Florida Adopts New Ratings-Based Reinsurance Collateral Rule
Dec 1, 2008
On September 16 the Florida Cabinet, sitting as the Financial Services Commission, adopted a potentially far-reaching rule providing for an alternative ratings-based approach to the reinsurance collateral requirement applicable for ceding insurers to take credit for reinsurance. In essence, this rule provides for lower collateral requirements for certain reinsurers that are determined to be “eligible” by the Florida Insurance Commissioner after an application process. The amount of collateral required to take credit for the reinsurance will be based upon the credit ratings of the insurer. This is a significant issue for the industry and all agents and industry professionals should understand the rule and the implications involved. The following is a summary of Florida ‘s newly adopted ratings-based reinsurance rule.