Florida
’s chief insurance regulator said in an exclusive interview last week that he hopes to put a final rule in place by April allowing foreign reinsurers to operate in his state without posting any collateral, but expects legal challenges by opponents.
However, “you can anticipate there may be a challenge to the rule,” according to Florida Insurance Commissioner Kevin McCarty, raising the possibility of court action by domestic insurance and reinsurance groups, which have voiced angry opposition to such a change.
In addition to Mr. McCarty in Florida, New York Insurance Superintendent Eric Dinallo had earlier proposed a regulation to reassess and possibly eliminate collateral requirements without waiting for a model law to be crafted by the National Association of Insurance Commissioners.
In an interview at the National Underwriter headquarters office in Hoboken, N.J., Mr. McCarty said the moves by the two regulators were not “rogue” actions. “We’ve been abundantly patient,” he said, and were prepared to go along with a proposal that had been crafted but then wound up being sent back to an NAIC study committee for further examination.
“We were disappointed the NAIC” went back to study “something we had studied for seven years,” he said.
Mr. McCarty said he was looking at a 60- to 90-day time frame to get his collateral rule approved by the state’s Financial Services Commission, made up of members of the governor’s cabinet, and has just begun a review of industry comments that have been submitted.
Both states would require reinsurers to have top rankings by financial rating firms in order to operate without collateral.
He said he is working very closely with New York so that the rules they come up with will be very much alike. “At the end of the day, if not similar, the differences between the two regulations will be minimal,” he added.
The current system—allowing U.S. reinsurance firms to do business without having to post any collateral but requiring alien insurers with a solid financial keel to post 100 percent of their potential liabilities—“doesn’t survive analysis,” Mr. McCarty said.
Florida
’s legislature gave approval for the reinsurance collateral change last January as part of broad-based legislation designed to improve insurance availability.
That legislation also expanded the Florida Hurricane Catastrophe Fund to help insurers reduce their costs by offering them discount reinsurance based on a requirement that savings be passed on to customers.