Lloyd’s reinsurers qualify to drop collateral on US deals starting Q4

Lloyd’s reinsurers providing protection to American carriers will be free of collateral requirements beginning Q4 2022, the  Lloyd’s Market Association (LMA) said of a pending rule change following UK-US & EU-US covered agreements.

“All US reinsurance contracts written by Lloyd’s underwriters incepting on or after 1 October 2022 will be written under the Reciprocal Reinsurer status,” the LMA said, with note that Lloyd's had been approved as a Reciprocal Reinsurer by US regulators. “This means that no collateral will be posted in the Lloyd’s Credit for Reinsurance Trust Funds.”

US cedants will continue to be able to take full balance sheet credit for reinsurance coverage.

Contracts written prior to the pending October 1, 2022 implementation date are not freed of the to-date collateral requirements.

Collateral requirements are lifted for reinsurers meeting set requirements for capital, solvency and available central funds. Reinsurers must consent to US court jurisdiction and to host supervisory authority as agent for process of service, both of which Lloyds handles centrally.

Presently, Lloyd’s reinsurers providing protection to US reinsureds are required to provide collateral supporting contracts in the form of the Lloyd’s Credit for Reinsurance Trust Funds. This is deducted by Lloyd’s from the premium received for each contract.

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