As we previously discussed here, the move to change the rules governing collateral requirements for foreign reinsurers has been gaining momentum in a number of U.S. states. New York started the trend last October, when its Superintendent of Insurance, Eric Dinallo, introduced a draft regulation that seeks to eliminate the existing collateral requirements imposed on foreign and alien reinsurers operating in New York. Less than two months after New York’s proposed change was announced, Florida’s Office of Insurance Regulation has expressed a desire to also change its system of foreign reinsurer collateral requirements by introducing a draft rule that would give the insurance commissioner discretion to allow unaccredited reinsurance companies to conduct business in Florida without having to post 100 percent collateral.
Proponents of the change assert that implementing this rule will increase the flow of foreign capital into the domestic reinsurance market, increasing capacity and benefiting consumers. They argue that the old rules, under which foreign or unaccredited reinsurance companies are obligated to post 100% of their liabilities to U.S. insurers to conduct business in the state, operate as a barrier to investment by foreign reinsurers. Foreign participation in the Florida reinsurance market is especially important, as the majority of residential property risk in the state is reinsured by non-U.S. insurance companies. A copy of the draft regulation can be found here.
