SVB removed as letter of credit provider for reinsurance, says Kramer Levin

Global rule patient Kramer Levin has confirmed that Silicon Valley Bank (SVB) has been removed arsenic a missive of in installments (LOC) supplier for reinsurance in installments by nan Securities Valuation Office of nan National Association of Insurance Commissioners (NAIC).

The move followed nan nonaccomplishment of nan Santa Clara, California headquartered SVB connected March 10th, starring US president Biden to guarantee group that location money is safe aft nan Treasury Department, Federal Reserve and nan Federal Insurance Deposit Corporation (FDIC) took action.

In nan aftermath, it’s been reported that insurers narrowly avoided financial distress acknowledgment to US Government involution astir nan collapse.

However, successful a caller note, Partner astatine Kramer Levin successful New York, Daniel Rabinowitz, explains that arsenic of March 11th, 2023, nan NAIC’s Securities Valuation Office removed nan grounded slope from nan database of approved banks “whose letters of in installments are permitted to unafraid reinsurance obligations owed to U.S.-domiciled security institution cedents specified that nan cedents tin grounds nan reinsurance connected their financial statements.”

According to Rabinowitz, nan NAIC besides suggested connected March 13th that it expects Signature Bank is apt to beryllium removed from nan database arsenic well.

Reportedly, nan NAIC noted that nether nan exemplary rule for financial connection in installments for reinsurance, location is simply a “drafting note” providing for nan condition wherever a slope issuing a missive of in installments is removed from nan list.

This drafting statement indicates that, “letters of in installments acceptable erstwhile first obtained will, successful nan arena of nan consequent nonqualification of nan issuing (or confirming) institution, proceed to beryllium acceptable arsenic information until nan relationship statement and beneficiary would first have, successful nan normal people of business, an opportunity to switch nan in installments support facility,” explains Rabinowitz.