Policy Documents

Regulating Onshore Special Purpose Reinsurance Vehicles

Martin F. Grace, Robert W. Klein, Richard D. Phillips –
May 21, 2001

The increased risk from natural disasters in the United States has prompted significant changes in primary insurance markets and changes in related markets for reinsurance and other forms of risk transfer and financing. Among the mechanisms that have been developed are Special Purpose Reinsurance Vehicles (SPRVs), which have been principally formed outside the United States (for tax and regulatory reasons) to facilitate the securitization of catastrophic insurance risk. The National Association of Insurance Commissioners (NAIC) is considering model legislation that will facilitate the formation of SPRVs in the United States. This paper examines several important considerations in crafting this legislation, as well as regulators’ role and responsibilities in overseeing SPRV transactions.