credit for reinsurance model law regulation task force’s

American Council of Life Insurers

101 Constitution Avenue, NW, Washington, DC 20001-2133

www.acli.com

April 1, 2019

Director Chlora Lindley-Myers

Missouri Department of Insurance, Financial Institutions

and Professional Registration

Chair, NAIC Reinsurance (E) Task Force

Via email to [email protected] and [email protected]

Re: March 2019 Proposed Revisions to the Credit for Reinsurance Model Law (#785) and the Credit

for Reinsurance Model Regulation (#786)

Dear Director Lindley-Myers:

The American Council of Life Insurers (ACLI) advocates on behalf of 280 member companies dedicated

to providing products and services that promote consumers’ financial and retirement security. Ninety

million American families depend on our members for life insurance, annuities, retirement plans, long-

term care insurance, disability income insurance, reinsurance, dental and vision and other supplemental

benefits. ACLI represents member companies in state, federal and international forums for public policy

that supports the industry marketplace and the families that rely on life insurers’ products for peace of

mind. ACLI members represent 95 percent of industry assets in the United States. ACLI also represents

all professional life reinsurers assuming mortality and morbidity risks in the United States.

ACLI Generally Supports the March 2019 Draft Amendments.

ACLI appreciates the opportunity to comment on the March 2019 proposed amendments to the NAIC

Credit for Reinsurance Model Law (#785) and Regulation (#786) (CFR Models). We also appreciate the

Task Force’s and NAIC’s thoughtful approach to drafting these amendments and to considering

feedback from stakeholders.

ACLI Encourages NAIC to Foster A Level Playing Field.

• We believe that non-EU, non-UK NAIC qualified jurisdictions should recognize the U.S. state-based

system of national regulation, including its approach to group capital and group supervision, as a

condition of their reinsurers having collateral requirements similar to those under the covered

agreements. The terms and conditions of that recognition and reciprocal collateral reduction should

also be similar to those imposed by the covered agreements. That tack would reduce pressure for

additional covered agreements, promote sound competition in the U.S. reinsurance market, and

maintain consumer protection.

To accomplish this we recommend revising #785 – F.(1)(a)(iii) to read: “A qualified jurisdiction, as

determined by the commissioner pursuant to [Subsection 2E(3) of Credit for Reinsurance Model

Law], which is not otherwise described in subparagraph (i) or (ii) above and which meets certain

additional requirements, consistent with terms and conditions of in-force covered agreements, as

specified by the commissioner in regulation.” Adding the underlined language would help maintain

a level playing field among the categories of reciprocal jurisdictions.

mailto:[email protected]


ACLI to NAIC Reinsurance Task Force

March 2019 Draft CFR Amendments

April 1, 2019

of 2

• We also urge the Task Force, as the NAIC Committee Process formalizes the standards and

processes for implementing the amendments, to conform them as closely as possible to the

analogous provisions in the covered agreements. We ask that those standards and processes be

exposed in draft form, with opportunity for comment.

ACLI Has Several Technical Comments in the CFR Models.

• #785 – F.(5): We recommend adding the word “ceded” to describe the outstanding liabilities that

the receivership court may require to be secured. Adding the word “ceded” conforms to Article 3,

paragraph 4.(h) of both covered agreements.

The revised subsection F.(5) would read: “if subject to a legal process of resolution, receivership, or

winding-up proceedings as applicable, the ceding insurer, or its representative, may seek and, if

determined appropriate by the court in which the resolution, receivership, or winding-up proceedings

is pending, may obtain an order requiring that the assuming reinsurer post collateral for all

outstanding ceded liabilities; and…”

• #785 -- F.(6): We recommend deleting the phrase “consistent herewith” to avoid any unintended

implication that parties may not negotiate collateral between them.

The revised subsection F.(6) would read: “Nothing in this subsection shall limit or in any way alter the

capacity of parties to a reinsurance agreement to agree on requirements for security or other terms

in that reinsurance agreement consistent herewith.”

• #786 – 9.B.(3)(e): We recommend deleting this subsection as an artefact of prior drafts,

unnecessary given the rule-making discretion in #785 – (1)(a)(iii).

We stand ready to assist NAIC and state regulators in gaining timely passage of the amended Model Law

on Credit for Reinsurance and working to support promulgation of the Model Regulation.

Sincerely,

Carolyn Cobb Vice President & Chief Counsel, Reinsurance & International Policy

[email protected] (202) 624-2340

Patrick Reeder Vice President & Deputy General Counsel [email protected] (202) 624-2195

Steve Clayburn Senior Actuary, Health Insurance & Reinsurance

[email protected] (202) 624-2197




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April 1, 2019

Director Chlora Lindley‐Myers, Chair (Missouri)

Director Ray Farmer, Vice Chair (South Carolina)

National Association of Insurance Commissioners, Reinsurance (E) Task Force

Attention: Mr. Jake Stultz, [email protected]

RE: NAIC Implementation of the Bilateral Agreements Between the United States of America

and the European Union (EU) and United Kingdom (UK) on Prudential Measures

Regarding Insurance and Reinsurance (Covered Agreements)

