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Press Release

Florida Office Of Insurance Regulation Tightens Finite Reinsurance Requirements
Thursday, April 14, 2005
Contact:   Valerie Beynon, APR
               850/ 413-2515

Tallahassee – Florida Insurance Regulation Commissioner Kevin McCarty today announced that the Florida Office of Insurance Regulation (Office) is initiating a rule change that will require domestic insurance companies to make additional disclosures and attestations relating to their finite and other risk limiting reinsurance agreements and comply with the disclosure requirement for credit for reinsurance.
"This aspect of company disclosure is vital to Florida consumer and investor assurance," said Commissioner McCarty. "The Office is concerned about the improper use of finite reinsurance to manipulate financial results."
Finite reinsurance is a financing arrangement used to protect insurers from interest rate risk and timing risk. The concern insurers have about interest rate risk involves potential losses they could realize due to interest rate fluctuations whereas timing risk addresses situations where insurers want to hedge against variations in the timing of their future loss payments. If finite reinsurance is accounted for as a traditional reinsurance product, however, the capital and income of the companies involved can be manipulated.
"As regulators, this will assist us in verifying that the correct accounting treatment is being utilized by insurers entering into finite and other risk limiting reinsurance contracts," said McCarty.
A rule development workshop will be held on Tuesday, May 10, 2005 at 10 a.m. in Room 116 of the Larson Building at 200 East Gaines St. in Tallahassee, Florida.