As of March 11, the Securities Valuation Office of the National Association of Insurance Commissioners (NAIC) has removed Silicon Valley Bank (SVB) from the list of approved banks ("qualified U.S. financial institutions," or QUSFIs) whose letters of credit are permitted to secure reinsurance obligations owed to U.S.-domiciled insurance company cedents such that the cedents can record the reinsurance on their financial statements. The NAIC indicated on March 13 it expected that Signature Bank is likely to be removed from the list as well. The NAIC added that under the model law for financial statement credit for reinsurance, there is a "drafting note" providing for the circumstance where a bank issuing a letter of credit is removed from the list. The drafting note indicates that "letters of credit acceptable when first obtained will, in the event of the subsequent nonqualification of the issuing (or confirming) institution, continue to be acceptable as security until the account party and beneficiary would first have, in the normal course of business, an opportunity to replace the credit support facility."
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