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The National Association of Insurance Commissioners has approved revisions to its Credit for Reinsurance Model Law and Regulation to make the models consistent with provisions of covered agreements with the European Union and United Kingdom.
The United States and the European Union signed a covered agreement to address the U.S. lack of equivalency related to the bloc’s Solvency II directive for the insurance industry in September 2017, and U.S. representatives signed an agreement with the United Kingdom ahead of Brexit in December 2018 that was widely applauded by industry groups. Failure to sign such agreements prompted concerns about U.S.-based insurers being put at a competitive disadvantage and potential retaliation against EU-based entities.
In addition to conforming to the requirements in the covered agreements, these changes will provide reinsurers domiciled in NAIC-qualified jurisdictions other than within the EU – currently Bermuda, Japan and Switzerland – with similar reinsurance collateral reductions, according to an NAIC statement issued on Tuesday.
"These changes underscore the commitment of U.S. insurance regulators to resolving any disparate treatment of U.S. insurance firms operating abroad," Eric Cioppa, NAIC president and Maine insurance superintendent, said in the statement. "I encourage my colleagues to work with their state legislatures to pass these updates quickly."
States must comply with the provisions in the covered agreement within five years of the signing of the covered agreement with the EU or face potential preemption by the Federal Insurance Office.
SCOTTSDALE, Ariz. — The U.S. state-based system of insurance regulation is under frequent scrutiny by federal and international regulators, and the captive insurance sector is getting caught up in these debates, said Julie Mix McPeak, president of the National Association of Insurance Commissioners.