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Member, Beacon International Group, Ltd.
In formal comments to the National Association of Insurance Commissioners, the Captive Insurance Companies Association has said proposed revisions to the definition of “multistate reinsurer” in the NAIC’s standards for state accreditation are overly broad, imprecise and should not be adopted.
In a letter directed to John M. Huff, chairman of the Kansas City, Missouri-based NAIC’s Financial Regulation Standards and Accreditation (F) Committee and director of the Missouri Department of Insurance, Dennis P. Harwick, president of Minneapolis-based CICA, said the proposed revisions “should not be adopted because they would impose an unreasonable and unneeded regulatory burden on the captive industry.”
Mr. Harwick’s letter said CICA acknowledges some regulators’ concerns about life and annuity insurers’ use of special purpose vehicles in meeting the excess reserve requirements set by the NAIC’s regulations XXX and AXXX. But, as written, the proposed revision to the definition of multistate reinsurer “would cause severe damage to the captive insurance industry, and no bases have been put forward as to why the proposal should apply to the entire captive industry,” the letter said.
As written, the proposal would impose NAIC accreditation standards on most captive reinsurers, the CICA letter said, and would also pose legal problems. In addition, the proposal “fails to consider the existing regulatory structure, which is designed to ensure financial soundness,” the letter said.
In a statement Wednesday, Mr. Harwick said the NAIC either needs to completely reject the proposed revision or rewrite it so that it is applicable only to captives owned by insurance companies and used to reinsure reserves under Regulation XXX or AXXX.