Multi-State Pile-Up


Berwyn car spindleThe National Association of Insurance Commissioners (NAIC) is attempting once more to get a handle on some of the complex risks and financial arrangements that can be encompassed by captive insurance companies. The first draft by NAIC staff proposed revisions of the preambles to Parts A and B  of the NAIC Accreditation Program Manual sought to clarify the definition of a multi-state reinsurer that assumes business written in any state other than its state of domicile constitutes multi-state business, and would
subject such a multi-state reinsurer to the accreditation standards. Their main concern 
was the use of captives for life insurers XXX/AXXX redundant reserves.  Unfortunately, the definition was written so broadly that one could argue that captives of many types could be swept up in the accreditation process unnecessarily.

With many comments delineating these issues (including from the VCIA), the NAIC staff withdrew the draft and is now out with a second draft. The second draft looks better and seems to be more narrowly focused. But here again, the language defining the scope of the Part A standards covering life/health and property/casualty insurers appears to conflict with the stated purposes because some categories identified are so broad that they could  be read to include captives other than captive life/health reinsurers.  The NAIC took what I believe the unprecedented step of issuing a clarification to their clarification!  Hey, I have been there myself, so I have some sympathy.

Well, hopefully with the latest round of comments and review, the NAIC can finally put this issue to bed – until the next captive issue burbles up for their consideration…

Thank you all very much, and I look forward to hearing from you soon.

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