Reinsurance News

Regulators waive Lloyd’s collateral requirements for US reinsurance

21st April 2022 - Author: Matt Sheehan

From October 2022, no Lloyd’s underwriters writing US contracts will be required to provide collateral for their US reinsurance obligations.

The change is the result of new rules that come into effect later this year, which will eliminate collateral requirements for financially strong non-US reinsurers writing US reinsurance, following approval as a Reciprocal Reinsurer.

Lloyd’s – and therefore all the underwriters operating within its market – has now been afforded this status by US regulators and the NAIC, meaning it can drop its collateral requirements from October 1st.

The current rules require Lloyd’s reinsurers to provide collateral to support their US contracts if they do not meet certain financial benchmarks, in the form of the Lloyd’s Credit for Reinsurance Trust Funds.

There is presently no requirement to post collateral if a reinsurer has at least €226 million of own funds or capital and surplus, its central fund contains at least €226 million, or if it has a solvency ratio of 100% SCR under Solvency II.

Contracts of US reinsurance written prior to October will continue to be subject to these collateral requirements, as will existing in-force US reinsurance contracts.

The Lloyd’s Market Association assured that the new rules will not change the way US reinsurance business is processed, although it said the market has made “adjustments internally” so that no funding of US reinsurance business will take place from 1 October 2022.

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