Nevada Division of Insurance Issues Guidance on Credit for Reinsurance Standards for Captive Risk Retention Groups Filing on a U.S. Generally Accepted Accounting Principles Basis
Jun 15, 2016
The Nevada Division of Insurance (“NDI”) has issued guidance on Credit for Reinsurance standards for Captive Risk Retention Groups (“RRGs”) filing on a U.S. Generally Accepted Accounting Principles basis.
In Bulletin 16-003 issued today, June 15, 2016, Nevada Insurance Commissioner Barbara Richardson advised that Nevada Revised Statute (“NRS”) 694C.350 states that a captive insurer may take credit for reserves on risks ceded to a reinsurer that is in compliance with NRS 68 IA. 140 to 240.
To view the Bulletin, click here.
For RRGs, the NDI is expecting that, pursuant to NRS 68 IA, any unauthorized reinsurer utilized that reduction in liabilities would not be greater than the amount of collateral held by the ceding RRG.
The accounting for the provision for unauthorized reinsurance can be accounted for as a liability on line 16 of page 3 of the Property & Casualty Annual Statement or a reduction of reinsurance recoverables on line 16 of page 2.
Effective July 1, 2015, Nevada Senate Bill 67 adopted various National Association of Insurance Commissioners (“NAIC”) model laws and acts, including the NAIC Credit for Reinsurance Model Law. Specifically, SB 67 requires:
- Nevada’s Insurance Commissioner to assign a rating to each certified reinsurer, giving due consideration to the financial strength ratings that have been assigned by rating agencies deemed acceptable to the Commissioner pursuant to regulation. The Commissioner shall publish a list of all certified reinsurers and their ratings.
- Sets forth the criteria a certified reinsurer must secure obligations assumed from U.S. ceding insurers at a level consistent with its rating, as specified in regulations promulgated by the Commissioner.
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