National Association of Insurance Commissioners Government Relations Leadership Council approved proposed legislation intended to modernize regulation of reinsurance by the states for submission to Congress

Last week, the National Association of Insurance Commissioners Government Relations Leadership Council approved proposed legislation intended to modernize regulation of reinsurance by the states for submission to Congress.  The proposed legislation establishes a "Reinsurance Supervision Review Board," which has power to:

"(1) evaluate the reinsurance supervisory systems of the States to determine whether such jurisdictions qualify as Home State Supervisors or Port of Entry Supervisors under standards recommended by the NAIC and adopted by the Board;

(2) evaluate the reinsurance supervisory systems of non-U.S. Jurisdictions to determine whether they are eligible for recognition by the Board as Qualified Non-U.S. Jurisdictions under standards recommended by the NAIC and adopted by the Board;

(3) develop sample supervisory recognition agreements and information sharing and regulatory cooperation agreements, to be entered into uniformly by Port of Entry Supervisors with Qualified Non-U.S. Jurisdictions under standards recommended by the NAIC and adopted by the Board; and

(4) preserve the confidentiality of supervisory information within the Board’s control, and enter into agreements with State, federal, and non-U.S. financial supervisory and law enforcement officials and agencies for sharing supervisory information on a confidential basis."  — Proposed Reinsurance Regulatory Moderization Act

The Proposed Reinsurance Regulatory Modernization Act also creates two new classes of reinsurers: "National Reinsurers" (domestic U.S.) and "Port of Entry Reinsurers" (foreign).  National Reinsurers would be licensed through a single home states.  Port of Entry Reinsurers would be licensed  through a single state that a port of entry."
 
According to a press release from the NAIC, NAIC endorsed the legislation to facilitate cross-border reinsurance transactions and enhance competition, while allowing for adequate regulatory oversight and preserving state-based regulation of reinsurance. The proposed legislation does place significant regulatory oversight on the states over reinsurers, but the legislation also pre-empts inconsistent state laws. In the pressre lease, Scott Richardson, Director of the South Carolina Department of Insurance, is quoted as saying the legisltation is "a more comprehensive alternative to the reinsurance provisions of the recently passed Nonadmitted and Reinsurance Reform Act.”
 
 
 
A copy of the proposed legislation can be found here.
 
By Sarah J. Delaney