San Juan, Puerto Rico – Puerto Rico's insurance industry, which has seen a surge in interest following a series of global catastrophic events, is at a crossroads. The island's International Insurance Center (IIC) has the potential to attract more international insurers, but recent legislative changes have raised concerns about the potential loss of accreditation from the National Association of Insurance Commissioners (NAIC).
Alexander Adams, the Insurance Commissioner of Puerto Rico, highlighted the IIC's significant potential for economic growth. He explained that the IIC, a subsidiary of the Office of the Insurance Commissioner (OIC), is responsible for authorizing international insurers and reinsurers to operate on the island. By serving as a bridge for the provision of insurance-related services to other countries, the IIC offers tax advantages to its participants.
This potential is particularly relevant in today's "hard" insurance market, characterized by limited reinsurance capacity and rising costs due to frequent global catastrophes. According to Adams, Puerto Rico currently hosts around 31 international insurers, with five new additions in the past year. However, the recent passage of Law 49 of 2024 has raised concerns among regulators.
The NAIC, which accredits insurance regulatory bodies, had previously revoked the OIC's accreditation in 2020 but reinstated it in 2022. Law 49, aimed at facilitating operations for international insurers in the United States, could potentially jeopardize Puerto Rico's accreditation once again. Adams expressed concerns that the law's provisions, particularly regarding the exemption of international insurers from certain financial requirements, might be inconsistent with NAIC standards.
A group of insurance commissioners is currently reviewing the potential impact of Law 49 on Puerto Rico's accreditation. The final decision will be made by the NAIC's Financial Regulation Standards and Accreditation Committee. While Adams emphasized the importance of maintaining accreditation to ensure the solvency of insurers operating in Puerto Rico, he also acknowledged the need to balance regulatory requirements with the goal of attracting more international businesses.
The future of Puerto Rico's insurance industry hinges on the outcome of this review. If the NAIC revokes Puerto Rico's accreditation, it could deter international insurers from setting up operations on the island and potentially lead to higher insurance costs for consumers.
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