31, 2006:

•Removed restrictions on the assets held by reinsurers;

The pre-existing prescriptive rules on admissible assets and quantitative limits were removed for pure reinsurers and replaced by high level "prudent person" investment principles covering liquidity, security, quality, profitability and matching of assets.

1818

FSA’s 2006 Measures (Cont’d)

•Removing restrictions on the assets held by reinsurers;

•Changed the life reinsurance rules on capital requirements and technical provisions;

Pure reinsurers and mixed insurers carrying on life reinsurance protection business and permanent health insurance can now determine their minimum capital requirement using the non-life solvency tests. Furthermore, pure reinsurers can now calculate their technical provisions on a basis which has less of a margin of prudence built in than was required. The FSA estimates that the combined effect of these is a significant increase in excess capital of UK pure reinsurers. A certain proportion of that capital is needed to meet the individual capital adequacy standards that the FSA imposes on each firm. But even taking that into account the FSA estimates the changes resulted in the potential freeing up of capital of approximately £730 million.

1919

FSA’s 2006 Measures (cont’d)

Removing restrictions on the assets held by reinsurers;

•Changing the life reinsurance rules on capital requirements and technical provisions;

•Relaxed restrictions on reinsurers' activities;

Previously reinsurers could only carry on reinsurance business and activities directly arising from that business. The FSA relaxed that restriction for pure reinsurers so as to permit them to carry on related operations such as providing actuarial advice or claims management services for their clients.

2020

FSA’s 2007 Measures

Dec. 31, 2007

•Financial Services and Markets Act 2000 (Reinsurance Directive) Regulation 2007 No 3255:

This provides that a proposed transfer by a reinsurance undertaking must be publicized and notified to policyholders. That requirement can be waived by the court in certain circumstances.

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Dec. 31, 2007

•Financial Services and Markets Act 2000 (Reinsurance Directive) Regulation 2007 No 3255:

•Services and Markets Act 2000 (Reinsurance Directive) Order 2007 No. 3254

This makes clear that the term "a relevant reinsurer" (as used in Statutory Instrument No. 2001/544) includes reinsurers that fall within the RID as well as other foreign reinsurers. The instrument also deals with Gibraltar-based firms, extending to Gibraltar-based firms carrying on reinsurance within the meaning of the RID the right to establish branches in the UK, which Gibraltar-based firms carrying on direct insurance business already had.

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Dec. 31, 2007

•Financial Services and Markets Act 2000 (Reinsurance Directive) Regulation 2007 No 3255;•Services and Markets Act 2000 (Reinsurance Directive) Order 2007 No. 3254;•The Reinsurance Directive Regulations 2007 No. 3253 A new procedure for reinsurance transfers. It was already possible, prior to the RID, to transfer reinsurance portfolios under Part VII of FSMA, but changes were required to the UK procedure to comply with the RID and in particular the need for home state authorization of transfers by UK branches of pure reinsurers. Also, the Treasury chose to simplify the Part VII process as it applies to reinsurance transfers, so that where the consent of all the policyholders has been obtained, an application to court will not be necessary, although a solvency certificate (which is a minimum requirement under the RID) will have to be obtained. There is also provision to clarify the application of the requirements for certificates as to solvency and consent of certain regulators to transfers by non-EEA insurers with a branch in the UK, and to transfers to branches of non-EEA insurers elsewhere in the EEA.

2323

Sources of Foreign Reinsurance Supervisory Rules









2424

NAIC Nonadmitted InsuranceNAIC Nonadmitted Insurance Model Act (“NIMA”) 2007 Model Act (“NIMA”) 2007

Section 4.F(3) Placement of Insurance BusinessSection 4.F(3) Placement of Insurance Business

(a) the assuming insurer must be authorized to do a (a) the assuming insurer must be authorized to do a reinsurance business by its domiciliary jurisdiction and be reinsurance business by its domiciliary jurisdiction and be authorized to write the type of reinsurance in its domiciliary authorized to write the type of reinsurance in its domiciliary jurisdiction; and (b) must satisfy all legal requirements for jurisdiction; and (b) must satisfy all legal requirements for such reinsurance in the state of domicile of the ceding such reinsurance in the state of domicile of the ceding insurerinsurer

Section 5 Surplus Lines InsuranceSection 5 Surplus Lines Insurance

C(2)(c), Lloyd’s Plans:C(2)(c), Lloyd’s Plans:

(i) Maintain a trust fund consisting of trusteed funds (i) Maintain a trust fund consisting of trusteed funds representing the group’s liabilities attributable to business representing the group’s liabilities attributable to business written in the U.S., andwritten in the U.S., and

(ii) Maintain a trusteed surplus of $100 million.(ii) Maintain a trusteed surplus of $100 million.

