Florida Office of Insurance Regulation Notifies Certified Eligible Reinsurers Of Supplemental Information Required for New and Renewal Applications

In accordance with Rule 69O-144.007 of the Florida Administrative Code (“Rule”), the Florida Office of Insurance Regulation (“OIR”) is authorized to allow credit for reinsurance without full collateral for transactions involving property and casualty assuming insurers not meeting Florida’s standard credit for reinsurance requirements — namely Section 624.610(3)(a)-(d), F.S.  The Rule not only sets forth the initial requirements to becoming an eligible reinsurer, it also delineates the documents and/or information that a certified eligible reinsurer must provide annually to maintain its eligible reinsurer status.  Of critical importance, the Rule appears to grant the OIR some regulatory authority to request “any other information that the Office [or OIR] may require to assure market stability and the solvency of ceding insurers.” 

The genesis of the Rule is Section 624.610(3)(e) of the Florida Insurance Code.  Section 624.610(3)(e), F.S. identifies specific factors that the Florida Insurance Commissioner (“Commissioner”) must consider if reinsurance is ceded to an assuming insurer that is not authorized, accredited or has established the requisite trust account pursuant to Section 624.610(3)(a)-(d), F.S.  Specifically, the Commissioner may allow statutory credit, “but only if the assuming insurer holds surplus in excess of $250 million and has a secure financial strength rating from at least two statistical rating organizations deemed acceptable by the commissioner as having experience and expertise in rating insurers doing business in Florida, including, but not limited to, Standard & Poor’s, Moody’s Investors Service, Fitch Ratings, A.M. Best Company, and Demotech.”  Section 624.610, in pertinent part, pinpoints eight items that the Commissioner must consider:

1.  The domiciliary regulatory jurisdiction of the assuming insurer.

2.  The structure and authority of the domiciliary regulator with regard to solvency regulation requirements and the financial surveillance of the reinsurer.

3.  The substance of financial and operating standards for reinsurers in the domiciliary jurisdiction.

4.  The form and substance of financial reports required to be filed by the reinsurers in the domiciliary jurisdiction or other public financial statements filed in accordance with generally accepted accounting principles.

5.  The domiciliary regulator’s willingness to cooperate with United States regulators in general and the office in particular.

6.  The history of performance by reinsurers in the domiciliary jurisdiction.

7.  Any documented evidence of substantial problems with the enforcement of valid United States judgments in the domiciliary jurisdiction.

8.  Any other matters deemed relevant by the commissioner.  The Commissioner shall give appropriate consideration to insurer group ratings that may have been issued.  The commissioner may, in lieu of granting full credit under this subsection, reduce the amount required to be held in trust under paragraph (c) of Section 624.610(3).

By adopting Rule 69O-144.007, the Commissioner provided further guidance as to how the OIR would evaluate and approve applications for certified reinsurer status.  We understand that the OIR recently notified its certified eligible reinsurers that, in addition to the documents required under Rule 69O-144.007(8) for new and renewal applications, reinsurers would need to provide supplemental information.  For example, similar to the New York Department of Financial Services, the OIR is now requiring that all eligible reinsurers complete the recently amended Form CR-F, which attempts to capture reinsurance recoverable information for the assuming insurer and its retrocessionaires.  Form CR-F is a byproduct of the charges undertaken by the National Association of Insurance Commissioners (NAIC)’s Reinsurance Task Force.  The OIR is also requiring the eligible reinsurer to provide a description of the eligible reinsurer domiciliary jurisdiction’s “liquidity priority of obligations in the context of an insolvency proceeding.”  This is an element of any determination they would make regarding the qualification of the domiciliary jurisdiction, which is part of their statutory review.  Moreover, the eligible reinsurer must provide a description of its “participation in any solvent scheme of arrangement, or similar procedure, involving U.S. ceding insurers.” 

Fortunately, the OIR has been very cooperative and understanding by addressing the questions raised by applicants seeking to comply with the request for supplemental information.  Based upon discussions that we have had with key OIR officials, we believe that the OIR is prepared to work with eligible reinsurers during the initial eligibility and subsequent renewal processes. 

A chart of eligible Florida and New York reinsurers is attached for review.

Should you have any questions, or require any assistance in complying with these new OIR directives, please contact Colodny Fass.

Should you have any questions or comments, please contact Colodny Fass.