Summary: Pursuant to a congressional request, GAO reviewed property/casualty reinsurance practices and regulations, focusing on: (1) the types and limitations of reinsurance activity data available to regulators; (2) the extent of state reinsurance regulation; and (3) recent regulatory improvements.
GAO found that: (1) state regulators could not adequately assess the effect of reinsurance on its participants' financial condition because they could not separately detail reported annual aggregate data, and unlicensed foreign reinsurers were not subject to U.S. regulatory jurisdiction or filing requirements; (2) each state emphasized regulation of ceding insurers and reinsurers within its jurisdiction; (3) in 1984, the National Association of Insurance Commissioners (NAIC) developed a model law to encourage uniform reinsurance regulation, and amended it in 1989 to increase the minimum standards; (4) some states adopted the model law; (5) NAIC increased reinsurance reporting requirements for annual financial statements, which allowed state regulators to better assess the impacts of reinsurance, quantified overdue reinsurance, and enabled regulators to better detect potential problems with uncollectible reinsurance; and (6) since not all states had implemented the model law and the financial reporting requirements, it could not determine whether the regulatory changes would prove effective, how consistently they would be implemented, or whether additional regulatory initiatives would be necessary.
