Captive Insurers May Be Impacted by Proposed NAIC Credit for Reinsurance Model Law

The National Association of Insurance Commissioners (NAIC) Reinsurance (E) Task Force has proposed revisions to the Credit for Reinsurance Model Law (#785)—Option 3 that would give state insurance regulators unlimited authority, beyond the current requirements, for a ceding insurer to get credit for reinsurance ceded.

Steve Kinion, director of the Delaware Bureau of Captive and Financial Insurance Products, discussed the proposed changes during his regulatory update at the Delaware Captive Insurance Association (DCIA) 2015 Fall Forum on November 12.

The concern expressed by Mr. Kinion was that, if adopted by NAIC, the proposed change could have an impact on captives. He indicated that the Delaware Insurance Department would be opposing the proposed change because of its possible impact on captives.

Captive owners and managers are encouraged to submit comments to NAIC on the proposed change to the Credit for Reinsurance Model Law by Tuesday, November 17.

Mr. Kinion requested that the NAIC comment period on the proposed changes be extended to the November 17 date. The Captive.com editor would also like to encourage captive owners, executives, and managers to comment by that date.

The current provisions of the Credit for Reinsurance Model Law provide uniform regulatory treatment; however, the proposed changes could result in varying state regulatory practices. Following is the broad grant of authority excerpted from the NAIC proposal:

... provided further, that the commissioner may adopt by regulation an approval requirement and specific additional requirements relating to valuation of assets and obligations, and the amount and forms of security held, in connection with particular types of reinsurance arrangements, or may specify by regulation that credit will be reduced or eliminated in connection with particular types of reinsurance arrangements.

What are "particular types of reinsurance arrangements"? Could this apply to captives? Should state regulators be given this broad authority?

Share your thoughts with NAIC. Address comment letters to the Honorable John M. Huff, Chair of the Reinsurance (E) Task Force, and direct to [email protected] and [email protected].

The NAIC Fall 2015 National Meeting is scheduled for November 19-22, 2015, at the Gaylord National Hotel and Convention Center in National Harbor, Maryland (Washington, DC).