Zurich North America Issues Public Comment on Treasury's Fiscal Service Bureau Notice
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Zurich Surety ("Zurich") is one of the largest providers of surety bonds in
Overall, we find no compelling reason to change the approaches or methodology of the
Furthermore, there is ample surety capacity in the marketplace. There is no need to diminish the established standards which provide certainty and stability in the surety market, especially as doing so could result in avoidable loss to the government and taxpayers without achieving any corresponding benefit.
1) Should Fiscal Service consider changing the approach or methodology it uses to value the assets and liabilities of a company applying to be certified as an insurer or reinsurer, or to be recognized as an admitted reinsurer? In particular, please consider commenting on the following items: (a) Admissible versus non-admissible assets; (b) capital requirements; (c) underwriting limitation; and (d) comparison to requirements imposed by relevant regulatory authorities.
Zurich supports the Bureau's current approach and methodology for evaluating the assets and liabilities of a company applying to be certified as a (re)insurer or an admitted reinsurer on federal surety bonds. As the owner of risks running to the federal government, the Bureau plays a critical role in analysing the companies that provide surety protection for federal assets. It is important that the Bureau maintain comprehensive oversight of companies permitted to (re)insure federal assets, including but not limited to maintaining a
Zurich has been and remains supportive of the
Zurich strongly supports The Bureau's longstanding rules regarding admissible versus non-admissible assets, capital requirements, and underwriting limitations. Furthermore, Zurich strongly supports the Bureau's current rules with respect to its single risk underwriting limitation. These rules have helped to sustain the current and historic stability of the surety industry.
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.
Zurich supports the Bureau's current methodology of evaluating an insurance entity's individual companies rather than engaging in a financial analysis at the corporate group level. Given the focus of domestic
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.
Given the impressive history of success that the current approach and methodology have achieved for the federal government, taxpayers and the surety industry, Zurich cautions against reducing the standards regarding credit for surety reinsurance. Changes are taking place throughout many state departments of insurance, as they work to implement the
4) Should Fiscal Service consider changing any aspects of the approach or methodology it uses to determine recognition of a company as an admitted reinsurer? In your response, please address Fiscal Service's treatment of both domestic and alien reinsurers and discuss the benefits and risks to the federal government of any proposed changes.
Zurich supports the Bureau's current methodology for recognition of companies as an admitted reinsurer. At this point in time, Zurich does not have any specific recommendations to change how the Fiscal Service reviews admitted, domestic or alien insurer applications. Zurich would be interested in commenting on any specific regulatory changes the Bureau is contemplating on how it evaluates admitted, domestic and alien reinsurers.
5) Should Fiscal Service consider changing the permissible methods, as described in the program's regulations and annual letters published on its website, for limiting risk in excess of a surety company's underwriting limitation? In your response, please address permissible methods for limiting risk in excess of the underwriting limitation relative to both federal surety bonds and to non-federal risks.
Zurich strongly supports maintaining the Bureau's current approach to limiting risk in excess of a surety company's underwriting limit. The current underwriting limitation provides a needed safeguard to ensure approved sureties do not assume risks they are not capable of insuring. Zurich strongly encourages the Bureau to maintain its current 10% underwriting limitations.
6) Should Fiscal Service consider changing the schedule and the documentation required for issuing and renewing certificates of authority and, if so, what changes should it consider? As an example, but not a limitation on the scope of the foregoing question, should Fiscal Service consider issuing certificates of authority that are valid for more than one year based on a company's financial condition? Please address the benefits and risks to the federal government of implementing such proposed changes, including issuing certificates of authority that are valid for more than one year.
Zurich supports the Bureau's current schedule and the documentation required to renew an insurer's certificate of authority.
7) Please recommend any other revisions to the program regulations as addressed in 31 CFR part 223 or the annual letters published on Fiscal Service's website that are consistent with protecting the federal government and provide the rationale for those revisions.
Zurich does not have any further recommendations to offer the Bureau at this time in relation to 31 CFR part 223 or its annual letters.
To summarize our overall comments, the Bureau's
We appreciate the important work of the
Very truly yours,
Senior Vice President
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The notice can be viewed at: https://www.regulations.gov/document?D=FISCAL-2019-0002-0012
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