The comment period for the New York Insurance Department’s (“NYID”) Proposed Tenth Amendment to New York Regulations 17, 20 and 20-A (the “2010 Proposal”) came to a close on August 4, 2010.  The 2010 Proposal, which was released for public comment on July 22, 2010, would reduce the amount of collateral that unauthorized reinsurers must post in order for insurers to receive full credit for reinsurance ceded.  To be eligible for the reduced collateral under the 2010 Proposal, reinsurers would need to satisfy a number of requirements, including maintenance of at least $250 million in policyholder surplus.  For alien reinsurers to be eligible, the regulator of their home jurisdiction would also need to (i) execute a memorandum of understanding with the NYID, and (ii) grant U.S. reinsurers reciprocal access to the home jurisdiction.  Under the 2010 Proposal, the Superintendent would assign ratings to unauthorized reinsurers, ranging from Secure-1 to Vulnerable-5, and the amount of collateral required of the reinsurer would be determined based upon the rating assigned.

The 2010 Proposal follows a similar draft amendment to Regulation 20 that was published for public comment on December 24, 2008 (the “2008 Proposal”), which would have prohibited arbitration as a dispute resolution mechanism for ceding insurers seeking reinsurance credit under the 2008 Proposal.  The 2010 Proposal would not override agreements between ceding and assuming insurers to arbitrate, but would require that each party consent to the jurisdiction of U.S. courts.

The 2010 Proposal would also make ceding insurers subject to notification requirements regarding concentration of risk in an individual reinsurer or group of affiliated reinsurers.

To view the 2010 Proposal, click here.