Dear Director Lindley‐Myers, Director Farmer, Members of the Task Force & Interested Regulators, Thank you for the opportunity to comment on the March 7, 2019, Reinsurance (E) Task Force exposed proposed revisions to the Credit for Reinsurance Model Law (#785) and the Credit for Reinsurance Model Regulation (#786), which are intended to incorporate relevant provisions of Covered Agreements. We write on behalf of the Association of Bermuda Insurers & Reinsurers (ABIR)1; General Insurance Association of Japan (GIAJ)2; and the Swiss Insurance Association3. Collectively, we represent the remaining three NAIC qualified jurisdictions, currently providing reinsurance coverage and protection to U.S. ceding companies and policyholders, which have not

1 ABIR members have headquarters and operations in Bermuda with operating subsidiaries in the United States

and Europe and do business in more than 150 countries. Members employ over 117,000 people around the globe

including more than 47,500 employees in the US, nearly 1,500 employees in Bermuda, and more than 16,800 in

Europe. Over the past twenty years, ABIR members have paid policyholders and ceding companies in the United

States and EU over a quarter of a trillion (USD) in claims.

2 GIAJ is an industry organization whose 27 member companies account for about 95 percent of the total general insurance premiums in Japan which is one of seven jurisdictions listed in the NAIC List of Qualified Jurisdictions. Some of its members or their affiliates are certified reinsurers. 3 The Swiss Insurance Association SIA is the umbrella organization that represents the private insurance industry. The SIA’s membership consists of over 80 small and large, national and international primary insurers and reinsurers with over 46,000 employees in Switzerland. SIA member companies account for over 90% of private insurance premiums generated in the Swiss market.

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proceeded with negotiating a covered agreement with the U.S. Department of Treasury and U.S. Trade Representative under the authority of The Dodd–Frank Wall Street Reform and Consumer Protection Act (Pub.L. 111–203, H.R. 4173, commonly referred to as Dodd–Frank). NAIC Credit for Reinsurance Reform Over six years ago, the NAIC passed amendments to its Credit for Reinsurance Model Law (#785) and its Credit for Reinsurance Model Regulation (#786) that, once implemented by a state, allow non-U.S. reinsurers to post significantly less than 100% collateral for U.S. business, provided the reinsurer is evaluated and certified. The NAIC developed a process to evaluate the reinsurance supervisory systems of non‐U.S. jurisdictions, for purposes of developing and maintaining a list of jurisdictions recommended for recognition by the states as Qualified Jurisdictions. The purpose of the Process for Developing and Maintaining the NAIC Lists of Qualified Jurisdictions was to provide a documented evaluation process for creating and maintaining this NAIC list.

The NAIC also established the Reinsurance Financial Analysis Working Group (ReFAWG). Its purpose is to provide advisory support and assistance to states in the review of applications for certified reinsurers. ReFAWG makes available to the states a uniform application for certification of reinsurers based upon the requirements of the NAIC Credit for Reinsurance Model Law (Model #785) and Credit for Reinsurance Model Regulation (Model #786).

Assuming insurers (reinsurers) are encouraged to submit initial applications to a single state to allow the application to be considered through the ReFAWG process and in an effort to facilitate multi‐state recognition of a certification, known as passporting. If an applicant for certification has been certified as a reinsurer in an NAIC accredited jurisdiction, other states have the discretion to defer to that jurisdiction's certification, and to defer to the collateral level assigned by that jurisdiction. ReFAWG helps facilitate passporting of certified reinsurers and address issues of uniformity among the states. ReFAWG also facilitates ongoing monitoring of certified reinsurers. Ultimately, states have the discretion to defer to the certification and collateral reduction of a reinsurer assigned by the lead state. As of March, 25 2019, NAIC ReFAWG recommends twenty‐nine (29), certified reinsurers for passporting by the states. Twenty-five (25) of these certified reinsurers—over 86%—have Bermuda, Japan or Switzerland as a domiciliary jurisdiction.4 Bermuda, Japan and Swiss Markets On December 16, 2014, the NAIC Executive (EX) Committee and Plenary approved the NAIC Qualified Jurisdiction Working Group’s Summary of Findings and Determination of Bermuda: Bermuda Monetary Authority (BMA), Japan: Financial Services Agency (FSA), and Switzerland: Financial Market Supervisory Authority (FINMA), to recognize approving these jurisdictions as 4 NAIC ReFAWG lists Lloyds of London (UK) entities collectively as one reinsurer.

https://en.wikipedia.org/wiki/Act_of_Congress

http://legislink.org/us/pl-111-203

https://www.congress.gov/bill/111th-congress/house-bill/4173

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Qualified Jurisdictions and place these jurisdictions on the NAIC List of Qualified Jurisdictions, effective January 1, 2015 for a 5‐year period.5

