b'Insurance Regulatory | US/NAICStates Begin Revising Credit for Reinsurance Laws to Follow the New NAIC ModelsDuring 2020, US jurisdictions began revising their laws and regulations governing credit for reinsurance to implement the amendments to the National Association of Insurance Commissioners Credit for Reinsurance Model Law and Model Regulation (the NAIC Models) that were adopted by the National Association of Insurance Commissioners (NAIC) on August 6, 2019. Those amendments were designed to satisfy the requirements of (i) the bilateral agreement on insurance and reinsurance between the US and the European Union; and (ii) a substantially similar bilateral agreement between the US and the UK (together, the Covered Agreements). Background of the Covered AgreementsIn contrast to primary insurance, where an insurer generally needs to be licensed in a state in order to do business in the state, a reinsurer does not need to be licensed in a state in order to provide reinsurance to insurers in the state. However, if the reinsurer is not licensed in the state, then certain requirements need to be fulfilled in order for the US insurer purchasing the reinsur-ance (the ceding insurer) to receive credit for the reinsurance on its balance sheet. Traditionally, an unlicensed reinsurer was required to post collateral for 100% of its reinsurance obligations, but that requirement has been relaxed over time as a result of a series of amend-ments to the NAIC Models, which have created avenues for some qualifying reinsurers to reduce or even eliminate this collateral requirement. Another important development was the enactment of the Nonadmitted and Reinsurance Reform Act of 2010 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), which provided that credit for reinsurance is determined solely by the state of domicile of the ceding insurer.In 2011, the NAIC Models were amended so that reinsurers that have completed a prescribed process to become certified reinsurers can post significantly less than 100% collateral to secure their US reinsurance obligations. Under the 2011 amendments, individual reinsurers are certified based on criteria that include, but are not limited to, financial strength, timely claims payment history and the requirement that a reinsurer be domiciled and licensed in a qualified jurisdiction. The NAIC has established a process to evaluate jurisdictions over-sight of reinsurers, under which it has designated seven non-US jurisdictions as qualified jurisdictions for this purpose (Bermuda, France, Germany, Ireland, Japan, Switzerland and the UK). The NAIC has also established a peer review system to oversee the certification of non-US reinsurers by states, which enables non-US reinsurers that become certified in one state to passport that certification throughout the US.54GLOBAL INSURANCE INDUSTRY | YEAR IN REVIEW2020'