The resolution calls for the Financial Condition Committee to flesh out the proposal to answer concerns raised by the reinsurance industry, and sets a September deadline for final approval by the full NAIC body.

North Dakota Commissioner Jim Poolman, who backs the resolution, said the vote should serve as a wake-up call to industry that it could no longer continue "to say 'no, no, no' without putting up any alternatives."

But industry representatives such as Mike Koziol, assistant vice president of the Property Casualty Insurers Association of America (PCI), said among the alternatives proposed were a federal reinsurance regulator and a working trust mechanism, similar to collateral but that would allow carriers to draw down the funds as claims are paid.

"It is a more vibrant scheme as opposed to collateral, which is static," he said.

The proposed reinsurance evaluation office will evaluate reinsurers primarily on their lowest financial strength rating, but also include other factors such as willingness to pay and effectiveness of the company's domiciliary regulator.

Critics contend that the current proposal contains too many unanswered questions, such as how a nongovernmental body like the NAIC could judge a foreign governments regulatory system or what would be the effect if a carrier was downgraded by a rating agency.

Phil Carson, American Insurance Association assistant general counsel, said it was the proposal of backers who failed to look at alternatives to not only collateral but also risk other than credit risk.

"This proposal is not responding to any identified problem in the reinsurance market and is not necessary," he said.

NAIC President and Maine Commissioner Al Iuppa and Task Force Chair and Massachusetts Commissioner Julie Bowler stunned industry reps at the summer meeting when they made a proposal scrapping all studies to implement a ratings scheme.

On Saturday, Mr. Iuppa said "the industry will take 300 years to come up with any alternative to collateral," and has repeatedly said 2006 was the year of decision on the issue.

He noted that alien reinsurers come from four jurisdictions--Bermuda, U.K., Germany and Switzerland--that each have regulatory and solvency monitoring methods on par or better than the United States.

Meanwhile, the issue of possible federal preemption of reinsurance regulation from the states loomed over the hearings as an unknown.

Illinois Insurance Director Mike McRaith repeatedly asked industry representatives to try and pin down Treasury officials as to whether the department considers collateral a trade issue and will therefore soon impose its own solution, which presumably might not be to industry's liking.

Industry officials have said in the past that their discussions with Treasury officials have indicated no such desire on their part.

Dave Matcham, chief executive of the International Underwriting Association, said the NAIC's move "represents a real breakthrough in the discussions to introduce a more efficient system of regulating reinsurance business in the U.S."

He said the 100 percent collateral burden imposed unnecessary costs on the industry and, "Any collateral requirement needs to be based on principles of financial strength rather than geographic location.

"We look forward to the NAIC concluding its due process as soon as possible. I would like to acknowledge and thank the association's Reinsurance Task Force for its leadership and vision in stating that the current system needs to be changed. The group's forward thinking approach recognizes the global nature of the industry and the value of other regulatory platforms."