Individual reinsurers have been analyzed and certified by regulators based on specific criteria including financial strength, timely claims payment history, and the requirement that a reinsurer be domiciled and licensed in a "qualified jurisdiction." Reinsurers in Bermuda, Japan and Switzerland have worked collaboratively with the NAIC and state insurance regulators to implement the original reforms envisioned for cross-border reinsurance including the original 2011 Credit for Reinsurance Model Law (#785) and the Credit for Reinsurance Model Regulation (#786). We appreciate the ability to build upon these successful relationships to offer suggestions in support of advancing Credit for Reinsurance in a manner that continues to protect U.S. ceding companies and policyholders and maintains a competitive, level playing field for certified reinsurers. SUGGESTIONS TO PROPOSED MODELS and NAIC PRACTICES:

I. The NAIC Models should create a level playing field for all reciprocal jurisdictions in a manner that is jurisdictionally agnostic

We urge the Task Force, as the NAIC Committee Process formalizes the standards and processes for implementing the application of ‘commissioner discretion’ described in the amendments, to conform them as closely as possible to the analogous provisions in the covered agreements. Doing so would promote sound competition among reinsurers from qualified jurisdictions that have not yet signed a covered agreement with the United States. We ask that those standards and processes be exposed in draft form, with opportunity for comment.

II. The NAIC Credit for Reinsurance Model Law (#785) imposes uncertainty and ambiguity in Reciprocal Jurisdictions without a Covered Agreement

Of the three paths to establish a reciprocal jurisdiction, this third draft of the Credit for Reinsurance Model Law (#785) gives certainty to the assuming insurers domiciled in jurisdictions that have entered into an international reinsurance covered agreement or are from a U.S. jurisdiction in good standing with the NAIC financial standards and accreditation program. While the proposed, Model Law (#785) gives the commissioner the ability to use the rigor and discipline of individual state formal rule making process to add commissioner discretion for qualified jurisdictions, this commissioner discretion is only reserved for qualified jurisdictions not recognized by a covered agreement or from a U.S. jurisdiction. To become qualified, jurisdictions are already required to go through substantial rigorous review and a

5 As of January 1, 2017, the NAIC List of Qualified Jurisdictions include Bermuda, France, Germany, Ireland, Japan,

Switzerland and the United Kingdom (UK).

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thorough application process with the applicant state and NAIC ReFAWG and in the case of Bermuda, Japan and Switzerland qualifications have demonstrated in practice their qualifications since being fully approved in 2015.

We respectfully request that the any ‘certain additional requirements’ language in 2(F)(a)(iii) be revised as follows to reflect an intent to maintain a level playing field among the categories of reciprocal jurisdictions and apply any additional requirements consistent with the terms of existing international covered agreements:

Section 2.F. (1) Credit shall be allowed when the reinsurance is ceded to an assuming insurer meeting each of the conditions set forth below. (a) The assuming insurer must have its head office or be domiciled in, as applicable, and be licensed in a Reciprocal Jurisdiction. A “Reciprocal Jurisdiction” is a jurisdiction that meets one of the following: (i) … (ii) …; or (iii) A qualified jurisdiction, as determined by the commissioner pursuant to [Subsection 2E(3) of Credit for Reinsurance Model Law], which is not otherwise described in subparagraph (i) or (ii) above and which meets certain additional requirements, consistent with the terms and conditions of in-force covered agreements, as specified by the commissioner in regulation.

III. A provision in the Proposed Model Regulation (#786) is inconsistent with the

reference to regulation in Model Law (#785), and inserts additional uncertainty and ambiguity for non- Covered Agreement jurisdictions

Credit for Reinsurance Model Regulation (#786) Section 9, subparagraph (B)(3)(e) is now unnecessary given the discretion granted in the model law and presents opportunity for potentially arbitrary application of commissioner discretion outside of formal rulemaking with its due process considerations. Any additional factors for consideration should be delineated in regulation or can be addressed in the NAIC ReFAWG and Reciprocal Jurisdiction processes. We believe amending 9(B)(3)(e) as follows is consistent with the intent of the NAIC with respect to identifying reciprocal jurisdictions.

(B) (3) A qualified jurisdiction, as determined by the commissioner pursuant to [cite state law equivalent of Section 2E(3) of the Credit for Reinsurance Model Law and Section 8C of the Credit for Reinsurance Model Regulation], which is not otherwise described in paragraph (1) or (2) above and which the commissioner determines meets all of the following additional requirements:

(a) … (e) Such additional factors as may be considered in the discretion of the Commissioner

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We appreciate the opportunity to provide these comments and look forward to continuing to work with the NAIC and state insurance regulators to assure smooth implementation of the credit for reinsurance revisions. We would appreciate the opportunity to discuss these reforms with you at the NAIC Spring National Meeting in Orlando, Florida.

Sincerely,

John Huff President and CEO Association of Bermuda Insurers and Reinsurers

Makoto Kawagoe General Manager, International Business Planning Department The General Insurance Association of Japan

Urs Arbter Division Head of Insurance Strategy Swiss Insurance Association

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biltir.bm BILTIR_Bermuda

[email protected] / [email protected] +1-441-295-1044 1st Floor, Par-la-Ville Place 14 Par-la-Ville Road, Hamilton HM 08, Bermuda

April 1, 2019

VIA EMAIL to [email protected] and [email protected] Reinsurance Task Force at the National Association of Insurance Commissioners 1100 Walnut Street, Suite 1500 Kansas City, MO 64106-2197

RE: Proposed Revisions to the Credit for Reinsurance Model Law and Regulation

The Bermuda International Long Term Insurers and Reinsurers (“BILTIR”) thanks the National Association of Insurance Commissioners (“NAIC”) for accepting several of the comments submitted in our letter dated October 16, 2018. We note however there were certain BILTIR comments that were not addressed in the revised March 7, 2019 version of the “Proposed Revisions to the Credit for Reinsurance Model Law and Regulation” (the “Revised Proposals”). We believe those areas are fundamental to establishing a workable framework for achieving the goals of the model revisions, and therefore merit the attention of the Task Force.

