Worldwide: Corporate Insurance & Regulatory Bulletin – February 2012

Last Updated: March 12 2012

Originally published 5 March 2012

Keywords: insurance, corporate, reinsurance, Finance Bill

UK – proposed changes to the taxation of insurance groups


HM Treasury has recently closed a consultation on the tax regime for controlled foreign companies ("CFCs"). CFSs are non-UK tax resident companies controlled by UK companies. Under the existing rules, a UK company can be assessed to UK tax on profits realised by the CFCs in its group where those CFCs pay less than 75% of the tax on their income that they would have paid had they been resident in the UK, and the departure of several UK-headquartered insurance groups has been attributed to this rule. HM Treasury is believed to be aiming to reverse this trend with its changes to the CFC tax regime.

HM Treasury is yet to digest all the comments received on the consultation paper, so the final form of the new rules to be introduced to Parliament as part of the Finance Bill 2012 is yet to be established. Probable features of the new rules can, however, be discerned from the draft rules published on 31 January 2012, including the following provisions:

  • Under the new regime, it is anticipated that an exemption from the regime for CFCs based in certain countries (typically those that are not considered tax havens) will continue to apply, although it is worth noting that the exemption for CFCs based in Luxembourg will not apply to insurers.
  • There may be an exemption when only a small proportion of the relevant CFC's trading income is derived from the UK.
  • It is expected that the determination of whether a country is a CFC will include consideration of where the significant people functions relevant to asset ownership and risk management are located – if these are in the UK, the CFC rules will apply. This definition will catch overseas insurers using UK persons to insure non-UK risk.
  • There are also expected to be changes to the types of income which fall to be assessed to UK tax under the CFC regime; for example, it is anticipated that property income will be excluded, as will reinsurance income unless there are no commercial reasons for the reinsurance or the CFC is outside the European Economic Area.


Changes to taxation of life assurance business are required in order to address issues arising from the advent of Solvency II, as the current tax system for life assurance businesses relies on regulatory returns which will not provide the necessary information once Solvency II comes into force.

The proposed changes in this area include the following:

  • All life assurance business will be taxed on the basis of accounts, rather than regulatory returns. (Currently, only permanent health insurance is taxed on an accounts basis.)
  • The allocation of profits between businesses will no longer be prescribed by statue, instead it will become a commercial allocation.
  • The tax regime for life assurance companies will be more aligned to the regime for other companies, for example with regard to the taxation of debt.

Europe – Solvency II timing update

February has seen continued speculation about when (and even whether!) Solvency II will be implemented. Although there is nothing concrete to report, market opinion certainly seems to be that the previously anticipated implementation date for Solvency II will be pushed back.

In particular, EIOPA has written a letter to the European Commission emphasising the challenges it faces with regard to consulting on Solvency II while there are still so many uncertainties, and stressing the importance of the next legislative steps occurring in a timely manner. The letter also stated that "it is difficult in light of the global crisis to defend any further delay in its implementation" and that further delays might encourage individual countries to pursue their own solutions.

Concern has also been expressed by the new head of the German supervisory authority that the anticipated timetable cannot now be met in light of the delay to the vote in the Economic and Monetary Affairs Committee which was announced in January.

In addition, the European Actuarial Consultative Group said in its February report that the rumours of delay were consistent with reports of continuing controversy in the European Parliament on topics including "discount rates and the reflection of asset illiquidity".

We will be monitoring this area closely.

Europe – European Commission letter to EIOPA regarding third country equivalence

On 2 February 2012, the European Commission (the "Commission") wrote a letter to the European Insurance and Occupational Pensions Authority ("EIOPA") regarding third country equivalence assessments under Solvency II.

Whilst not prejudging the outcome of the ongoing negotiations in the Council of Ministers and the European Parliament in relation to Omnibus II, the Commission understands that these bodies are supportive of a transitional regime for third country equivalence, and are, therefore, moving forward in this regard.

