Supplement No. 1 to
Circular Letter No. 8 (2005)

August 3, 2005


All Authorized Insurers


Finite Reinsurance

STATUTORY REFERENCE: Insurance Law §§ 309, 310

On March 29, 2005, the Department published Circular Letter No. 8 because of concern about the improper use of finite reinsurance to manipulate financial reporting results. The Circular Letter required that as part of the examination of an insurance company, the Chief Executive Officer attest that: no side agreements exist that would reduce, limit, mitigate or otherwise affect the risk being transferred under a reinsurance agreement and appropriate documentation exists to support the insurer’s accounting for reinsurance that properly reflects the economic intent and actual risk transfer of the transaction.

Since that time, the Blanks Working Group of the National Association of Insurance Commissioners (NAIC) has adopted additional disclosures regarding finite reinsurance for the annual statement of property/casualty insurers, including a CEO and CFO attestation. These additional requirements will be effective for the filing of the 2005 annual statement for all authorized property/casualty insurers in the United States.

In conjunction with the formal adoption by the NAIC of these new national requirements and in the interest of uniformity, the Department will discontinue the requirement for the Circular Letter 8 (2005) attestation for property/casualty insurers. However, until such time as the filing of the 2005 annual statements, the attestations will be required on examination of property/casualty insurers. The requirement for health insurers and life insurers is under review. Life insurers are reminded of the requirements of SSAP No. 61 and 11 NYCRR 127 ("Regulation 102").

If you have any questions relative to this Supplement to the Circular Letter, please contact Audrey Samers, Deputy Superintendent and General Counsel, at 212 480-5282.

Howard Mills
Superintendent of Insurance