On June 25, 2019 the National Association of Insurance Commissioners (NAIC) adopted amendments to its Credit for Reinsurance Model Law and Regulation (Reinsurance Models). The amendments were necessary in order to incorporate provisions relating to reinsurance collateral requirements contained in the Bilateral Agreement Between the United States and the European Union on Prudential Measures Regarding Insurance and Reinsurance, and a substantially similar agreement between the United States and the United Kingdom (together, the Covered Agreements), which were signed in September 2017 and December 2018, respectively.
While the Covered Agreements signed ultimately contained provisions relating to reinsurance collateral that NCOIL opposes, NCOIL nonetheless believes it is extremely important for states to adopt the Reinsurance Models, as amended, because pursuant to the terms of the Covered Agreements, U.S. state regulators risk federal preemption of state reinsurance laws unless the appropriate reinsurance collateral reforms are adopted into state law within 60 months from September 2017 – the date the Covered Agreement with the EU was signed. Thus, the “drop dead” date when federal preemption will occur absent state legislative action is September 2022. Additionally, there is a separate, shorter 42-month deadline at which time the federal government will begin conducting an assessment of remaining non-compliant states. This will occur in February 2021.
Therefore, in order to guard against federal preemption of the state-based system of insurance regulation – a system that has effectively protected consumers and helped create the largest, most competitive and innovative insurance market in the world – NCOIL urges all states to adopt the amended Reinsurance Models as quickly as possible.
NCOIL expects legislation on this issue to be introduced in states starting this Fall. Once introduced, click on each state below for the status of the legislation.