BILTIR represents 45 insurers and reinsurers and 16 associate companies servicing the long-term (life and annuity) industry. Our members account for over half of the more than $300 billion of assets held by all long-term companies on the island, and the sector continues to grow. Approximately 73% of reserves held by the Bermuda long-term insurers and reinsurers are attributed to business with US ceding companies.

We thank you for the opportunity for BILTIR members to share our thoughts and comments on the Revised Proposals, which we outline below.

1. Treatment of Non-EU Qualified Jurisdictions

We reiterate the importance of a level and consistent playing field for EU jurisdictions under the Bilateral Agreement Between the United States of America and the European Union on Prudential Measures Regarding Insurance and Reinsurance and the UK under the Bilateral Agreement Between the United Kingdom and the United States of America on Prudential Measures Regarding Insurance and Reinsurance (collectively referred to as the “Covered Agreements”), and the requirements placed upon non-EU and non-UK Qualified Jurisdictions. As such, the framework in the NAIC models needs to provide certainty regarding those requirements in order for the industry and its regulators to evaluate whether the requirements are the same.

Several sections in both the Credit for Reinsurance Model Law (#785) amended March 7, 2019 (“Model Law”) and Credit for Reinsurance Model Regulation (#786) amended March 7, 2019 (“Model Regulation”) remain uncertain in this area. For example, the definition of “Reciprocal Jurisdiction” in section 9(B)(3)(e) of the Model Regulation includes “[s]uch additional factors as may be considered in the discretion of the commissioner”. Since the Model Regulation would be expected to provide additional details, this still appears to be open-ended for additional requirements to be imposed on non-EU jurisdictions.



With respect to the proposed edits in section 9(C)(3)(c) of the Model Regulation, the implications are for an insurer domiciled in a reciprocal jurisdiction to maintain, on an ongoing basis, a minimum solvency or capital ratio as “the commissioner finds appropriate”. We suggest that this amendment adds further uncertainty and produces inconsistent requirements for EU and non-EU jurisdictions. We recommend that the Commissioner should recognize and utilize the applicable statutory minimum solvency requirement for the relevant Reciprocal Jurisdiction which would provide greater clarity around the regulations.

We note that sections F(1)(b), and (c) of the proposed amendments to the Model Law, and sections 9(B)(3)(e), 9(C)(3)(c) of the Model Regulation continue to provide for potential disparate treatment of non-EU insurers. It is imperative to our BILTIR members that the NAIC work toward a framework that treats EU and non-EU jurisdictions equivalently and provide additional clarity regarding the standards imposed on non-EU jurisdictions.

2. Cedant’s Insolvency

Subsection F(5) of the Model Law was amended, however we still have concerns surrounding the term ‘conservation,’ which requires a lower standard to secure a court order and is designed to be a lighter approach than rehabilitation or liquidation. Additionally, we suggest adding the word ‘ceded’ to describe the outstanding liabilities that the receivership court may require to be secured. Adding this word conforms to Article 3, paragraph 4(h) of the Covered Agreements. Therefore, we support the draft language of subsection F(5) of the Model Law be revised with the following language: “If subject to a legal process of rehabilitation, or liquidation as applicable, the ceding insurer, or its representative, may seek and, if determined appropriate by the court in which the proceedings are pending, may obtain an order requiring that the assuming insurer post security for all outstanding ceded liabilities”.

3. Mutual Recognition

Lastly, we note there have been amendments made in the Revised Proposals, for example section 9(B)(3)(c) of the Model Regulation, where qualified jurisdictions are explicitly required to recognize the U.S. state regulatory approach, including its approach to group supervision and group capital, in order to seek to become a reciprocal jurisdiction. We suggest these amendments be designed so that the U.S. state regulatory approach also has an obligation to mutually recognize the Reciprocal Jurisdiction’s regulatory approach including its approach to group supervision and group capital. We also recommend that explicit language be added to allow for flexibility on how mutual recognition could be achieved, including the potential for a regulatory process to meet this requirement.

We thank the NAIC for the opportunity to provide our feedback on the Revised Proposals and we are happy to address any questions you may have.



