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CIRCA challenges NAIC proposal for new RBC charge on life reinsurance

CIRCA submitted two NAIC comment letters ahead of the Life Risk-Based Capital Working Group meeting on Oct. 6, arguing any recapture-related charge should reflect each reinsurer’s financial strength and recapture likelihood.

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The Cayman International Reinsurance Companies Association, or CIRCA, has submitted two comment letters to the National Association of Insurance Commissioners challenging a proposed new risk-based capital, or RBC, charge on life reinsurance ceded to reinsurers in non-reciprocal jurisdictions, Reinsurance News reports.

CIRCA filed the letters during the NAIC comment period ahead of the Life Risk-Based Capital Working Group meeting on Oct. 6, and it responded to the working group’s request for input on how the proposed charge should be implemented.

The association argued that any recapture-related charge should be based on an individual reinsurer’s financial strength and the likelihood that ceded business would be recaptured, rather than using the reinsurer’s domicile or jurisdiction status as a proxy.

CIRCA’s chairman, Faramarz Romer, said recapture risk exists across reinsurers in varying degrees, and that a charge that does not reflect that variation would not be risk-based.

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