Lloyd’s Director & General Counsel Sean McGovern, called Florida’s decision to explore making changes in the collateral insurance requirements for foreign, or “alien,” reinsurers, such as Lloyd’s, “good news.”
Florida has begun consultations with the industry on regulations aimed at relaxing the collateral requirements. The decision follows the announcement in October that New York was also revising its rules (See IJ web site – https://www.insurancejournal.com/news/national/2007/10/18/84395.htm).
In an article on its web site (www.lloyds.com) Lloyd’s noted that “in a bid to attract new capacity into the region, the Florida Office of Insurance Regulation (OIR) has unveiled plans to give credit to companies with the strongest credit rating. This means that companies with a double ‘A’ rating from two or more rating firms would receive 100 percent credit, with the requirement reducing on a sliding scale based on ratings.”
Florida currently treats foreign and domestic reinsurers differently. US-licensed and Florida-accredited reinsurers do not have to post collateral but foreign, or “alien,” reinsurers, are required to post collateral to the full amount of their liabilities. Th OIR described the collateral requirement as a “barrier to investment by foreign reinsurers in the Florida market.”
Lloyd’s Chairman Peter Levene and others have long complained about the collateral requirements, maintaining that they are unnecessary, and calling for a “level playing field” (See IJ web site – https://www.insurancejournal.com/news/international/2007/10/19/84404.htm).
McGovern commented: “We are pleased that Florida has decided to revisit the rules regarding collateralization. We believe that this is a significant step towards US and non-US reinsurers being treated equally. This must continue to be the goal.”
Lloyd’s also noted that the “Florida OIR held a workshop last month to seek public input on a draft rule that would implement new legislation giving the insurance commissioner discretion in allowing unaccredited reinsurance companies to conduct business in Florida without having to post 100 percent collateral.” The text of the proposals may be obtained at: http://www.floir.com/pdf/Reinsurance_Coll_Rule_Draft_112107.pdf.
Earlier this year, the Florida Legislature passed a law that gives the insurance commissioner the ability to establish lower collateral requirements for foreign reinsurers that are highly rated and financially sound.
“Allowing foreign reinsurers to conduct business with Florida insurers without requiring them to post millions of dollars in collateral will lead to increased capital and competition in our state,” Commissioner Kevin McCarty indicated in a statement last month. “These factors will help to stabilize and potentially reduce property insurance rates.”
Source: Lloyds and the Florida Office of Insurance Regulation
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