Reinsurance Focus

We have previously posted on the NAIC’s initiatives with respect to captives and the NY Department’s captives report. The NAIC’s Executive Committee and Plenary, in a joint teleconference, have adopted the Reinsurance Task Force’s proposed White Paper on the activities of captives. Activity regarding captives at the NAIC continues on several fronts, including:

Financial Analysis Working Group of the Financial Condition (E) Committee

Additional responsibilities relating to captives have been assigned to this working group:

• Perform analytical reviews of transactions (occurring on or after a date as determined by the NAIC membership) by nationally significant US life insurers to reinsure XXX and/or AXXX reserves with affiliated captives, special purpose vehicles (SPVs), or any other US entities that are subject to different solvency regulatory requirements than the ceding life insurers, to preserve the effectiveness and uniformity of the solvency regulatory system.
• For such transactions entered into and approved prior to this date and still in place, collect specified data in order to provide regulatory insight into the prevalence and significance of these transactions throughout the industry.
• Provide recommendations to the domiciliary state regulator to address company specific concerns and to the PBR Implementation (EX) Task Force to address issues and concerns regarding the solvency regulatory system.

It was noted that some state insurance departments already conduct reviews of some individual transactions involving captives.

Principle-Based Reserving Implementation (EX) Task Force of the Executive (EX) Committee

This task force will consider the Report’s recommendations in the context of the proposed Principal-Based Reserving system and make further recommendations, if any, to the Executive (EX) Committee. This activity may be conducted through a new Captive Working Group, which will report to this task force. The Captive Working Group will consider the following issues:

• Address any remaining XXX and AXXX problems without encouraging formation of significant legal structures utilizing captives to cede business;
• Address confidentiality of information; and
• Recommend enhancement to the Financial Analysis Handbook Guidance to allow for a consistent approach for states’ review and ongoing analysis of transactions involving captives and SPVs.

Blanks Working Group of the Accounting Practices and Procedures Task Force of the Financial Condition (E) Committee

This working group is evaluating an exposure draft of a definition of “captive affiliate,” which, if adopted, would result in enhanced disclosure in Schedule F of transactions with captives. (see recent agenda item).

Reinsurance Task Force of the Financial Condition (E) Committee

The Reinsurance Task Force may implement other recommendations from the White Paper.

This post written by Rollie Goss.

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