The National Association of Insurance Commissioners will submit to Congress a federal bill to modernize the regulation of reinsurance by state regulators.

The Reinsurance Regulatory Modernization Act of 2009 would create two new classes of reinsurers: “national reinsurers” located in the U.S. and “port of entry reinsurers” outside of the country.

In order to transact reinsurance business in the U.S., national reinsurers would have licenses through a single home state, while port of entry reinsurers would be certified through a single port of entry state, according to the proposed bill. Reinsurers would continue to have the option of operating under the existing regulatory approach, according to the NAIC.

The proposed federal bill also establishes the “Reinsurance Supervision Review Board” as a federal entity responsible for evaluating states and non-U.S. jurisdictions. The board would consist of 10 state regulators and five members from the treasury and commerce departments and the office of the U.S. trade representative, the bill proposes.

Appointments to the board would be made by the NAIC president.

The Reinsurance Regulatory Modernization Act of 2009 was adopted by the NAIC’s Reinsurance Task Force Sept. 15 and approved by its Government Relations Leadership Council (GRLC) at the group’s recent national conference, held in National Harbor, Md.

Roger Sevigny, NAIC president and chairman of the GRLC, said in a statement the organization of state regulators endorsed the proposed bill “to facilitate cross-border reinsurance transactions and enhance competition within the U.S. market, while ensuring that U.S. insurers and policyholders are adequately protected against the risk of insolvency.”

Scott Richardson

Under the bill, state insurance supervisors would be responsible for evaluating both national and port of entry reinsurers licensed in their state, establishing appropriate collateral requirements for reinsurance agreements, the NAIC said.

Scott Richardson, acting chairman of the NAIC’s Reinsurance Task Force, said there are numerous reasons his group favors the proposed bill.

“We are supporting this federal legislation in order to preserve and improve state-based regulation of reinsurance, ensure timely and uniform implementation of this legislation throughout all states, and as a more comprehensive alternative to the reinsurance provisions of the recently passed Nonadmitted and Reinsurance Reform Act,” said Richardson, director of the South Carolina Department of Insurance.