Insurance regulators propose stricter reinsurance and risk transfer rules

Insurance regulators in the United States and the United Kingdom are proposing more stringent capital treatment for asset-intensive reinsurance arrangements. In the US, the National Association of Insurance Commissioners (NAIC) intends to revise risk-based capital treatment regarding recapture risk for agreements outside reciprocal jurisdictions. In response, the Cayman Islands has applied for Qualified Jurisdiction Status with the NAIC.

In the UK, the Prudential Regulation Authority has proposed increasing the counterparty default adjustment for funded reinsurance treaties.

Simultaneously, regulators in Singapore, Hong Kong, and the UK have initiated consultations on alternative risk transfer solutions using protected cell companies. These structures, which separate assets and liabilities into distinct cells within one legal entity, are intended to expand insurance access for small and medium-sized enterprises and distribute large-scale natural catastrophe risks across a broader pool of participants.