Sincerely,

CC BILTIR Board of Directors

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THE GENERAL INSURANCE ASSOCIATION OF JAPAN 9 Kanda Awajicho 2-Chome, Chiyoda-Ku Tokyo 101-8335, Japan Tel:+81-3-3255-1703 E-mail:[email protected]

April 1, 2019

Director Chlora Lindley‐Myers, Chair (Missouri) Director Ray Farmer, Vice Chair (South Carolina) National Association of Insurance Commissioners, Reinsurance (E) Task Force Via email to [email protected], [email protected]

Re: GIAJ Comments on proposed revisions to the Credit for Reinsurance Model Law (#785) and the Credit for Reinsurance Model Regulation (#786)

Dear Director Lindley‐Myers and Director Farmer,

The General Insurance Association of Japan (GIAJ)1 appreciates the opportunity to comment on the proposed revisions to the Credit for Reinsurance Model Law (#785) and the Credit for Reinsurance Model Regulation (#786).

In previous comments on NAIC consultations, the GIAJ highlighted that any revisions should incorporate principles such as consistency with existing rules, fair treatment among insurers, efficiency of supervision, and removal of duplicative regulations.

We note that the latest proposed revisions are intended to incorporate technical input received from the U.S. Department of Treasury and the Office of the United States Trade Representative. We also understand that it is not the intention of the NAIC to alter the basic direction of the revisions being considered by the NAIC Reinsurance (E) Task Force through its process, of which the GIAJ has been supportive.

We wish to submit some comments on the latest version of the proposed revisions to clarify some parts which we think are ambiguous.

Model Regulation 9.B.(3)(c) In order to be designated as a “Reciprocal Jurisdiction”, a qualified jurisdiction needs to provide “written confirmation” that it recognizes the US state regulatory approach to group supervision and group capital. This “written confirmation” should be accepted in manner that is format agnostic. From the standpoint of efficiency and fair treatment, as long as recognition is secured in effect, the format of the written confirmation should not be important. For example, an e-mail communication from a competent regulatory authority in the qualified jurisdiction should be sufficient confirmation. Introduction of prescriptive measures should be avoided. It should be noted that insurance related laws in many jurisdictions are not applied extraterritorially, and that they rarely refer to other jurisdictions let alone whether or not they recognize other supervision.

1 GIAJ is an industry organization whose 27 member companies account for about 95 percent of the total general insurance premiums in Japan which is one of seven jurisdictions listed in the NAIC List of Qualified Jurisdictions. Some of its members or their affiliates are certified reinsurers.





2

Model Regulation 9.B.(3)(d) Similar to the above comment, with regard to “written confirmation” by a competent regulatory authority in a qualified jurisdiction on information provision regarding insurers and their parent, subsidiary, or affiliated entities referred to in this section, written confirmation should be accepted irrespective of its format. Model Regulation 9.C.(3)(c) With regard to an assuming insurer domiciled in a Reciprocal Jurisdiction, as defined in Section 9.C.(3), we understand that the NAIC Committee Process will publish recommendations regarding a minimum solvency or capital ratio that such an insurer must have and maintain on an ongoing basis. From the standpoint of consistency with existing rules and efficiency of supervision, such a minimum solvency or capital ratio requirement should utilize an existing NAIC process such as the “Process for Developing and Maintaining the NAIC List of Qualified Jurisdictions”. In addition, with regard to existing qualified jurisdictions, determinations made in a qualified jurisdiction’s process should be maintained unless a major change is made regarding its regulation. Model Regulation 9.C.(5) Drafting Note We welcome a reference to the “passporting” process which facilitates multi-state recognition of assuming insurers and encourages uniformity among states. Model Regulation 9.B.(3)(e) and 9.C.(8) The Credit for Reinsurance Model Law (#785) provides that the Commissioner may adopt specific additional requirements via regulation. While we understand that the Commissioner has discretion to some extent regarding credit for reinsurance, such discretion should not override the basic idea of the Models and should avoid legal uncertainty. Therefore, we believe the related wording of Sections 9.B.(3)(e) and 9.C.(8) should be deleted. If the NAIC finds it difficult to delete the wording related to commissioner discretion, new wording to limit such discretion within necessary limits should be added (e.g. "to the extent necessary, in light of the objectives of this regulation"). Sincerely,

Makoto Kawagoe General Manager, International Business Planning Department The General Insurance Association of Japan

John F. Finston 415-591-7574 Direct415-591-7510 [email protected]

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Mr. Daniel (“Dan”) Schelp Managing Counsel National Association of Insurance Commissioners 1100 Walnut Street Suite 1500 Kansas City, MO 64106-2197

Mr. Jake Stultz Senior Accounting Policy Advisor National Association of Insurance Commissioners 1100 Walnut Street Suite 1500 Kansas City, MO 64106-2197

Re: Proposed Revisions of the Credit for Reinsurance Model Law and Regulation

Dear Mr. Schelp and Mr. Stultz:

We appreciate the opportunity to comment on the Proposed Revisions of the Credit for Reinsurance Model Law (#785) and Regulation (#786) exposed for public consideration by the Reinsurance (E) Task Force on March 7, 2019 (collectively, the “Exposed Drafts”). We are submitting these comments on behalf of the International Underwriting Association of London (“IUA”). The IUA is a trade association that represents international insurers operating in the London Insurance Market including multi-national insurers and reinsurers that are directly and significantly affected by the U.S. Credit for Reinsurance laws and regulations. The IUA has long supported the Reinsurance (E) Task Force in furtherance of its mission to “monitor and coordinate activities and areas of interest”, including with respect to its periodic consideration of certain model law revisions.

