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OIR Proposes Rules on Certified Reinsurers

OIR Proposes Rules on Certified Reinsurers

The Office of Insurance Regulation has followed up on a 2014 rule development workshop by now proposing two rules related to credit for reinsurance.  Proposed rule 69O-144.005 “Credit for Reinsurance” and proposed rule 69O-144.007 “Credit for Reinsurance from Certified Reinsurers” will provide guidance to reinsurers seeking to maintain reduced collateral and to domestic ceding insurers.  If an interested party requests a hearing on the rules, the OIR will hold the hearing on February 18 in Tallahassee.

The rules would use the term “certified reinsurer” instead of “eligible reinsurer” under existing regulations.  The rules would require a domestic ceding insurer to notify the OIR when its reinsurance recoverables from a single reinsurer or affiliated group of reinsurers exceed, or are likely to exceed, 50% of reported surplus.  In addition, a domestic ceding insurer would be required to notify the OIR when it cedes, or is likely to cede, to any single reinsurer or affiliated group of reinsurers more than 20% of its gross written premiums.

The proposed rules also outline the amount of collateral that certified reinsurers must maintain in order for ceding insurers to take 100% credit for the reinsurance.  The rules set forth a sliding scale that requires reinsurers to post less collateral as their financial strength ratings become higher.  The financial strength ratings must be obtained from at least two of five listed rating agencies.  When the rulemaking process is complete, the OIR’s goal is to post the ratings on its website so ceding insurers will be able to readily determine the collateral requirements associated with any certified reinsurers they use.