This bill permits establishment of special purpose reinsurance vehicles and establishes a regulatory framework for the oversight of activities related to special purpose reinsurance vehicles. Special purpose reinsurance vehicles provide insurers an option other than standard reinsurance as a possible method of transferring risk at a time when insurers are facing significant increases in reinsurance costs. The bill is substantially similar to the National Association of Insurance Commissioners' Special Purpose Reinsurance Vehicle Model Act and would permit insurers access to special purpose reinsurance vehicles in a marketplace other than those offshore insurance markets where special purpose reinsurance vehicles are already permitted.

A special purpose reinsurance vehicle is an entity established for the exclusive purpose of facilitating the securitization of the risk of one or more ceding insurers as a means of accessing alternative sources of capital and achieving the benefits of securitization. Investors in fully funded insurance securitization transactions provide funds that are available to the special purpose reinsurance vehicle to secure the aggregate limit under a special purpose reinsurance vehicle contract that provides coverage against the occurrence of a triggering event. The creation of special purpose reinsurance vehicles is intended to achieve greater efficiencies in conducting insurance securitizations, to diversify and broaden insurers' access to sources of risk-bearing capital and to make insurance securitization generally available on reasonable terms to as many insurers as possible.