The IUA commends the NAIC for its tremendous progress as respects the proposed amendments to the Credit for Reinsurance Model Law and Credit for Reinsurance Model Regulation. In addition, we are grateful for the collaborative and transparent drafting process that permits us to engage with state insurance regulators and NAIC staff on this important topic.

Attachment Six

Mr. Daniel (“Dan”) Schelp Mr. Jake Stultz April 1, 2019 Page 2

As you know, the Bilateral Agreement Between the United States of America and the European Union on Prudential Measures Regarding Insurance and Reinsurance and the substantially similar Bilateral Agreement Between the United States of America and the United Kingdom on Prudential Measures Regarding Insurance and Reinsurance (collectively, the “Covered Agreements”) contemplate action by the states. In particular, certain laws and regulations regarding collateral requirements applicable to European Union (EU) and/or U.K. reinsurers accepting business from U.S. ceding insurers must be updated in order to be consistent with the terms of the Covered Agreements. You may recall that the IUA submitted to the NAIC letters dated 18 July 2018 and 15 October 2018 that endorsed modest edits to prior iterations of the model amendments in order to ensure consistency with the terms of the Covered Agreements and protect the state-based system of U.S. insurance regulation. It is our understanding that these edits were generally incorporated into the Exposed Drafts and we thank the Task Force for its diligent consideration with respect these matters. Despite these positive steps, the Exposed Draft does not yet account for certain agreements entered into in contemplation of some long-tail losses such as adverse development cover (“ADC”) that are signed after losses occur. The prescient language regards the “losses incurred” language in Section 2(F)(7) of the Exposed Draft. As you know, Paragraph 8 of Article 3 of the Covered Agreement maintains that terms of the agreement:

“shall apply only to reinsurance agreements entered into, amended, or renewed on or after the date on which a measure that reduces collateral pursuant to this Article [3] takes effect, and only with respect to losses incurred and reserves reported from and after the later of (i) the date of the measure, or (ii) the effective date of such new reinsurance agreement, amendment, or renewal.”

The Exposed Draft tracks this language with respect to losses incurred and we appreciate the Task Force’s prioritization of consistency with the terms of the Covered Agreements. Nevertheless, as drafted, Section 2(F)(7) of the Exposed Draft will have the unintended consequence of excluding ADC contracts from application of the reciprocal jurisdiction provisions. To remedy this issue, we propose adding language to give state insurance commissioners the authority to approve reduced or zero collateral for adverse development cover contracts entered into after the effective date of the enabling legislation with respect to

Attachment Six

Mr. Daniel (“Dan”) Schelp Mr. Jake Stultz April 1, 2019 Page 3

cedents that are domiciled in a commissioner’s state, provided that the commissioner finds such a reduction to be fair, reasonable, and in the best interest of the ceding insurer. Such an amendment is not inconsistent with the terms of the Covered Agreements and would provide state insurance commissioners with proper discretion to prevent harmful retroactive changes to the collateral status of certain existing contracts. Subject to the amendment detailed above, the IUA is pleased to support the Exposed Drafts as written and encourages all relevant NAIC committees – including the Reinsurance (E) Task Force, Financial Condition (E) Committee, and Executive (EX) Committee – to pass the Exposed Drafts during the Spring National Meeting in Orlando, Florida. As always, we welcome the opportunity to comment on these important revisions and/or provide technical advice. We will be in attendance at the Spring National Meeting in Orlando and would be pleased to address any comments or questions you may have. Yours Sincerely,

John F. Finston

JFF cc: Dave Matcham, International Underwriters Association

Helen Dalziel, International Underwriting Association Daniel McCarty, Drinker, Biddle & Reath

Attachment Six

805 Third Avenue 29th Floor | New York, New York 10022 | 212 702 0707 | www.kbra.com

March 26, 2019

VIA Email [email protected], [email protected]

Mr. John Rehagen, Director Acting Chair, Reinsurance (E) Task Force c/o Mr. Jake Stultz Senior Accounting Policy Advisor National Association of Insurance Commissioners 1100 Walnut Street Suite 1500 Kansas City, MO 64106‐2197

Re: Model Law 785 and Model Regulation 786 update: Request to include Kroll Bond Rating Agency, Inc. (“Kroll”), Approved NRSRO for Certified Reinsurer Purposes

Dear Acting Chair Rehagen and Committee Members:

Thank you for the opportunity to comment on Model Law 785 and Model Regulation 786, posted for public comment on March 7, 2019 (the “Law” and the “Regulation,” respectively).

Please accept this letter as Kroll’s formal request to be listed by name in Sections 8(3)(c) and 8(4)(a) of the Regulation as an acceptable rating agency for certified reinsurer purposes.

At the December 3, 2017 fall national meeting of the Reinsurance (E) Task Force, a recommendation was adopted that the states may consider Kroll as an acceptable rating agency for certified reinsurer purposes. In support of that consideration, revisions were made to include Kroll in both the Uniform Application Checklist for Certified Reinsurers and the matrix of ratings and collateral levels.