2525

NAIC Nonadmitted InsuranceNAIC Nonadmitted Insurance Model Act (“NIMA”) 2007 (cont’d) Model Act (“NIMA”) 2007 (cont’d)

Section 5.C(2)(d) Group of incorporated Insurers Under Common Administration,Section 5.C(2)(d) Group of incorporated Insurers Under Common Administration,Which Has Continuously Transacted An insurance Business Outside the United StatesWhich Has Continuously Transacted An insurance Business Outside the United Statesfor at Least Three Years…for at Least Three Years…

(i) Maintain aggregate policyholders’ surplus of $10(i) Maintain aggregate policyholders’ surplus of $10 Billion;Billion; (ii) Maintain a trusteed surplus in amount of $100 Million;(ii) Maintain a trusteed surplus in amount of $100 Million; (iii) Each individual insurer shall maintain capital and(iii) Each individual insurer shall maintain capital and surplus of not less than $25 Million.surplus of not less than $25 Million.

Section 5.C(2)(e) An insurer not domiciled in the U.S.Section 5.C(2)(e) An insurer not domiciled in the U.S.

Maintain capital and surplus requirements under the laws of ___ state; or $15 Maintain capital and surplus requirements under the laws of ___ state; or $15 Million (Subsection C(2)(a) and shall have in force a trust fund of not less than Million (Subsection C(2)(a) and shall have in force a trust fund of not less than the greater of (i) $5,400,000; or (ii) 30% of the U.S. surplus lines gross liabilities, the greater of (i) $5,400,000; or (ii) 30% of the U.S. surplus lines gross liabilities, excluding aviation, wet marine and transportation insurance liabilities, not to excluding aviation, wet marine and transportation insurance liabilities, not to exceed $60,000,000 (or $18,000,000). exceed $60,000,000 (or $18,000,000).

Subsection (ii) can be waived by way of credit for diversification among several Subsection (ii) can be waived by way of credit for diversification among several

lines of insurance and geographic location [Subsection (e)]; and the past and lines of insurance and geographic location [Subsection (e)]; and the past and projected trend in the size of the company’s capital and surplus considering such projected trend in the size of the company’s capital and surplus considering such factors as premium growth, operating history, loss and expense ratios, or other factors as premium growth, operating history, loss and expense ratios, or other appropriate criteria [Subsection (f)]appropriate criteria [Subsection (f)]

Section 5.C(4) Provide Annual AccountingSection 5.C(4) Provide Annual Accounting

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HighlightsHighlightsEU/RID NAIC/NIMAEU/RID NAIC/NIMA

The RID gives reinsurers not The RID gives reinsurers not based in an EU Member state based in an EU Member state the opportunity to conduct the opportunity to conduct business in the EU without the business in the EU without the need to establish a branch.need to establish a branch.

Art. 26: “Cooperation Art. 26: “Cooperation agreements…information agreements…information exchange”exchange”

--”guarantee of secrecy”--”guarantee of secrecy”

Art. 49: “…no more Art. 49: “…no more favourable than that accorded favourable than that accorded to reinsurance undertakings to reinsurance undertakings having their headhaving their head

office in that Member State.” office in that Member State.”

Same. But, unlike EU, which Same. But, unlike EU, which can assess collateral but can assess collateral but doesn’t, the U.S. does require doesn’t, the U.S. does require collateral as a proxy to a collateral as a proxy to a branch, financial strength branch, financial strength rating, equalization reserves, rating, equalization reserves, etc.etc.

No counterpart. Likely inNo counterpart. Likely in future State regulations future State regulations

(information sharing part of (information sharing part of NYS proposal).NYS proposal).

Certainly nonadmitted Certainly nonadmitted reinsurers are not treated reinsurers are not treated more favorably than more favorably than admitted/licensed reinsurers. admitted/licensed reinsurers. Also not treated more Also not treated more favorably than domestic, favorably than domestic, unlicensed reinsurers who unlicensed reinsurers who must post collateral.must post collateral.

2727

Highlights (Cont’d)Highlights (Cont’d) EU/RID NAIC/NIMA EU/RID NAIC/NIMA

Art. 50: “…negotiation of Art. 50: “…negotiation of agreements with…third agreements with…third countries regarding means countries regarding means of supervision over…of supervision over…

“ “(a) reinsurance (a) reinsurance undertakings which have undertakings which have their head offices situated their head offices situated in a third country, and in a third country, and conduct reinsurance conduct reinsurance business within the business within the Community” Community”

EU insurers can require EU insurers can require pledging of assets by third-pledging of assets by third-country reinsurers.country reinsurers.

