Recap: OIR Proposed Rule Hearing–Credit for Reinsurance

On Monday, November 26, 2007, a representative from this office attended a Rule Development Workshop at the Florida Office of Insurance Regulation (“OIR”) on Proposed Rule 690-144.007, Credit for Reinsurance.  The purpose of the Proposed Rule is to implement revisions to Section 624.610, Florida Statutes, relating to rating-based collateral requirements. 

To view a draft of the Proposed Rule, click here.

To view today’s meeting agenda, click here.

Present from the OIR were Belinda Miller (OIR Deputy Commissioner), Bob Prentiss (OIR Attorney), and Ray Spudack (Economist).  Following introductory remarks from Mr. Prentiss, Ms. Miller provided a general overview of the Proposed Rule, stating that it will allow reinsurers to post less than 100% collateral with the intent to stabilize insurance rates and increase capacity.  Ms. Miller acknowledged that this was not a “cure-all” and may not be useful for all companies.  She also stated that the OIR is concerned about the receptiveness of ceding insurers and is sensitive to the concerns raised by Florida domestic companies. 

Ms. Miller noted that the OIR was actively participating in a related National Association of Insurance Commissioners (“NAIC”) Task Force, which is considering a national proposal on the issue.  Saying that the Task Force yet has a lot of work left to do, Ms. Miller concluded her remarks by stating that the OIR is actively seeking comments and suggestions on the Proposed Rule.

Next, Mr. Spudack provided a section-by-section review of the Proposed Rule.  During his presentation, public comment was considered by the OIR members.  Regarding section (2) relating to eligible reinsurers, the OIR members stated that the Rule is not intended to create a dual standard between American and international reinsurers.  They further noted that the intent is to encourage American and international reinsurers to be active in Florida and clarifying language would be acceptable.  Regarding section (3) relating to rating agencies, the OIR members stated that they drafted this section from the statutes.  Regarding section (4) relating to the amount of credit allowed, the OIR members stated that the provisions in this section are intended to encourage reinsurers to write in Florida.  They were also receptive to adding a provision that would allow parties to negotiate higher levels of collateral if they wish.

In general, concerns were raised because the Proposed Rule removes security from Florida domestics and protections against insolvency.  Also, a national standard is preferential to multiple state standards.  The OIR members stated that it was not their intent to place additional burdens on Florida domestic companies.  Further, they do not intend to adopt a rule that will not provide any benefit to Florida ceding companies.  The OIR members noted that the national NAIC proposal was slow-moving and adoption of state standards may encourage the NAIC to move more quickly. 

Concerns were expressed about the short notice given to companies in anticipation of the workshop and it was requested that the workshop be continued.  The OIR stated that it would leave the record open until December 10, 2007 for additional written comments.  Further, a public hearing likely will be scheduled at which additional comments may be considered. 

The OIR members concluded the workshop by noting that this Rule is intended to encourage reinsurers to write in Florida and provide market stability and increased capacity.  They acknowledged that the impact will likely not be immediate if at all, but it is “worth a try.”

Next, the Proposed Rule will be noticed for a public hearing if approved by the Financial Services Commission. 

 

The above information is intended to be a brief summary of the activates that took place at the workshop and is not intended to be a comprehensive review of the issues and items contained therein.  Should you have additional questions or comments, please feel free to contact this office.