Kroll believes that the updates requested in this letter are not only in line with NAIC’s mission to assist state insurance regulators in serving, promoting and protecting the public interest by, among other things, promoting competition, but also will provide fair and equal treatment of Kroll compared with its NRSRO peers. Omitting mention of Kroll’s status as an acceptable rating agency for certified reinsurer purposes is proving confusing to readers about Kroll’s status, particularly for reinsurers who rely solely on the language in the Regulation, which identifies four other NRSROs by name‐‐but not Kroll‐‐as being certified reinsurers.

Therefore, to maintain consistency and promote fairness, Kroll respectfully requests that the Regulation be updated to add Kroll by name. Kroll also requests that the matrix be updated to include

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Mr. John Rehagen, Director Acting Chair, Reinsurance (E) Task Force c/o Mr. Jake Stultz National Association of Insurance Commissioners March 26, 2019 Page 2 of 2


the Kroll rating scale. For your convenience, the attached appendix provides links to the updated Uniform Application Checklist and the related matrix, which have been referred to in this letter.

Kroll understands that its request is not the reason for which the Committee has opened the Law and the Regulation for comment, but Kroll views this comment period as an opportunity to address an inconsistency. Kroll is hopeful that proper consideration will be given to approve this update at this time.

Kroll appreciates the work of the Reinsurance (E) Task Force and the Reinsurance Financial Analysis (E) Working Group that culminated in the acceptance of Kroll as an NRSRO for Certified Reinsurer Purposes. Kroll also appreciates the decision to include Kroll in the Uniform Application Checklist for Certified Reinsurers and in the related matrix. Kroll believes in the NAIC’s mission and appreciates the work that all NAIC committees do to ensure consistency in documentation. Kroll further believes that the updates to the Law and Regulation requested in this letter will aid in NAIC’s effort to maintain consistency and accuracy in all relevant NAIC documentation and will further protect the public interest by promoting competition.

Thank you for your time and consideration. Kroll looks forward to a fair and positive conclusion to this request. If the Committee requires further information, please do not hesitate to contact me.

Sincerely,

Murray R. Markowitz Chief Compliance Officer

cc: Mr. James Nadler, CEO and President, KBRA Ms. Tina Bukow, Managing Director, KBRA

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Appendix

The Uniform Application Checklist for Certified Reinsurers is available on the NAIC website at: https://www.naic.org/documents/committees_e_reinsurance_related_uniform_application_checklist_for_cert_reins.pdf (see page 6)

The Certified Reinsurer Secure Ratings Matrix is available on the NAIC website at: https://www.naic.org/documents/cmte_e_reinsurance_financial_analysis_wg_certified_reinsurer_secure_ratings_matrix.pdf

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Sabrina Miesowitz Deputy General Counsel

Lloyd’s America, Inc. The Museum Office Building 42 West 54th Street 14th Floor New York NY 10019 www.Lloyds.com/America

Telephone +1 212 382 4081 Fax +1 212 382 4070 Email: [email protected]

Lloyd’s is authorised under the Financial Services and Markets Act 2000

March 26, 2019

Via Email

Director Chlora Lindley-Myers Missouri Department of Insurance Chair, NAIC Reinsurance Task Force

Re: Proposed Revisions to Models 785 & 786

Dear Director Lindley-Myers,

This comment letter is submitted on behalf of Underwriters at Lloyd’s, London (“Lloyd’s”) in response to the latest drafts of the proposed revisions to the NAIC Credit for Reinsurance Model Law (#785) and the Credit for Reinsurance Model Regulation (#786) (the “Proposed Revisions”) implementing the covered agreement. We appreciate all of the hard work that the Reinsurance Task Force (“RTF”) has put into this implementation effort.

In our view the latest drafts of the Proposed Revisions address substantially all of the outstanding comments from stakeholders. We believe that the RTF should adopt the Proposed Revisions to allow the states to move forward with enactment ahead of the 2022 effective date of the zero collateral provisions of the covered agreement.

We look forward to continuing to work with the RTF and individual state regulators to ensure these reforms are adopted.

Regards,

April 1, 2019 Director Chlora Lindley-Myers, Chair Reinsurance (E) Task Force National Association of Insurance Commissioners c/o Mr. Jake Stultz Via e-mail [email protected]

Re: NAIC Request for Comments on Proposed Revisions to Credit for Reinsurance Model Law and Regulation

Dear Director Lindley-Myers: The Reinsurance Association of America (RAA), the American Property Casualty Insurance Association (APCIA), and the National Association of Mutual Insurance Companies (NAMIC) appreciate the opportunity to submit comments on the third draft of proposed revisions to the Credit for Reinsurance Model Law (#785) and the Credit for Reinsurance Model Regulation (#786).1 We appreciate the changes reflected in the current drafts, particularly those that address the fair treatment of U.S. reinsurers in the United States and those that achieve consistency with the U.S./EU and U.S/UK covered agreements. That said, as drafted these models would impose various requirements on U.S. reinsurers that are unnecessarily redundant with requirements they are already subject to in their domiciliary state and would also allow regulators discretion to impose additional unspecified requirements on assuming reinsurers from Reciprocal Jurisdictions. In our view, U.S. reinsurers that meet the strong solvency and surplus requirements applicable to all reinsurers based in Reciprocal Jurisdictions should be treated equally with non-U.S. reinsurers, and the inclusion of regulator discretion to impose additional requirements on any reinsurer in this

