The Federal Insurance Office Act of 2010 (the FIO Act) sets forth procedures for the preemption of “state insurance measures” by the Director of the Federal Insurance Office (FIO) in connection with a covered agreement. Using those procedures, which include notice and opportunity for public comment, a state insurance measure shall be preempted only if the FIO Director determines that it (1) results in less favorable treatment of a non-U.S. insurer domiciled in a foreign jurisdiction that is subject to a covered agreement than a U.S. insurer domiciled, licensed, or otherwise admitted in that state, and (2) is inconsistent with the covered agreement.
FIO is undertaking a comparison of state insurance measures to the U.S.-EU Covered Agreement and the U.S.-UK Covered Agreement (the Covered Agreements) to determine whether any state insurance measures should be subject to potential preemption under the FIO Act. FIO is conducting this evaluation with respect to each U.S. state, commonwealth, territory, possession of the United States, and the District of Columbia (referred to as “U.S. States”).
State Revisions to Credit for Reinsurance Measures
Implementation of the Covered Agreements contemplates action by each U.S. State to revise its relevant credit for reinsurance measures. In 2019, the National Association of Insurance Commissioners (NAIC) adopted amendments to its Credit for Reinsurance Model Law (#785) and Regulation (#786) (the 2019 Model Law and Regulation) in response to the Covered Agreements. The 2019 Model Law and Regulation were later designated by the NAIC as accreditation standards. U.S. States are revising their credit for reinsurance measures based on the 2019 Model Law and Regulation.
FIO considers the 2019 Model Law and Regulation to provide a basis for U.S. States to revise their credit for reinsurance measures for purposes of achieving consistency with the Covered Agreements and avoiding a potential preemption determination under the FIO Act.
Accordingly, FIO will initially evaluate U.S. State credit for reinsurance measures by comparing them to the 2019 Model Law and Regulation. FIO will prioritize those U.S. States with the highest volume of gross ceded reinsurance, as specified in the Covered Agreements. While other factors may be relevant, FIO will focus on differences from the text of the 2019 Model Law and Regulation in considering whether a U.S. State credit for reinsurance measure may be inconsistent with the Covered Agreements and therefore subject to potential preemption under the FIO Act.
Timing of U.S. Preemption Obligations Under the Covered Agreements
Article 9, Paragraph 4 of the Covered Agreements sets forth certain U.S. obligations for implementation of the Covered Agreements, including that the United States would begin evaluating state insurance measures for potential preemption by March 1, 2021. The agreements require the United States to “complete any necessary preemption determination” by September 1, 2022.
FIO is available to consult with representatives of U.S. State insurance agencies on these matters. Please contact FIO at FIO.email@example.com.