Kansas City, Mo. - The National Association of Insurance Commissioners (NAIC) met last week to discuss steps to amend disclosure requirements for insurers that utilize reinsurance with limited risk transfer features, also known as finite reinsurance.
In a public meeting in Chicago on May 12, the NAIC Property and Casualty Reinsurance Study Group gathered feedback from interested parties on a set of proposed disclosure requirements, and to exchange views on the current statutory accounting principles regarding reinsurance transactions.
The latest proposed disclosures would require an insurer to report to state insurance regulators any agreement that has the effect of altering policyholders' surplus by more than three percent, or representing more than three percent of premium or losses. The new disclosure is designed to identify any reinsurance contract that has been accounted for differently under statutory accounting principles compared to general financial statement purposes. Additional reporting requirements regarding contract terms and management's intention in entering the contract have been included to improve transparency, reports NAIC.
NAIC study group members also worked toward developing a standard attestation form to be signed by the insurer's CEO and CFO acknowledging reinsurance contracts that the company has taken "credit" for on its financial statements.
"We believe that these issues need to be addressed with a sense of urgency," said Joe Fritsch, Director of Insurance Accounting Policy for the New York Insurance Department and chair of the study group. "State insurance regulators have seen nothing to alleviate our concerns since we began our rigorous review of these practices."
The Study Group released the draft disclosures for a 30-day comment period, and indicated intentions of adopting the enhanced disclosures during the upcoming NAIC summer meeting, June 11-14 in Boston.
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