The Commission has been engaging in dialogue about a potential transitional regime for third country equivalence under Solvency II with the supervisory authorities of a number of third countries. As a result of this, the Commission has asked EIOPA to carry out a technical analysis (as opposed to a full equivalence assessment) of the following in relation to a number of countries:

  1. whether persons working for, or on behalf of, the supervisory authorities are bound by obligations of professional secrecy equivalent to those under Solvency I; and
  2. the areas where the third country's supervisory regime does not currently meet the equivalence criteria ("Gap Analysis").

The countries involved, and the status of the Commission's discussions with them, is as follows:

  1. Australia, Chile, Hong Kong, Israel, Mexico, Singapore and South Africa have expressed an interest in being part of a transitional regime. Discussions with these countries are ongoing and decisions about their potential inclusion in a transitional regime will not be taken by the Commission until 2013.
  2. Initial discussions have been had with Brazil, China and Turkey. Whilst discussions are at an early stage, these countries are also, in principle, interested in inclusion in a transitional regime.
  3. The Commission and EIOPA recently met with representatives from the Federal Insurance Office and state insurance regulators from the United States. As the prudential regulation of insurance undertakings is a state competence under US law, a different approach for equivalence in relation to the US will be required.
  4. The Japanese Financial Services Agency (the "JFSA") has indicated its interest in being included in a transitional regime in relation to group solvency and group supervision. Therefore, the Commission has asked EIOPA to initiate further discussions with the JFSA in order to carry out a Gap Analysis in these areas.

Europe – EIOPA publishes action plan for colleges of supervisors

EIOPA has published a 2012 action plan for colleges of supervisors, which is dated 16 January 2012 (the "Action Plan").

The Action Plan details actions which colleges are required to implement during 2012, and sets deadlines for the completion of these actions. The action points are split between action points for colleges which have not been constituted until now/ have not fulfilled the work plan for 2011, and action points for all colleges. Key targets from the Action Plan include:

  • Preparing for the implementation of Solvency II – the particular focus here is the pre-application process for internal model approval (an ongoing task);
  • Agreeing a work plan for when to take actions and decisions in 2012, in particular in relation to Solvency II (to be completed by 30 June 2012);
  • Enhancing of the regular exchange of information in colleges (to be complied with from 30 June 2012 and ongoing); and
  • (A task for the group supervisor) making a gap analysis (by the end of 2012).

Alongside the Action Plan, EIOPA also published a report (dated 2 February 2012) on the functioning of colleges and the accomplishments of the 2011 action plan (the "Report"). A key conclusion from the Report is that, despite the lack of a final legal text, colleges are making great efforts to prepare for the Solvency II regime.

Europe – European Commission White paper on pensions

The European Commission (the "Commission") published a White Paper on 16 February 2012 entitled "An Agenda for Adequate, Safe and Sustainable Pensions" (the "White Paper"). This follows the Commission's Green Paper published in July 2010, which reviewed the legal framework surrounding pension provision in Europe.

The White Paper puts forward measures to help create an environment where employees can work for longer and save more for their retirement. The proposals aim to balance the length of time people spend at work and in retirement. It also encourages personal and occupational pension savings in addition to state benefits. It addresses the possibility of introducing later retirement ages and proposes to make pensions more portable for people who move countries. The proposals also aim to ensure that occupational pension rights are sufficiently protected in employer insolvency situations.

To take these proposals forward, the Commission has proposed some legislative reforms, and it will also contemplate using codes of practice and conduct. In particular, the Commission wants to revise Directive 2003/41/EC (the "IORP Directive"), which deals with the supervision of institutions for occupational retirement provision, before the end of 2012 The UK implemented the IORP Directive through the Pensions Act 2004. The White Paper states that the aim of this review would be to "maintain a level playing field with Solvency II".

The suggestion that a Solvency II style regime could be imposed on pension schemes has proved controversial, as many in the pensions industry are worried that the cost of implementing such a regime would be substantial. The pensions systems used in European member states vary substantially, particularly in the importance placed on state, occupational and personal pensions savings. For that reason, it is not clear how a review of the IORP Directive may impact UK pensions legislation. EIOPA has promised an impact study which the industry hope will take into account the marked difference in pension provision between member states.

