NAIC Reinsurance Task Force Discusses The Nonadmitted and Reinsurance Reform Act of 2007

The National Association of Insurance Commissioners (“NAIC”) Reinsurance Task Force (“RTF”) and the NAIC Governmental Relations Leadership Council (“GRLC”)  held a conference call on Wednesday, December 19, 2007 in response to the passage of HR 1065, the “Nonadmitted and Reinsurance Reform Act of 2007”

At the recent NAIC 2007 Winter National Meeting, the GRLC charged the RTF with providing comments and recommending revisions to the bill by December 20, 2007.

The GRLC also has been working with Congress in its efforts to enhance reinsurance regulation by gathering general comments and specific and/or technical recommendations that also could be used to modify the bill. 

Thus, the Dec. 19 conference call represented the last opportunity for the RTF to comment on and compose a draft of recommendations before the GLRC deadline.

Prior to the call, NAIC staff sent a survey to various insurance industry representatives regarding the provisions contained in the reinsurance section of H.R. 1065 in order to solicit feedback and generate topics of discussion as well as narrow the focus of the RTF for the conference call.  A copy of the survey is attached for your review.

One day prior to the call, H.R. 1065 unanimously passed the United States House of Representatives, giving the conference call a heightened sense of urgency, inasmuch as the United States Senate likely will take up its own version of the bill (S 929) shortly after the holiday season.  It was discussed that some legislators currently campaigning for President are interested in passing legislation on insurance regulation. 

Focusing the discussion on what would constitute a “deal breaker,” the RTF indicated that technical and high level recommendations as to the language of the bill must quickly be relayed to the Senate before it passes a unfavorable bill.

The discussion also included how to express that the NAIC is in favor of the general concept behind the legislation, and that it advocated Congressional initiatives to address problems generated by extra-territoriality—an issue which has led to redundant regulation of the industry.  At the same time, RTF desires to clarify that Congress should use caution in the wording and practical effect of the legislation, since its application may serve to negate states’ authority regarding insolvency regulation. 

The survey results reveal that if the legislation can be crafted to guard against the loss of state authority, then about 70 percent of interested parties favor the legislation and its ability to alleviate the problems surrounding the extra-territoriality issue.

One recommendation repeatedly proposed in various forms during the meeting was the insertion of language into the legislation that would establish the primacy of the state domicilary regulator.  This would allow Congress to require mutual recognition of reinsurers, thus limiting extra-territoriality issues (for reinsurance credit concerns) and then allow the NAIC, in conjunction with the individual states, to handle the details of enforcement and compliance. 

The conference call ended with the decision to draft a memo for submission to the GLRC along with the survey results, which will convey the consensus from the meeting: strong support for the concepts behind the legislation, while concurrent concern over preempting state law. 

The memo, which will soon be drafted and circulated for comment before transmittal to the GLRC, will include specific language designed to apprise Congress of what is acceptable to the NAIC regarding the bill’s effect on the industry.  The memo will also include a summary of common concerns and recommendations from the survey. 

 

Please note that this office will continue to follow this and other issues related to reinsurance regulation and provide information regarding those issues as they arise.