Credit for Reinsurance from Eligible Reinsurers: FPCA Letter to Dr. Ray Spudek

Members:

Colodny Fass has previously discussed the issue of collateral for reinsurance obligations and how the current regulations require unauthorized and unaccredited reinsurers to post 100 percent collateral for such obligations with Florida-domiciled insurers.

We also discussed the Office of Insurance Regulation’s (“OIR”) Proposed Rule 69O-144.007: Credit for Reinsurance from Eligible Reinsurers that would change this standard.

The Proposed Rule provides the framework under which the OIR, in its discretion, could allow certain unauthorized and unaccredited reinsurers to conduct business in Florida without having to post 100 percent collateral.

This Firm attended the OIR’s hearing held April 29, 2008, regarding this Proposed Rule, to present the FPCA’s concerns that a fully-collateralized system provides better protection for Florida insurers and their policyholders, including one member company’s concern that limited collateral requirements could negatively affect the ceding insurer’s rating.

At the hearing, Dr. Raymond Spudeck, the OIR’s chief economist, requested additional information as to how many of the FPCA’s member companies were rated, and by which rating company. Attached hereto for your review is a copy of a letter which was recently submitted to the OIR addressing the question posed by Dr. Spudeck at the April 29, 2008 hearing.

To view the report on the April 29, 2008 hearing, click here.

A copy of the Proposed Rule text and meeting notice is attached for your review. 

We will continue to monitor the debate regarding this Proposed Rule and keep you apprised in this regard.

 

Should you have any questions or concerns regarding the attached, please do not hesitate to contact this office.

 

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