Florida OIR relaxes rule for German reinsurer
Jacksonville Business Journal
by Rachel Witkowski Staff Writer
A German reinsurance company is the first foreign reinsurer to get a collateral reduction incentive from the state regulator for covering the insurance companies that keep property owners insured and bringing capital to a hurricane-prone state.
The Florida Office of Insurance Regulation reported Wednesday that Hannover Rueckversicherung AG was approved for a reduction in its collateral as part of OIR’s incentive to recruit more foreign reinsurers to the state.
“Modernizing insurance regulations to attract additional capital is good for competition, and good for the Florida insurance marketplace,” said Florida’s Insurance Commissioner, Kevin McCarty, in a news release. “Florida is the first state to take advantage of this concept, which will make our state a national leader in attracting international reinsurance capital.”
The collateral requirement reduction to entice foreign reinsurance companies to bring business to the state came out of the Florida Legislature’s property insurance special session in 2007. Based on that legislation, the Florida Cabinet approved a rule in September 2008 to allow the OIR to lower collateral requirements for foreign reinsurers “that are highly rated and financially sound,” the regulator stated.
Foreign reinsurance companies were previously required to post 100 percent collateral. whereas American insurance companies posted no collateral.
Hannover Rueckversicherung was the first reinsurer approved for the collateral requirement reduction, though it had previously offered reinsurance to Florida property insurers and other lines of business. Hannover reported $4.6 billion in capital and surplus, had a financial strength rating from at least two nationally recognized rating organizations and has presented evidence of financial stability to the insurance regulator, the OIR stated.
More than 90 percent of reinsurance to cover Florida property insurance comes from foreign reinsurance companies, according to the OIR. Hurricanes Katrina, Wilma and Rita caused about $72.7 billion in insured losses in 2005, of which reinsurers paid about 61 percent.
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