In the era of globalization, should U.S. reinsurers be treated no differently than their alien counterparts? Thats the key question facing regulators next week as they debate a controversial proposal to assess all reinsurers equally when it comes to collateral requirements.

Indeed, the collateral proposal is one of the hottest issues up for debate at next week's meeting of the National Association of Insurance Commissioners. Instead of imposing more burdensome mandates on “alien” carriers, the idea is to require all reinsurers to post some collateral to cover potential U.S. liabilities–with the amount depending upon a number of criteria, to be determined by a new Reinsurance Evaluation Office.

Making such a plan feasible, proponents say, is the fact that four major foreign domiciles generate the bulk of U.S. “alien” reinsurance capacity–the United Kingdom, Germany, Switzerland and Bermuda, all with sophisticated and capable regulatory authorities. That lessens the need to impose a burdensome collateral charge on carriers that just happen to be from outside the United States.