As we previously reported a year ago, the National Association of Insurance Commissioners (NAIC) adopted ‎amendments to the Credit for Reinsurance Model Law (#785) and Credit for Reinsurance Model Regulation ‎‎(#786) to implement the certain international agreements to eliminate collateral requirements for qualifying ‎reinsurers. The Models created a new category of reinsurers, called “reciprocal reinsurers”, which may qualify to ‎provide reinsurance to U.S. cedents without posting collateral for reinsurance credit. ‎ ‎

To date approximately 48 U.S. jurisdictions have enacted reciprocal reinsurer legislation and 38 of those ‎jurisdictions have adopted or proposed the enabling regulations. Many of these states are now accepting ‎applications. ‎

The NAIC Reinsurance Task Force is asking that states that have yet to adopt the legislation and regulations do ‎so by July 1, 2022, and at the latest by September 1, 2022, to avoid Federal preemption of laws that are ‎inconsistent with the international agreements. ‎

The benefits of the reciprocal reinsurer legislation extends to all E.U. countries, the U.K., and other “qualified” ‎jurisdictions, such as Bermuda, Japan and Switzerland.‎ ‎ In addition, the ability to obtain reciprocal reinsurer ‎status also extends to U.S. reinsurers that are domiciled in states that have been accredited by the NAIC – ‎currently, all 50 states, the District of Columbia and the U.S. Virgin Islands.‎

Similar to the “certified reinsurer” application process, reinsurers first apply for “reciprocal reinsurer” status in a ‎‎“lead” state and, once approved by that state and the NAIC ReFAWG (Reinsurance Financial Analysis Working ‎Group), can “passport” their approval to other states utilizing a streamlined application process. Other states are ‎encouraged to defer to the lead state’s approval. ‎

We continue to monitor and report on these developments.