Dave Matcham welcomes the new framework for reinsurance regulation to be introduced in the United States.

After more than a decade of campaigning, it looks like a new framework for reinsurance regulation finally will be introduced in the United States this year. This will include both credit for reinsurance reform and single-state licensing. Currently non-US reinsurers are required to post collateral of 100% of gross liabilities assumed from American cedants – an arrangement that has resulted in at least $50bn tied up in letters of credit, trust funds and other

expensive financial instruments. But in September this year the National Association of Insurance Commissioners’ Reinsurance Task Force approved a new framework that includes collateral levels as low as 10% for well regulated non-US reinsurers. Ratification is expected in December.

Under the new system, ratings will be assigned to individual companies according to their financial strength; this is then used to apply collateral

requirements. Both US and non US companies will receive similar treatment. The new framework will allow US reinsurers to operate across the country with a single state licence for the first time – a warmly welcomed development.

Modernisation has not been easy. It has involved

a lot of dialogue with US state regulators and

legislators, and the marshalling of support among many international bodies, including the European Commission. The average term of office for a US state insurance commissioner can be as low as 12

to 18 months, so over the years there has been an almost continuous effort to convince and educate new-generation regulators. This new more forward-looking approach reflects both the methods of other progressive regulatory regimes around the world and the global character of our industry.

Dave Matcham is chief executive of the International Underwriting Association.