1 The Reinsurance Association of America (RAA) is a national trade association representing reinsurance companies doing business in the United States. RAA membership is diverse, including reinsurance underwriters and intermediaries licensed in the U.S. and those that conduct business on a cross-border basis. The RAA also has life reinsurance affiliates. Representing nearly 60 percent of the U.S. property casualty insurance market, the American Property Casualty Insurance Association (APCIA) promotes and protects the viability of private competition for the benefit of consumers and insurers. APCIA represents the broadest cross-section of home, auto, and business insurers of any national trade association. APCIA members represent all sizes, structures, and regions, which protect families, communities, and businesses in the U.S. and across the globe.

The National Association of Mutual Insurance Companies’ more than 1,400 member companies represent 41 percent of the total property/casualty insurance market and serve more than 170 million policyholders. NAMIC members write more than $253 billion in premiums, accounting for 54 percent of homeowners, 43 percent of the automobile, and 35 percent of the business insurance markets.


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category or on a particular Reciprocal Jurisdiction is contrary to the very reason why we have model laws and regulations. The comments set forth below reflect these principles. Treatment of U.S. Reinsurers U.S. domiciled reinsurers should have the same access to U.S. markets that is afforded to reinsurers subject to a covered agreement, without imposing unnecessary, redundant or inapplicable administrative obligations. Although the current exposure drafts expand the definition of Reciprocal Jurisdiction to include U.S.-accredited jurisdictions, both the model law and regulation also contain provisions that would compel U.S. reinsurers to provide state regulators with reports, certifications and assurances that are entirely redundant with what state regulators already receive from a U.S. reinsurer domiciled in an accredited jurisdiction, or have ready access to under our robust state-based system of regulation.2 The provisions also allow discretion to impose additional requirements on assuming insurers from this category of Reciprocal Jurisdiction, where that discretion does not exist with respect to Reciprocal Jurisdictions subject to a covered agreement. To address these issues, we propose to qualify the amended definition of Reciprocal Jurisdiction by adding the following language in the model law at Section 2(F)(1)(a)(iii) and in the model regulation at Section 9(B)(3):

At Section 2(F)(1)(a)(ii) of the model law:

“A U.S. jurisdiction that meets the requirements for accreditation under the NAIC financial standards and accreditation program. Assuming insurers domiciled in such jurisdictions shall only be subject to the requirements described in paragraphs (b) and (c) below.”

At Section 9(B)(2) of the model reg:

“A U.S. jurisdiction that meets the requirements for accreditation under the NAIC financial standards and accreditation program. Assuming insurers domiciled in such jurisdictions shall only be subject to the requirements described in sub-section (1), (2) and (3) of paragraph C below.”

These changes would place U.S. domiciled reinsurers on the same playing field as reinsurers from Reciprocal Jurisdictions subject to a covered agreement, while relieving them from redundant regulatory obligations that often become confusing when applied to U.S.-domiciled reinsurers. Treatment of Non-U.S. Jurisdictions Not Subject to a Covered Agreement With respect to Reciprocal Jurisdictions not subject to a covered agreement, the draft model law and regulation continue to allow for commissioner discretion to impose additional requirements for both Reciprocal Jurisdiction status and with respect to assuming insurers based in a Reciprocal Jurisdiction. We acknowledge that the current model law and regulation allow for some discretion;

2 For example, such materials include, but are not limited to, annual statements, actuarial opinion summaries, interrogatories, quarterly reports and financial statements, Risk-Based Capital reports, attestations, and checklists.

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however, not to the broad extent envisaged by the exposure drafts in this area. The inclusion for commissioner discretion to deviate from the model law and regulation creates uncertainty in the process as a whole. At the very least, the exercise of commissioner discretion as set forth in the model law should be subject to the normal regulatory process. In other words, use of that discretion should be exercised through a regulation that outlines a list of factors to be considered, as is currently included in the model regulation. We welcome the NAIC’s efforts to establish criteria and a process with respect to revocation or suspension of a Reciprocal Jurisdiction. Given the gravity surrounding the eventual consequence, however, we would expect to see reference to this criteria and process in the model law, with the specificities of the process being outlined in the model regulation. That criteria and process should also be linked in to the NAIC accreditation program. Without such formal safeguards in place, there is room for discretion to be used in an arbitrary way, thus undermining any meaningful outcome for jurisdictions that would be assessed for Reciprocal Jurisdiction status. Conclusion We appreciate the opportunity to offer comments and work with the NAIC to effectively implement revisions to the model law and regulation in light of the U.S./EU and U.S./UK covered agreements. We welcome the opportunity to work with the NAIC to reach a conclusion acceptable to all parties on the revisions to both the model law and regulation. Please do not hesitate to contact us with any questions or concerns. Sincerely, Reinsurance Association of America American Property Casualty Insurance Association National Association of Mutual Insurance Companies

credit for reinsurance model law regulation task force’s

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