Virginia is the latest of the growing list of states lowering collateral requirements for alien reinsurance companies in a bid to increase competition and reduce the cost of cover for direct insurers.
The state will be ready to allow alien reinsurers to operate with reduced levels of collateral from the start of next year.
The National Association of Insurance Commissioners (NAIC) last year unanimously approved a series of amendments to the collateral requirements for foreign reinsurers, a move freeing more states to follow in the footsteps of Florida, New York, Indiana and New Jersey and relax collateral requirements for alien reinsurers.
Virginia was one of the first states to take advantage of the NAIC amendments, passing legislation in the most recent legislative season. The new rule will come into effect from the start of next month, although Doug Stolte, deputy commissioner at the Virginia Bureau of Insurance, told Insurance Day implementation will not be completed until later in the year, with companies able to apply to operate with reduced collateral from January 1, 2013.
“Having additional reinsurance capacity at a competitive price is important for direct underwriters to put forward a reasonably priced product for consumers,” Stolte said.
Virginia’s position on the east coast means it faces hurricane exposure, and Stolte explained the changes to the state’s reinsurance rules will help maintain primary carriers’ ability to offer coverage at a competitive price.
“That was one of the major drivers, not only on the property and casualty side, but also life.”
While it is too early for any alien reinsurers to be given the green light to operate in Virginia with reduced collateral, Stolte said several firms have voiced their approval of the moves being made.
“Some of the major European reinsurers have talked to me and said they were very pleased- Lloyd’s, Hannover, folks like that.”