No counterpart in NIMA. But, No counterpart in NIMA. But, such negotiations are quite such negotiations are quite likely in the future, by both likely in the future, by both the NAIC and individual the NAIC and individual States.States.

States must require collateral States must require collateral of alien reinsurers not of alien reinsurers not licensed in the U.S.licensed in the U.S.

2828

Sources of Foreign Reinsurance Supervision










UK

Adoption into State LawNew York State

2929

New York StateNew York StateRegulation 20 (11 NYCRR 125)Regulation 20 (11 NYCRR 125)

(c) (1) In the case of an alien assuming insurer, not otherwise entered as a (c) (1) In the case of an alien assuming insurer, not otherwise entered as a United States branch in another state, such assuming insurer meets the United States branch in another state, such assuming insurer meets the standards of solvency required of licensed insurers of like character, such standards of solvency required of licensed insurers of like character, such terms and conditions as prescribed by the superintendent, and otherwise terms and conditions as prescribed by the superintendent, and otherwise complies substantially with related requirements, and such assuming complies substantially with related requirements, and such assuming insurer has deposited and continues to maintain in one or more New York insurer has deposited and continues to maintain in one or more New York state banks and/or members of the Federal Reserve System located in New state banks and/or members of the Federal Reserve System located in New York state, a trust fund or trust funds, constituting a trusteed surplus, in York state, a trust fund or trust funds, constituting a trusteed surplus, in cash, readily marketable securities, or letters of credit, in an amount of not cash, readily marketable securities, or letters of credit, in an amount of not less than $20,000,000 for the protection of the United States insurers, and less than $20,000,000 for the protection of the United States insurers, and United States beneficiaries under reinsurance policies (contracts) issued by United States beneficiaries under reinsurance policies (contracts) issued by such alien assuming insurers. Such trusteed amount shall be in addition to such alien assuming insurers. Such trusteed amount shall be in addition to any other trust fund required by this department, including, but not limited any other trust fund required by this department, including, but not limited to, a trusteed amount at least equal to the liabilities attributable to United to, a trusteed amount at least equal to the liabilities attributable to United States insurers and United States beneficiaries under reinsurance policies States insurers and United States beneficiaries under reinsurance policies (contracts) issued by such alien assuming insurers. As used in this (contracts) issued by such alien assuming insurers. As used in this subdivision, surplus means the balance remaining after subtracting the subdivision, surplus means the balance remaining after subtracting the liabilities, attributable to reinsurance policies (contracts) issued in the liabilities, attributable to reinsurance policies (contracts) issued in the name of such alien assuming insurer from the total assets deposited in the name of such alien assuming insurer from the total assets deposited in the trust fund or trust funds trust fund or trust funds

3030

New York StateNew York StateRegulation 20 (11 NYCRR 125)Regulation 20 (11 NYCRR 125)

Lloyd’s Lloyd’s

Finally, in the case of “a group located outside the United States whoseFinally, in the case of “a group located outside the United States whosemembers consist of individuals incorporated assuming insurers who are notmembers consist of individuals incorporated assuming insurers who are notengaged in any business other than underwriting as a member of the group engaged in any business other than underwriting as a member of the group and individual unincorporated assuming insurers” (referring to Lloyd’s-styleand individual unincorporated assuming insurers” (referring to Lloyd’s-stylereinsurers without mentioning any company or market names), there is anreinsurers without mentioning any company or market names), there is anadditional requirement of trusteed surplus funds in the amount ofadditional requirement of trusteed surplus funds in the amount of$100,000,000.[1] Lloyd’s has always been a market, not a company or$100,000,000.[1] Lloyd’s has always been a market, not a company orinsurance corporation, and it thus appears this section is in reference toinsurance corporation, and it thus appears this section is in reference toLloyd’s.Lloyd’s.

Thus, Lloyd’s is required to post collateral (a) equal to liabilities underThus, Lloyd’s is required to post collateral (a) equal to liabilities underreinsurance contracts, plus (b) trusteed surplus funds in the amount ofreinsurance contracts, plus (b) trusteed surplus funds in the amount of$20,000,000, and (c) trusteed surplus funds in the amount of $100,000,000.$20,000,000, and (c) trusteed surplus funds in the amount of $100,000,000.Therefore, as discussed later in this section, it is not surprising that Lloyd’s isTherefore, as discussed later in this section, it is not surprising that Lloyd’s isthe most vocal opponent of the U.S. reinsurance collateral requirements, andthe most vocal opponent of the U.S. reinsurance collateral requirements, andthe leader of the Pan-European effort to abolish such requirements.the leader of the Pan-European effort to abolish such requirements.