UK – FSA publishes insurance newsletters

The FSA published the first General Insurance Newsletter and Life Insurance Newsletter (together the "Newsletters") for the year on 8 February 2012. The Newsletters contain a summary of the FSA's latest work in the insurance sector and cover, amongst other things, a Solvency II policy and implementation update, an EU Gender Directive update, and lists of other publications and speeches since the last newsletter.

In relation to Solvency II, the FSA comments that "...we have no information to suggest that the dates beyond 2014 will change. Firms should continue to work on this basis and we will provide further updates as appropriate".

The Newsletters also provide updates as to when the FSA expects to publish a number of policy documents, including:

  • a response to comments received on guidance for consultation on structured products (due by the end of the first quarter of 2012);
  • a policy statement on insurance policies in packaged bank accounts (due in July 2012);
  • a consultation on a ban of all marketing of traded life policy investments (due in the second quarter of 2012);
  • a policy statement on Solvency II and linked long-term insurance business (due in the second quarter of 2012); and
  • final guidance on payment protection products (due by the end of the first half of 2012).

China – New draft rules on the administration of representative offices of foreign insurance related institutions

On 22 March 2011, the Chinese Insurance Regulatory Commission ("CIRC") released new draft rules on the administration of representative offices of foreign insurance related institutions (the "Draft Rules"). There was a public consultation on the Draft Rules, which ended in April 2011. If finally approved, the Draft Rules are intended to replace the rules on the administration of representative offices of foreign insurance institutions, published on 1 September 2006, and the interpretations of the CIRC on rules on the administration of representative offices of foreign insurance institutions, published on 25 November 2008.

The main changes that would be made by the Draft Rules include:

  1. the requirement that the total assets of the foreign insurance intermediary institution intending to set up a representative office in China at the end of the year immediately prior to application are at least US$2 billion would be reduced, so that instead they would only need assets of at least US$200 million;
  2. the requirements regarding the chief representative of the representative office would be strengthened – in particular, such individuals would be required to have 8 years' insurance related working experience (with 2 years' management experience in insurance companies);
  3. a "once a year face-to-face reporting" requirement would be imposed on the chief representative; and
  4. the amount of administrative penalties that could be given to any representative office which breaches the laws would be significantly increased.

The Draft Rules are under further review by the CIRC, who will publish them once ready. However, it is hard to estimate when this will happen as the timing may be affected by various factors including, for example, if there are discrepancies on certain provisions among relevant departments.

China – Renaissance of Insurance Asset Management Companies

For more than 4 years prior to the end of 2010 no new approvals for the establishment of Insurance Asset Management Companies ("IAMCs") had been issued by the CIRC, and only 9 IAMCs existed in the China market. However, this condition was changed as from December 2010 and a new round of establishment of IAMCs began.

This was signaled by the approval for the establishment of Shengming Asset Management Co., Ltd. in Shenzhen, which was issued on 16 December 2010.

In April 2011, in order to further control and manage potential risks in relation to fund operations, and to improve the development of asset management businesses, the CIRC issued Circular No. 19, which made several amendments to the 2004 'Interim Administrative Regulations on Insurance Asset Management Companies'. As a result of Circular No. 19, the requirement that the principal sponsor of an IAMC has prior insurance business experience was lowered from 8 years' prior experience to 5 years. However, other financial criteria for the establishment of an IAMC were enhanced. For example, the minimum amount of total assets required of the IAMC's principal sponsor was increased by RMB5 billion to RMB10 billion, and the minimum amount of the registered capital required of the IAMC was increased by RMB70 million to RMB100 million.

Other significant amendments include the expansion of the business scope of an IAMC (e.g. an IAMC will be able to operate funds from other consigners in addition to funds from its own shareholders). In addition, an IAMC is to be allowed to set up subsidiaries, although detailed implementation rules in relation to this area are to be issued separately in the future.

Despite the rise in the threshold requirements for the establishment of an IAMC, the market is still "hot", and insurance companies are positive about setting up IAMCs. Several approvals were issued by CIRC during 2011, including the approvals for AnBang Asset Management Co., Ltd (in May 2011), Guangdayongming Asset Management Co., Ltd. (in September 2011) and HeZhong Asset Management Co., Ltd. (in November 2011).

