The 2010 surplus lines modernization act is not interfering with the ability of state regulators to access financial data for surplus lines reinsurers regulated by other states, the Federal Insurance Office says in a new report.
Insurance industry trade groups which had lobbied for the law for perhaps a decade said they were pleased with the findings.
Bernie G. Heinze, executive director of the American Association of Managing General Agents (AAMGA) said the association was pleased to learn of the conclusions reached by FIO relating to Part II of the NRRA.
“From the inception of the examination by Congress into the scope of the NRRA as first proposed, we have maintained that the system of state regulation to access reinsurance information for regulated companies has – and continues – working as expected for the benefit of consumers, the competitive market and regulators,” Heinze said. “The NRRA is operating as designed, to afford a consistent and reliable framework for reinsurers and their respective domiciliary state regulators to ensure financial solvency.”
The report was mandated by the Dodd-Frank Act financial services reform law.
The DFA contains a provision, the Nonadmitted and Reinsurance Reform Act, which modernizes and reforms oversight of the non-admitted or surplus lines industry. The law gives oversight of a surplus lines insurer to the domiciliary state.
Because the law gives total oversight of a surplus lines insurer or reinsurer to the state where the insurer or reinsurer is based, there had been some concern voiced by regulators before the law was passed that they would lose their ability through the new law to access vital reinsurance data for underwriters outside their state.
FIO concludes Part II of the NRRA “has not had an adverse impact on the ability of state regulators to access reinsurance information for regulated companies.” It added that FIO will continue to monitor this matter and any potential issues that may arise, and that it will provide an updated report in 2015.
The provision of the NRRA, Part II, assigns the responsibility for regulating the financial solvency of a reinsurer to the domiciliary state and generally bars other states from requiring the reinsurer to provide additional financial information.
But it does not prohibit a non-domiciliary state regulator from continuing to obtain a copy of financial statements reinsurers' file with their domiciliary state regulators.
FIO said that in preparing the report, it consulted the Reinsurance Association of America, which said as of July 1, 2013, its members were unaware of any situation in which a state regulator has been unable to obtain information in which it had an interest.
FIO said that through the same period, state regulators did not express any concern with respect to the impact of the provisions in Part II of the NRRA and the ability to promptly to receive from another state regulator needed financial information with respect to a reinsurer.
The report said that only a few state regulators mentioned any concern about the potential impact of Part II of the law, but that concern was based “in terms of speculation that in some cases information may not be made available in the future.”
The report said that, “No currently known factually bases were advanced for this potential future concern.”
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