National Conference of Insurance Legislators Approves Model Law to Eliminate ‘Naked’ Credit Default Swaps
Dec 2, 2009
Model legislation that would prohibit “naked” credit default swaps (“CDS”) and establish a regulatory framework for “covered swaps,” which would then be overseen in the states as credit default insurance (“CDI”), was adopted by the National Conference of Insurance Legislators (“NCOIL”) at its recent November 2009 annual meeting.
The model law, which is considered by the NCOIL to fill a federal regulatory void, was modeled after New York State financial guaranty insurance law and would include a new definition of CDI that would establish a state regulatory regime to oversee the CDI market. The model contains requirements regarding company licensing; contingency, loss, and unearned premium reserves; policy forms and rates; and reinsurance, among other things. It would define authorized CDI and prohibit and penalize parties that engage in unauthorized CDI. Thus, the model would ban “naked” CDS.
Organizations that participated in NCOIL CDS policy discussions included the New York State Insurance Department, the International Swaps & Derivatives Association, the Securities Industry & Financial Markets Association, as well as the American Academy of Actuaries, the American Council of Life Insurers, the Association of Financial Guaranty Insurers, Marketcore and the National Association of Mutual Insurance Companies.
To view the NCOIL press release on this issue, click here.
Should you have any questions or comments, please contact Colodny Fass.
To unsubscribe from this newsletter, please send an e-mail to ccochran@cftlaw.com.