US – Update – States Continue to Consider Enacting the Amendments to the NAIC Insurance Holding Company System Model Act and Regulation

In 2011, Rhode Island, Texas and West Virginia became the first states to adopt legislation to implement the December 2010 amendments to the National Association of Insurance Commissioners ("NAIC") Insurance Holding Company System Regulatory Act ("Model Act") and Insurance Holding Company System Model Regulation with Reporting Forms and Instructions ("Model Regulation"). Throughout 2011 and the first part of 2012, legislation was introduced in a number of other states tracking the amendments to the Model Act. States that have considered or are currently considering legislation incorporating aspects of the amended Model Act include California, Florida, Illinois, Indiana, Kansas, Kentucky, Nebraska, New York, Oklahoma and Pennsylvania. In addition, the New York Department of Financial Services has released supplements to prior circular letters, discussing its increased efforts to monitor holding company systems and announcing enterprise risk management expectations. For more information on these New York regulatory developments, please see our articles from the September 2011 Mayer Brown Global Corporate Insurance & Regulatory Bulletin, New York Increases Efforts to Monitor Holding Company Systems and New York Announces Enterprise Risk Management Expectations. While the proposed and recently enacted holding company legislation is not uniform across the states, the legislation generally incorporates significant changes brought about by the amendments to the NAIC models.

The Model Act and Model Regulation apply to insurance holding company systems, which are defined as groups of two or more affiliated entities, at least one of which is an insurer. The December 2010 revisions represent a shift in emphasis of the NAIC's approach to the regulation of insurance holding company systems. Historically, such regulation has been designed to build "walls" around an insurer through regulation of acquisitions, dividends and inter-affiliate transactions. The new approach adds a new "windows" component to the traditional "walls" component giving insurance regulators access to enhanced information about the activities and risk profile of an insurer's non-insurance affiliates.

One of the focal points of the Model Act amendments is the concept of "enterprise risk" – defined as any activity, circumstance or event involving an insurer's affiliate that is likely to have a material adverse affect upon the financial condition of the insurer or its insurance holding company system, including anything that would cause the insurer's risk-based capital to fall into the company action level, or would cause the insurer to be in hazardous financial condition. The amended Model Act requires an insurer's ultimate controlling person to provide a confidential enterprise risk management ("ERM") report as part of the insurer's "Form B" annual holding company registration statement.


The Model Act revisions provide that the Form B must include a statement that the insurer's board of directors is responsible for any oversees corporate governance and internal controls and that the insurer's officers or senior management have approved, implemented and continue to maintain and monitor corporate governance and internal control procedures. The Form B must also include a confidential ERM report provided by the insurer's ultimate controlling person. An ERM report should be designed to identify the material risks within the insurance holding company system that could pose financial and/or reputational contagion to the insurer. The ERM report should include material developments regarding strategy, internal audit findings, compliance or risk management affecting the insurance holding company system. Among other considerations, the ERM report should identify any material activity or development of the insurance holding company system that, in the opinion of senior management, could adversely affect the insurance holding company system.


Among changes brought about under the revised Model Act and Model Regulation regarding the "Form A" acquisition process, an acquiring person is required to acknowledge that it and all subsidiaries within its control will provide information to its home state commissioner upon request as necessary to evaluate the risk of financial and/or reputational contagion to the insurer. An acquiring person must file a "Form E" in the domestic state to address the competitive impact of the acquisition. A control person that wishes to divest its controlling interest in a domestic insurer must give the commissioner 30 days' prior notice.


There is a rebuttable presumption of "control" when a person directly or indirectly holds 10% or more of the voting securities of an insurer. Before the Model Act and Regulation were modified, the presumption could be rebutted by filing a disclaimer of control, which became effective immediately unless disallowed by the commissioner after a hearing. Under the modified Model Act and Regulation, disclaimers are no longer automatically effective upon filing. Disclaimers are only effective if not disallowed within 30 days after filing. If disallowed, an applicant may request an administrative hearing to seek reconsideration of the commissioner's decision.


