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You remember the Covered Agreements entered into between the US and the UK and the US and the EU to deal with Brexit and Solvency II and international financial standards, right? Well, the New York Department of Financial Services has noticed a proposed regulation implementing the new credit for reinsurance rules required under the Covered Agreements. The new regulation, the 12th amendment to regulations 17, 20 and 20A, does what was expected by allowing for reciprocal relief from credit for reinsurance requirements, but adds a few new interesting items relevant to reinsurance disputes.
The proposed regulation essentially ends the need for many non-US reinsurers to post collateral to allow US domestic ceding companies to obtain credit for reinsurance on their financial statements. Credit for reinsurance requirements for non-US reinsurers often led to requests for pre-hearing security in reinsurance arbitrations. While largely financial, the proposed regulation adds some new requirements to reinsurance contracts and could affect some reinsurance disputes.
