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Brad Kading Association of Bermuda Insurers and Reinsurers

“The Neal Bill would create a supply- demand imbalance that causes prices to go up for unaffi liated reinsurance and, overall, there would be a shortfall of 20 percent of the supply of reinsurance to the US market and that then leads to price increases for consumers of $11 to $13 billion across all lines.”

MATCHAM: We’ve noticed though, Richard, that the tax treaties might

not offer the protection that they think they’ve got when it comes down to the cascading effect of FET, and the US Treasury in recent times has been determined to capture that one percent in those subsequent transactions that you mentioned, and I know that a number of our members have effectively given up the fi ght and said, ‘we’ve got to make some sort of allowance here, otherwise we fear that we will be pursued more vigorously’.

SPILLER: I’m sure this bill will end up with a second leg impact, to take into account the network of tax treaties. It doesn’t lend itself to a simple solution.

Moving onto the Dodd-Frank Wall Street Reform Act. Dave, I know that the IUA was quite pleased to see this going through. Are there still issues there to be addressed, particularly in reference to the Federal Insurance Offi ce?

MATCHAM: There was a general expression of relief that something

had been passed. The FIO structure/option was probably not the best one for our market—we would have preferred the senate version, I think. The FIO option seems to be geared to being quite bureaucratic—there’s quite a lot of hurdles to overcome to satisfy the ultimate goal of an international agreement with a foreign jurisdiction. That’s led us to believe that we’ve got a number of months to wait for something tangible to come out that will leave us in a better ‘credit for reinsurance’ situation, which we had argued for, for many years. The plan [to create a Federal Insurance Offi ce] is welcome as it is a recognition that there needs to be one central offi ce to talk to overseas jurisdictions, and we hope that they can get it staffed up and operating as soon as possible. The extra territorial provisions that do exist within the US are going to be eliminated in July next year and that’s

positive. For those that have applied to Florida for their reduced collateral provisions, that will give them a bit more relief come July next year. We’ve noticed that some individual states are keen to pursue their own initiatives on credit for reinsurance following Florida’s lead. There’s at least two—New Jersey and New York—with proposals out there, and we are optimistic that other states will be looking to do something similar next year. There’s also the NAIC action on changing its own model law regulations and recognising the Dodd Frank provisions, and that’s also to be welcomed. There’s a recognition across a broad number of states and interested parties that change is needed. To actually get that concept in place was a battle. It was about three years ago when the NAIC did its own model framework, where it succeeded in having that put in place and then it’s a question of getting that through Congress, which they were unsuccessful in doing. There’s also some pretty good benefi ts on the surplus lines side, which our members welcomed—again, in July next year. The act includes a provision which in July 2011 effectively opens up surplus lines business from any US state to any surplus lines insurer approved and shown on the NAIC’s International Insurers Department list of eligible surplus lines insurers. This is because the act states that no US surplus lines broker should be prohibited from placing a surplus lines risk with IID listed companies, many of which are IUA members of Bermudan insurers. There are some states out there where it is diffi cult to become an eligible surplus lines insurer, so [Dodd-Frank] had a lot of positive impacts really, and we just need to continue to work with the state regulators to ensure that we can get things enacted as quickly as possible.

ROMY COMITER, senior manager, LECG: The insurance industry has always tended to sort itself out. If you go back to the 1980s and the 1990s with the asbestos claims, there was never any

November 2010 | INTELLIGENT INSURER | 27

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