The modified Model Act and Regulation provide for revisions to the "Form D" process for review of transactions between insurers and their affiliates. Management service and cost sharing agreements must include specific items enumerated in the Model Act and Regulation. Amendments or modifications to previously filed agreements must be filed with an explanation for the change and the financial impact on the insurer. The domiciliary state commissioner must be notified within 30 days of termination of a previously filed agreement. Among other requirements, a statement must be made describing how each inter-affiliate transaction meets the "fair and reasonable" standard.


Under the modified Model Act and Regulation, a commissioner can examine not only the insurer but also its affiliates to ascertain the financial condition of the insurer, including the risk of financial contagion to the insurer by the ultimate controlling person, any affiliates or combination of affiliates, or the insurance holding company system on a consolidated basis. A commissioner has the power to issue subpoenas and examine persons under oath, and may seek a court order to enforce subpoenas, under penalty of contempt. Sanctions for violating "Form A" approval requirements include prohibiting all dividends or distributions from the insurer and placing the insurer under regulatory supervision.


In order to assess the business strategy, financial position, legal and regulatory position, risk exposure, risk management and governance processes, and as part of the examination of domestic insurers with international operations, a commissioner may participate in a "supervisory college" with other regulators charged with supervision of the insurer or its affiliates, including other state, federal and international regulatory agencies.


The West Virginia amendments become effective on 1 July 2012, including the requirement that the "Form B" include an annual ERM report.

The Rhode Island amendments became effective immediately upon passage on 27 May 2011, except for the requirement to file an ERM report, which takes effect on 1 July 2013.

The Texas amendments became effective on 1 September 2011, but the ERM report requirement is being rolled out in stages, based on the volume of an insurer's total direct or assumed annual premiums during the preceding 12-month period ("Premium Volume"). An insurer's annual "Form B" registration statement is required to include an ERM report from its ultimate controlling person as part of its first "Form B" filing due after (1) 1 July 2013, if its Premium Volume was $5 billion or more, (2) 1 January 2014, if its Premium Volume was more than $1 billion but less than $5 billion, (3) 1 January 2015, if its Premium Volume was more than $500 million but less than $1 billion and (4) 1 January 2016, if its Premium Volume was $300 million or more but less than $500 million.

For additional information on the amendments to the Model Act and Regulation, please see our article from the February 2011 Mayer Brown Global Corporate Insurance & Regulatory Bulletin, NAIC Adopts Modified Insurance Holding Company System Model Act and Regulation.

US – Update – NAIC Continues Consideration of AG 38

During a conference call on 21 February 2012, a joint working group of the National Association of Insurance Commissioners' (the "NAIC") Life Insurance and Annuities (A) Committee and Financial Condition (E) Committee (the "Joint Working Group"), formed by the Executive (EX) Committee to study Actuarial Guideline 38 ("AG 38"), an NAIC model regulation which requires life insurers to establish additional statutory reserves for certain universal life insurance policies with secondary guarantees ("ULSG policies")¸ took its first significant action by adopting a bifurcated approach to AG 38 that establishes separate standards for ULSG policies that are already in force and ULSG policies that are issued in the future.

For in force business, policies issued on or before a specified date would be treated as closed blocks of business. Those closed blocks of in force business would be evaluated by actuaries on a standalone basis. The evaluations would consist of asset adequacy analyses incorporating moderately adverse scenarios. If it is determined that the reserves are adequate on that basis, the company would not need to make an adjustment to its in force reserves. If it is determined that the reserves are deficient on that basis, the company would need to increase reserves to the level determined pursuant to the asset adequacy analysis. All states would rely on the conclusions reached pursuant to the actuarial evaluations. As such, the evaluations would lead to a unified regulatory decision regarding the adequacy of each company's in force reserves and the manner and timing of any adjustments. For prospective business, policies issued on and after a specified date, but prior to the effective date of Principle-Based Reserving ("PBR"), would be reserved using a formulaic approach consistent with the NAIC Life Actuarial (A) Task Force's interpretation of AG 38 (as modified or clarified to address any questions regarding its requirements). Policies issued on and after the effective date of PBR would be reserved under PBR methodology.

