US insurance regulatory body the National Association of
Insurance Commissioners’ (NAIC) has given its approval to the
Reinsurance Regulatory Modernization Act of 2009, a proposed
federal bill to be submitted to Congress that would reform
reinsurance regulation by states.

“The NAIC has endorsed the proposed federal legislation to
facilitate cross-border reinsurance transactions and enhance
competition within the US market, while ensuring that US insurers
and policyholders are adequately protected against the risk of
insolvency,” said Roger Sevigny, the NAIC’s president, chairman of
its Government Relations Leadership Council and New Hampshire’s
insurance commissioner.

The proposed legislation would create two new classes of reinsurers
in the US: national reinsurers (US) and port of entry reinsurers
(non-US).

In order to transact reinsurance business in the US, national
reinsurers would be licensed through a single home state, while
port of entry reinsurers would be certified through a single port
of entry state.

State insurance supervisors would be responsible for evaluating
their respective national and port of entry reinsurers, and
establishing appropriate collateral requirements for reinsurance
agreements.

Adding a federal element, the legislation also calls for
establishment of the Reinsurance Supervision Review Board as a
federal entity responsible for evaluating states and non-US
jurisdictions.

Scott Richardson, South Carolina Department of Insurance’s director
and acting chairman of the NAIC’s Reinsurance Task Force commented
that the NAIC supports the federal legislation in order to preserve
and improve state-based regulation of reinsurance and ensure timely
and uniform implementation of the legislation throughout all
states.

The proposed legislation follows hard on the heels of Congress’
passing of the Non-admitted and Reinsurance Reform Act (NRRA) on 10
September.

The NRRA has recently radically altered taxation of foreign
reinsurers in the US by closing a loophole that enabled them to
strip income from writing US business into tax havens.

This contrasted with domestic reinsurers that have always been
taxed in the US on income derived from their US business.