Issues Relating to Collateral Requirements Imposed upon Alien Reinsurers of United States Ceding Insurers

Due to the growth in the international nature of the reinsurance market, there has been increasing pressure in the United States (U.S.) for a system that would permit alien reinsurers, those assuming business from U.S. domiciled ceding companies, a reduced level of collateral, provided certain conditions were met. Support for this change has come from Lloyds, the London market and other non-U.S.-based reinsurers, and a small number of U.S.-based ceding companies. There has been strong opposition to this from U.S. reinsurers, most U.S. primary companies and others. This paper will give an overview of the U.S. reinsurance collateral requirement and discuss issues with perspectives from both sides. It is not the intent of this paper to advocate any position on the issue. Keywords: reinsurance; reinsurance collateral; solvency; insurance regulation; enforceability of judgements; accounting standards; mutual recognition