The Joint Working Group was created to address the issues surrounding AG 38 and statutory reserve requirements for insurers offering certain ULSG and term universal life products. In recent years, some regulators and industry participants have contended that some insurance companies may be improperly applying the provisions of AG 38 in determining the reserves for universal life policies with multiple secondary guarantees.

A number of issues regarding AG 38 remain outstanding and are still under consideration by the Joint Working Group. The Joint Working Group's draft proposal will now be considered by the Life Insurance and Annuities (A) Committee, the Financial Condition (E) Committee and ultimately the Executive (EX) Committee and Plenary at the NAIC Spring Meeting on 4-6 March 2012.

The Joint Working Group is comprised of representatives from Alaska, California, Florida, Iowa, New Jersey, New York, Tennessee, Texas and Virginia. The Joint Working Group operates under the following charge: The joint working group shall work expeditiously to determine whether it is prudent and necessary to develop interim guidelines and/or tools to be utilized by regulators in evaluating reserves for ULSG and Term UL products and, if so, to promptly develop such interim guidelines and/or tools. As part of this effort, the working group shall make recommendations regarding whether these interim guidelines and/or tools should be applied in force and/or prospective ULSG and Term UL products until such time as the final Valuation Manual is adopted. The working group shall use as guidance the work completed by the Life Actuarial Task Force with respect to this issue. Finally, the working group may engage resources as necessary to assist with analysis and preparation of necessary guidelines and/or regulatory tools.

US – Update – Additional states introduce credit for reinsurance reform legislation; New Jersey proposes new credit for reinsurance regulations

Georgia and Virginia have become two of the latest states where bills have been introduced to amend existing credit for reinsurance laws to adopt the reinsurance risk-based collateral reforms embodied in the recently amended National Association of Insurance Commissioners ("NAIC") model law. Meanwhile, the New Jersey Department of Banking and Insurance ("NJDOBI") has released for comment proposed new rules and amendments to existing rules to implement New Jersey's recently amended credit for reinsurance statute based on the NAIC model law. As we have previously reported, the following states have already adopted reduced collateral requirements:

  • Florida (property and casualty only)
  • Indiana (life, property and casualty)
  • New Jersey (life, property and casualty)
  • New York (life, property and casualty)

For more information on the NAIC reforms, please see our article from the October 2011 Mayer Brown Global Corporate Insurance & Regulatory Bulletin, NAIC Fall 2011 Meeting Notes. For background on the progression of reinsurance collateral requirements reform in the US, please see our article, US reinsurance collateral reform picks up pace, which can be found here.

Both the recently introduced Virginia House Bill 1139 and Georgia Senate Bill 385 contain provisions that track the amended NAIC model law and would make a significant change to the credit for reinsurance rules of those states by potentially allowing full credit to insurers that cede risk to unauthorized reinsurers that post less than 100% collateral. Under the newly proposed legislation in Virginia and Georgia, credit will be allowed to a domestic insurer when risk is ceded to an assuming insurer that has been "certified" as a reinsurer by the state insurance regulatory authority and that secures its obligations in accordance with the requirements of the relevant state's insurance code. In order to be eligible for certification, an assuming insurer must meet certain requirements, including being domiciled and licensed in a "qualified jurisdiction" as determined by the relevant state under its statute, maintaining financial strength ratings, maintaining minimum capital and surplus, submitting to the jurisdiction of the relevant state, meeting filing requirements and satisfying any other requirements of the relevant state. A rating will be assigned to each certified reinsurer, giving consideration to the financial strength ratings of the certified reinsurer. Most significantly, the proposed legislation provides that a certified reinsurer must secure its obligations at a level consistent with its ratings, as specified in rules to be adopted by the state insurance regulatory authorities, opening the door for the possibility of risk-based collateral requirements under which a certified reinsurer will be able to post less than 100% collateral, with the ceding insurer still receiving credit for the ceded insurance.

