Financially sound unaccredited reinsurance companies can now conduct business in Florida without having to post 100 percent collateral.
The Florida Office of Insurance Regulation announced that the Florida Cabinet, in its capacity as the Financial Services Commission, approved the rule implementing 2007 legislation.
The approval follows public hearings that were held in November and April and now enables the OIR to further its efforts at finding alternative approaches to improving Florida’s property insurance market.
“Florida needs to have well-capitalized and well-regulated foreign reinsurers to conduct business with Florida insurers without requiring them to post millions of dollars in collateral,” said Insurance Commissioner Kevin McCarty. “Attracting this capital is an important step toward stabilizing our insurance market. This rule sends a message of openness to the reinsurance market and encourages the investment of capital in reinsurance for Florida property risk. Increasing capital and increasing competition are very important to cover hurricane risk in our state.”
Under current law, U.S.-licensed and Florida-accredited reinsurers do not have to post collateral. When an insurance company buys reinsurance from a reinsurer authorized or accredited in Florida, the insurer gets a favorable accounting credit.
“This rule will allow the foreign reinsurers to be more competitive in our market,” McCarty said. “And it will make Florida a national leader in attracting capital via the reinsurance industry.”
For an insurer to get favorable accounting credit for reinsurance purchased from an unaccredited reinsurer, even if the unaccredited reinsurer is worth billions of dollars and is well regulated, the reinsurer has traditionally been required to post collateral for the full amount of the risk transferred. The collateral requirement has been cited as a barrier to investment by foreign reinsurers in the Florida market.
“As a safeguard, the Office always will do a thorough analysis of a reinsurer’s financial condition, claims paying and compliance history and regulatory environment before any collateral reduction is permitted,” added Deputy Commissioner Belinda Miller.
Source: Florida Office of Insurance Regulation
Topics Florida Legislation Reinsurance Market
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