Regulatory Update: NAIC Summer 2021 National Meeting | Knowledge
The revised CFR Model Laws eliminate reinsurance guarantee requirements for certain reinsurers and limit the worldwide application of prudential group insurance measures to insurance groups domiciled in “reciprocal jurisdiction”. A reciprocal jurisdiction includes a non-US jurisdiction that has entered into a covered agreement with the United States (such as the European Union, or the EU, and the United Kingdom, or the United Kingdom) as well as “qualified jurisdictions” that meet certain additional requirements. consistent with the terms and conditions of the covered agreements, including the fact that the jurisdiction “recognizes the US state’s regulatory approach to group supervision and group capital”. To date, Bermuda, Japan and Switzerland have been approved as reciprocal jurisdictions.
The NAIC previously adopted the Qualified and Reciprocal Jurisdiction Assessment Process to specify how qualified jurisdictions that meet the requirements of the revised CFR Model Laws are recognized as reciprocal jurisdictions. During the summer meeting, the NAIC adopted revisions to the Qualified and Reciprocal Jurisdiction Assessment Process that incorporate provisions to terminate the status of a qualified jurisdiction or reciprocal jurisdiction and create a process of reciprocal jurisdiction. passport to reciprocal jurisdictions, under which one state may defer to another state in determining the requirements applicable to reinsurers with reciprocal jurisdiction. The passport process is facilitated by the Reinsurance Financial Analysis Working Group (E) (ReFAWG). Ahead of the summer meeting, the ReFAWG outlined their draft review process for certified reinsurers and reciprocal jurisdiction reinsurers. Six letters of comment were received in response to this exposure, which the Reinsurance Working Group (E) sent back to ReFAWG to assess and recommend revisions. In response to the comment letters received, the revisions should focus on eliminating the submission of duplicate information for reciprocal jurisdiction reinsurers who are also licensed reinsurers and making deposits for licensed reinsurers and reinsurers of more consistent reciprocal jurisdictions.
In addition, the Mutual Recognition of Jurisdictions Working Group (E) voted to outline the draft assessment process for jurisdictions that recognize and accept the NAIC’s Group Capital Calculation (GCC) (referred to as ‘Recognize Jurisdictions’). and accept ”), which process will be similar to the process of evaluating qualified and reciprocal jurisdictions. A “recognize and accept” assessment is already part of the reciprocal jurisdiction review process, as any reciprocal jurisdictions designated by the NAIC through this review process are also automatically designated as “recognize and accept” jurisdictions. Likewise, under the terms of the covered agreements with the EU and the UK, all EU states and the UK are automatically designated as “recognize and accept” jurisdictions. The Mutual Recognition of Jurisdictions Working Group (E) will assess non-US jurisdictions under this “Recognize and Accept” process and a list of “Recognize and Accept” jurisdictions will be published through the NAIC committee process.
As of July 16, 2021, 42 U.S. jurisdictions have passed the 2019 revisions to the Model Credit for Reinsurance Law, while four jurisdictions are considering action. In addition, 15 states had adopted revisions to the Model Reinsurance Credit Regulations, and seven jurisdictions were considering action. The revised CFR model laws are due to be adopted by states by September 1, 2022, by which date the Federal Insurance Office (FIO) is due to complete its federal pre-emption reviews under the covered agreements with the EU and the UK. United. The NAIC encourages all states and jurisdictions to pass the revised CFR Model Laws as soon as possible and no later than July 1, 2022, to give the FIO time for its federal pre-emption analysis.