Lloyd’s of London, which has been pressuring for a change in New York’s reinsurance regulation for years, reacted positively to the proposal by New York State Insurance Superintendent Eric Dinallo to amend the obligations of non-U.S. reinsurers to post collateral.
“We will study the proposal in detail but it appears to be a significant step forward towards U.S. and non-U.S. reinsurers being treated equally. This must continue to be the goal,” commented Lloyd’s general counsel, Sean McGovern, in a brief statement.
McGovern also praised Dinallo for his “leadership on the issue.”
Dinallo, has proposed that the state treat the highest rated U.S. and non-U.S. reinsurance companies, which are not authorized or accredited to do business in New York, in the same manner as New York reinsurance companies (See IJ web site Oct. 18).
Currently, non-U.S. reinsurers’ need to post 100 percent collateral requirements for the U.S. business they write. The requirement, which dates from World War II, has long been a source of dispute, especially for Lloyd’s. While other large reinsurance companies have U.S. subsidiaries, which are licensed and do business locally, Lloyd’s is a market, not a company. It is therefore heavily impacted by the requirements.
New York City is the U.S. financial hub. Dinallo’s decision, therefore carries a great deal of weight, and is not only welcome news for Lloyd’s, but also for all non-U.S. reinsurers.
The U.S. relies increasingly on those foreign carriers to reinsure coverage. While Bermuda’s reinsurers are closely linked to the U.S., the Berkshire Hathaway companies are the last remaining U.S. based property/casualty reinsurers of significant size. Therefore, levelling the playing field by modifying the collateral requirements for large well capitalized reinsurers, should eventually benefit U.S. consumers, according to proponents of the change.
Source: Lloyd’s – www.lloyds.com
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