Offshore Reinsurers Back Many of Your Clients' Life and Annuity Arrangements

Northwestern Mutual is a Milwaukee-based policyholder-owned insurer. Vedder recommended that one priority should be for regulators to establish uniform solvency standards throughout the United States.

“Companies should not have to establish complex and costly structures and rely on disparate solvency standards across jurisdictions to compete on a level playing field,” Vedder said, according to a copy of the letter included in an NAIC meeting materials packet.

He said promoting transparency should be another priority.

“Without transparency, market discipline fails and consumer confidence dwindles, increasing risks to policyholders, the industry, and the state‐based regulatory and guaranty systems,” Vedder wrote.

Vedder acknowledged that many reinsurance deals help insurers reallocate risk.

The regulators in charge of some offshore jurisdictions have argued that their jurisdictions have modern insurance solvency regulations and tough oversight.

But, if insurers use some offshore reinsurance deals to take advantage of lower capital standards and reduce outsiders’ ability to see what’s going on, that could undermine regulators’ efforts to close other solvency regulatory gaps, he said.

“If capital standards are deemed to be too conservative in the U.S., they should be addressed transparently and uniformly through the NAIC and not through the alternate means of offshore reinsurance,” Vedder added.

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