Massachusetts Insurance Commissioner Julie Bowler, who is also chair of the NAIC Task Force, speaking at NCOIL's meeting said the current premise that all U.S. reinsurers pose no solvency threat, while their alien counterparts pose the exact opposite, is out of date in an increasingly global economy.

Ms. Bowler asked NCOIL to hold off taking any action on their own proposal.

The commissioner said the NAIC now seeks a "regulatory paradigm shift" that recognizes that most of the alien reinsurance in this country comes from four countries--U.K., Germany, Switzerland and Bermuda--with comparably evolved regulatory systems.

Last June, the Task Force stunned the insurance industry with its proposal to scrap the five-year debate over alien collateral requirements with a proposal based on some still-undefined ratings system.

The new proposal builds on that, with the financial strength ratings of the Nationally Recognized Standard Rating Organizations such as Fitch and Standard & Poor's serving as what Ms. Bowler termed a "starting point."

Under the plan, the NAIC will establish a Reinsurance Evaluation Office that will look at, in addition to financial strength ratings, criteria such as willingness to pay and the efficacy of the solvency regulation in the insurer's country of domicile to create a score that would determine what percentage of collateral needs to be posted.

Such a program will still encounter stiff opposition from domestic ceding companies that has been evident since the debate emerged around the turn of the century, if comments at the NCOIL meeting are any indication.

Ms. Cohen asserted that under the new regime non-U.S. reinsurers will have no reason to obtain U.S. licenses since it will not affect the amount of collateral they will have to post.

It was also noted a company such as State Farm will have to post at least the minimum 20 percent collateral requirement for the reinsurance it provides its subsidiaries.

State Farm representative James Tuite said the company has yet to evaluate the proposal.

Also at the NCOIL meeting, NAIC president Alessandro Iuppa, the Maine insurance superintendent, said the proposal would represent the last NAIC effort to reach a consensus on this issue, although he did not make clear how he would carry out that promise.

"This is the time for regulators to deal with this," he said.

If the NAIC proposal fails, he said non-U.S. insurers could challenge the current collateral requirement in the global trade arena. "But to me this is a solvency issue," he said.

Final comments on the NAIC proposal are due Wednesday. Ms. Bowler said she hoped both the Task Force and the parent Financial Condition Committee would approve the measure at the NAIC winter meeting next month.

NCOIL has had a proposal pending for four years that would have liberalized collateral requirements. The NCOIL executive committee is expected to take up the collateral issue in March depending on what the NAIC does.