The Virginia bill also contains provisions concerning the concentration of risk, following amendments to the NAIC models that were added in the wake of similar provisions added to New York's Regulation 20, Credit for Reinsurance from Unauthorized Insurers. Under the proposed Virginia legislation, a ceding insurer would have to take steps to manage its reinsurance recoverable proportionate to its own book of business. A domestic ceding insurer would have to notify the Virginia State Corporation Commission (the "Commission") within 30 days after reinsurance recoverable from any single assuming insurer, or group of affiliated assuming insurers, exceeds 50% of the domestic ceding insurer's last reported surplus to policyholders, or after it is determined that reinsurance recoverables are likely to exceed this limit. The proposed legislation would also require a ceding insurer to take steps to diversify its reinsurance program and notify the Commission within 30 days after ceding to any single insurer, or group of affiliated assuming insurers, more than 20% of the ceding insurer's gross written premium in the prior calendar year, or after it is determined that the reinsurance ceded is likely to exceed this limit. In both situations, the notification to the Commission is intended to demonstrate that the exposure is being safely managed by the domestic ceding insurer.

Under the Virginia bill, the ability of reinsurers to reduce their collateral obligations on in force business that is already reinsured and for which collateral has already been posted will be limited by "effective date" language that tracks last minute changes that were added to the NAIC models. The relevant language provides that credit for reinsurance from certified reinsurers "shall apply only to reinsurance contracts entered into or renewed on or after the effective date of the certification of the assuming insurer. Any reinsurance contract entered into prior to the effective date of the certification of the assuming insurer that is subsequently amended after the effective date of the certification of the assuming insurer, or a new reinsurance contract, covering any risk for which collateral was provided previously, shall only be subject to [this section] with respect to losses incurred and reserves reported from and after the effective date of the amendment or new contract".

Interestingly, the proposed Georgia bill does not contain the risk concentration provision or the effective date limitation. Whether those last minute additions to the amended NAIC models will ultimately find their way into the Georgia bill in the legislative process remains to be seen.

On 21 February 2012, NJDOBI issued proposed new rules and amendments to existing rules to implement the amendments to its credit for reinsurance statute that were enacted last year. The proposed new rules are based on the recent amendments to the NAIC model law and regulation, and NJDOBI is proposing amendments to the existing rules to more closely track the NAIC model law and regulation. Highlights of the proposed rules include procedures by which an insurer may become a certified reinsurer, the basis by which a certified insurer would be rated, standards for determining whether a jurisdiction is a qualified jurisdiction, the creation of a sliding scale based on ratings to determine the amount of collateral required and the addition of a provision addressing concentration risk, similar to the provision in the recently introduced Virginia bill and discussed above. The NJDOBI proposal is currently in the comment stage, with comments due on 21 April 2012.

We expect a number of other states to consider similar legislation this year to amend their laws and regulations to bring them into line with the amendments to the NAIC Credit for Reinsurance Model Law (#785) and Credit for Reinsurance Model Regulation (#786) that were adopted at the NAIC's 2011 Fall Meeting. Although NAIC model laws and regulations do not become effective in any given state unless and until they are enacted by the legislature or promulgated by the insurance regulatory authority of that state, the NAIC model law and regulation generally have an influence on state laws and regulations to the extent that certain aspects of the amended models become accreditation standards of the NAIC. States strive to maintain their NAIC accreditation so that other states will defer to them as the primary regulatory authority for insurers domiciled in their states. Inclusion of the amended versions of the Credit for Reinsurance Model Law and Credit for Reinsurance Model Regulation in the NAIC accreditation standards will create a strong incentive for states to adopt them.

In Illinois, legislation has already been introduced to amend the existing credit for reinsurance laws to conform with the revised NAIC models. For more information on the legislation introduced in Illinois, please see our article from the January 2012 Mayer Brown Global Corporate Insurance & Regulatory Bulletin, Illinois continues to pursue credit for reinsurance reform.

During 2012, the NAIC will continue its consideration of credit for reinsurance reform through the Reinsurance (E) Task Force, which will be conducting discussions to determine which aspects of the amendments to the models will become accreditation standards. The task force will also be establishing a new process to evaluate reinsurance supervision in non-U.S. jurisdictions and will be forming a subgroup to review applications to become a certified reinsurer.

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© Copyright 2012. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions