Credit for reinsurance involves deducting reinsurance in the calculation of a company's solvency margin. The credit is given either by increasing assets or reducing liabilities.

Collateralization involves reducing a reinsurer's credit risk through security deposits, and it is designed to provide the domestic supervisors with a level of assurance about the reinsurer's ability to meet its financial obligation to ceding insurers and their policyholders.

The report to the Task Force, prepared by the law firm Stroock & Stroock & Lavan LLP, compared regulatory requirements for credit for reinsurance in the United States, the United Kingdom and European Union countries.

Presented by Vincent Laurenzano, a consultant to New York-based Stroock, the report looked at solvency requirements, risk-transfer definitions and requirements, and other regulatory differences.

In conclusion, Mr. Laurenzano urged the NAIC not to decrease the collateral requirements for non-U.S. reinsurers. He told the regulators that "this is not a trade issue." He was referring to previous arguments by European reinsurers that the 100 percent requirement acts as a barrier to international trade.

Mr. Laurenzano asked the regulators not to reduce the collateral requirement merely to accommodate "a business model created by someone in Europe."

Representatives from the International Underwriting Association of London and from Cologne, Germany-based Cologne Re responded by asking the Task Force for time to study the previously unseen Stroock report.

Dave J. Matcham, IUA director of operations, said that without input from U.K., Bermuda, and EU insurance regulators--which they expect to present to the NAIC in San Diego in December--the Task Force would not have a balanced view of the regulatory environment on foreign soil.

The Task Force also heard a report from Washington, D.C.-based Reinsurance Association of America updating information about, among other things, the relative U.S. market shares of alien and U.S. reinsurers. According to the RAA, alien reinsurers are enjoying an ever-increasing share of the U.S. reinsurance market, presumably to the detriment of U.S. reinsurers.

Although the IUA questioned that declaration, the group could not definitively tell Task Force chairman and Georgia insurance commissioner John Oxendine that the statement wasn't accurate.