Swiss Re Americas Issues Public Comment on Treasury's Fiscal Service Bureau
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Thank you for the opportunity to respond to the
The Bureau has a historic view that uncollateralized reinsurance recoverables of a non-US reinsurer may not be counted as an asset for a capital and surplus calculation. This position is out of step with the authoritative sources of reinsurance collateral regulation in
A minor change to the application process, data considered, and the analytical methods used in evaluating financial condition will resolve this inconsistency and will not result in diminished protection of US government interests.
The Bureau should revise its practices and rules regarding credit for reinsurance to align analysis by
These changes will not negatively affect the ultimate ability of a surety company to carry out its contracts and will not harm the financial interests of
Responses to specific
The practice by the
US public policy on reinsurance regulatory collateral requirements has been clearly articulated by
The decision to move from a 100% collateral system for non-US assuming insurers to a system based on financial soundness, business practice, and regulatory reliability was made after years of debate and has proven to be sound public policy. Since non-US assuming insurers began providing reinsurance without 100% collateral in 2010, there has been no corresponding increase in uncollectible reinsurance.
In order to be eligible to provide creditable reinsurance to US cedents, non-US reinsurers must comply with rigorous financial statement/condition filing requirements at the state level and their home country must be vetted and approved by a state as a qualified or reciprocal jurisdiction.
Further, a second key element of the covered agreements is the recognition of US state regulatory authority and prohibition against local presence and other doing business requirements abroad. If the EU or
Fiscal Service could accomplish the proper credit for reinsurance recognition solely through the annual letter. However, if a change in regulation for clarity is desired, the following amendment to section 223.9 is recommended (new language underlined):
Sec. 223.9 Valuation of assets and liabilities.
In determining the financial condition of every such company, its assets and liabilities will be computed in accordance with the guidelines contained in the
However, the Secretary of the
(a) The State of domicile of the company is an NAIC-accredited State, or has financial solvency requirements substantially similar to the requirements necessary for NAIC accreditation, and recognizes credit for reinsurance for the insurer's ceded risk,
(b) the reinsuring company holds a certificate of authority from the Secretary of the
(c) or has been recognized as an admitted reinsurer in accord with Sec. 223.12.
Similarly, an admitted reinsurer's assets, capital and surplus, and credit for reinsurance should be calculated in the same manner as performed by US state insurance regulators. And, to the extent reinsurance is a permissible method for limiting risk, the credit for reinsurance calculated and allowed by Fiscal Service should be the same as calculated by state insurance regulators and no additional collateral should be required.
Inconsistent credit for reinsurance valuation by the Bureau is punitive to non-US companies that are complying with the sound public policy articulated by the federal government and implemented by the states by requiring collateral be posted for
If you have any questions, please contact me.
Head State Regulatory Affairs Americas
Swiss Re Americas
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The notice can be viewed at: https://www.regulations.gov/document?D=FISCAL-2019-0002-0011
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