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Wednesday, December 7, 2022

Senate Banking Committee Chair Urges FIO And the NAIC To Monitor Private Equity and Affiliated Offshore Reinsurance within the Life Insurance Industry

Earlier this month, United States Senator Sherrod Brown (D-OH), Chair of the Banking, Housing, and Urban Affairs Committee, urged the Federal Insurance Office (FIO) and the National Association of Insurance Commissioners (NAIC) to look at the growing position of personal fairness and various funding courses within the life insurance coverage market in addition to offshore reinsurance. The Senator inquired if non-public fairness and affiliated offshore reinsurers may pose systemic dangers and requested that FIO embody these matters in upcoming and future annual stories whereas including that his committee will host hearings on these matters at an unspecified future date.

Senator Brown’s latest written requests to FIO Director Steven Seitz and NAIC President Dean Cameron observe earlier written requests to every company again in March. At that point, Senator Brown raised issues centered on non-public fairness and pension-risk switch, asking FIO and the NAIC to review the problem and report again to Congress by May 31. Senator Brown’s latest letters are his response to the companies’ stories.

President Cameron, CEO Consedine, and Commissioners representing Connecticut, Missouri, and North Dakota responded to Senator Brown on behalf of the NAIC. In their response, the Commissioners reaffirmed the state-based insurance coverage regulatory regime’s skill to safeguard the solvency of life insurers beneath their purview. The Commissioners underscored their persevering with monitoring of the altering funding portfolios of life insurers through the prolonged low-interest price atmosphere highlighting the hunt for yield no matter possession construction whereas stating that “there’s nothing that PE companies add to the enjoying subject” that lessens state insurance coverage commissioners’ skill to guard insurance coverage entities inside broader monetary holding corporations.

FIO’s response to Senator Brown’s request raised issues round regulatory arbitrage and particularly highlighted Bermuda-based reinsurance suppliers. FIO famous transactions with affiliated offshore reinsurers leading to massive capital releases which will in any other case be impermissible with a home admitted reinsurer.

Last month, the NAIC’s Financial Stability (E) Task Force and Macroprudential (E) Working Group adopted what are being known as “Regulatory Considerations Applicable (however not unique) to Private Equity Owned Insurers.” At the NAIC Summer National Meeting, workstreams from the not too long ago adopted regulatory concerns plan have been assigned to different NAIC working teams, such because the Risk-Focused Surveillance (E) Working Group and the Group Solvency Issues (E) Working Group to think about proposed actions akin to revisions to Forms A, B, and D of the holding firm Annual Registration Statement, and extra particularly Form D affiliated agreements akin to funding administration agreements.

Locke Lord will proceed to watch developments earlier than Congress, federal companies, and throughout the NAIC.

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