[1] §125.4 ( c) (5) (d) (1) (iv) (a) Regulation No. 20, [1] §125.4 ( c) (5) (d) (1) (iv) (a) Regulation No. 20, available atavailable athttp://www.ins.state.ny.us/r_finala/2003/pdf/fr20a9tx.pdf.http://www.ins.state.ny.us/r_finala/2003/pdf/fr20a9tx.pdf.

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New York StateNew York StateProposed Regulation for 2008Proposed Regulation for 2008

The Superintendent of Insurance for the NYSID has announced The Superintendent of Insurance for the NYSID has announced proposed new reinsurance collateral rules. Alien and proposed new reinsurance collateral rules. Alien and domestic unauthorized reinsurance companies with the domestic unauthorized reinsurance companies with the highest credit ratings will be treated the same as authorized highest credit ratings will be treated the same as authorized companies. Weaker reinsurance companies will be required to companies. Weaker reinsurance companies will be required to post collateral on a sliding scale from 10 to 100 percent. post collateral on a sliding scale from 10 to 100 percent. Unauthorized reinsurers with a triple A credit rating from two Unauthorized reinsurers with a triple A credit rating from two rating agencies would not have to post collateral. rating agencies would not have to post collateral. Unauthorized reinsurers with a double A or equivalent rating Unauthorized reinsurers with a double A or equivalent rating would have to post collateral equal to 10 percent of claims, would have to post collateral equal to 10 percent of claims, single A 20 percent, and triple B 50 percent. Unauthorized single A 20 percent, and triple B 50 percent. Unauthorized reinsurers having a credit rating below triple B would still be reinsurers having a credit rating below triple B would still be required to post 100 percent collateral.required to post 100 percent collateral.

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New York StateNew York StateProposed Regulation for 2008 (cont’d)Proposed Regulation for 2008 (cont’d)

Other requirements would be as follows:Other requirements would be as follows: An unauthorized reinsurer must:An unauthorized reinsurer must: Meet the standards of solvency, including standards for capital adequacy, established by Meet the standards of solvency, including standards for capital adequacy, established by

its domestic regulator;its domestic regulator; Be authorized in its domiciliary jurisdiction to assume the specific kind of reinsurance it Be authorized in its domiciliary jurisdiction to assume the specific kind of reinsurance it

is offering;is offering; Maintain a policyholder's surplus or equivalent in excess of $250,000,000;Maintain a policyholder's surplus or equivalent in excess of $250,000,000; Accept required contract terms, including Accept required contract terms, including consent to the jurisdiction of U.S. courts for consent to the jurisdiction of U.S. courts for

disputes;disputes; Have a primary regulator that has a Have a primary regulator that has a memorandum of understandingmemorandum of understanding with the NYSID that with the NYSID that

addresses addresses information sharinginformation sharing and considers such matters as and considers such matters as regulatory equivalencyregulatory equivalency and and enforceability of judgmentsenforceability of judgments;;

Be domiciled in a country that allows U.S. reinsurers access to its market on similar Be domiciled in a country that allows U.S. reinsurers access to its market on similar terms; andterms; andPost 100 percent collateral upon the entry of an order of rehabilitation, liquidation or Post 100 percent collateral upon the entry of an order of rehabilitation, liquidation or conservation against the ceding insurance company.conservation against the ceding insurance company.

Collateral requirements will not change for authorized reinsurers; they will still not be Collateral requirements will not change for authorized reinsurers; they will still not be required to post any collateral. However, new safeguards will be put in place to help required to post any collateral. However, new safeguards will be put in place to help ensure the ability of these reinsurers to cover claims and thus protect consumers.ensure the ability of these reinsurers to cover claims and thus protect consumers.

Insurance companies ceding risk to reinsurers have Insurance companies ceding risk to reinsurers have responsibility for vetting thoseresponsibility for vetting those reinsurersreinsurers and developing risk management plans for their reinsurance placements. and developing risk management plans for their reinsurance placements.

The Superintendent of Insurance will retain final authority over any particular The Superintendent of Insurance will retain final authority over any particular transaction.transaction.

SourceSource: NYSID: NYSID

Economy & Finance

Eu Animated Presentation 3 03 2008