Allied World Issues Public Comment on Treasury's Fiscal Service Bureau Notice

WASHINGTON, March 6 -- Karen L. Colonna, senior vice president and deputy general counsel at Allied World, has issued a public comment on the U.S. Treasury Department's Bureau of the Fiscal Service notice entitled "Surety Companies Doing Business with the United States; Request for Information". The comment was written on Feb. 20, 2020, and posted on March 5, 2020:

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Allied World Insurance Company and Allied World Specialty Insurance Company (collectively "Allied World"), both Treasury listed sureties, appreciate the opportunity to submit comments in response to the U.S. Department of Treasury's Bureau of Fiscal Service Request for Information relating to surety companies doing business with the United States.

Allied World addresses the follow questions posed by the Surety Bond Branch:

2. What different methodologies, if any, should Fiscal Service consider using when evaluating applications from companies that are part of an insurance group's pooling agreement? Please provide your views on whether Fiscal Service should analyze such applicants' financial condition at the group level rather than, or in conjunction with, analysis at the individual company level. Please address the benefits and risks to the federal government of performing the financial analysis at the group level.

3. Should Fiscal Service consider changing the approach or methodology it uses to determine the credit allowed for reinsurance and, if so, what changes should it consider? Please address both reinsurance of federal surety bonds and of non-federal risks, and provide the rationale for any proposed changes.

Allied World is in support of allowing sureties, which are part of a pool, to choose to be reviewed on an individual or pooled basis. As the risks for a pooled individual surety are spread out amongst all pooled companies, the federal government is given the benefit of the pooled surplus and assets of all of the relevant companies.

We also support the modernization of the Surety Bond Branch's recognition of credit for reinsurance to allow credit based upon the law and regulation of the domestic state of the surety and in accordance with the National Association of Insurance Commissioners (NAIC) adopted revisions to the Credit for Reinsurance Model Law and Credit for Reinsurance Model Regulation, whereby reductions in collateral can be taken for certain reinsurers that are not specifically approved reinsurers of the U.S. Department of Treasury. This recognition of collateral is consistent with the work of the U.S. Treasury Federal Insurance Office ("FIO") in negotiating covered agreements with various jurisdictions allowing for the elimination of collateral by reinsurers in those jurisdictions. The states, the NAIC and FIO have determined that certain jurisdictions and/or certain reinsurers from those jurisdictions are financially sound and sufficiently regulated to allow either no collateral or a reduction in collateral. We feel that the Surety Bond Branch should be more aligned with those determinations and modify its rules to allow for recognition of certain jurisdictions or reinsurers as long as they are subject to an active covered agreement or otherwise accepted by a particular surety's domestic state under its laws and regulations.

If you have any questions, do not hesitate to contact me at (646) 794-0576. We thank you for the opportunity to comment.

Sincerely,

Karen L. Colonna

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The notice can be viewed at: https://www.regulations.gov/document?D=FISCAL-2019-0002-0003

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