The Senate Banking and Insurance Committee Approves a Credit for Reinsurance Bill

On February 16, 2021, the Senate Banking and Insurance Committee approved SB 728 by Senator Broxson. The companion bill, HB 733 by Representative Fetterhoff, has not yet been referred to House committees.

SB 728 adopts many of the provisions of the NAIC Credit for Reinsurance Model Law. In 2017 and 2018, the United States Treasury Department and the United States Trade Representative entered into agreements with the European Union and the United Kingdom which eliminated EU reinsurer collateral requirements if certain criteria are met. States have five years to comply with requirements or risk federal preemption.

In June 2019, the NAIC adopted revisions to its Credit for Reinsurance Model Law to implement the agreements. The revisions eliminate reinsurance collateral requirements for reinsurers domiciled in “reciprocal jurisdictions.” SB 728 adopts many of the provisions of the NAIC model law. It requires that credit for reinsurance must be allowed when the assuming insurer is domiciled in a reciprocal jurisdiction (which includes covered jurisdictions such as the EU and UK) or a “qualified” jurisdiction, which will be defined by administrative rule. The assuming insurer’s capital and surplus requirements and solvency or capital ratio requirements will be determined by rule. The bill requires assuming insurer must agree to notify the OIR if it falls below minimum requirements, must agree to submit to jurisdiction of Florida courts, must agree to designate the CFO or an attorney for service of process, and must agree pay all final judgments. The bill also requires certain reporting to the OIR and provides the OIR with the ability to take actions if an assuming insurer no longer meets the statutory or rule requirements.