The letter, submitted by RIMS president Nowell Seaman on 11 April, extolled the benefits to RIMS members, including the elimination collateral requirements, resulting in additional capital; the increase of reinsurance capacity; the requirement for the appointment of insurance commissioners for service; and streamlining the dispute process by clarifying jurisdiction and payment of final judgements.
It stated: “Although risk managers are not directly affected by the agreement, they will benefit indirectly via additional capital that would otherwise be tied up in collateral requirements as well as from increased reinsurance capacity.”
“This could have a positive impact on competition and prices for reinsurance. Risk managers would also benefit in the event of disputes with a non-local assuming insurer. By requirements to be eligible for the benefits of the agreement, such insurers must appoint insurance commissioners for service of process, agree to the jurisdiction of US courts, and agree to recognise and pay final judgments of US courts.”
The agreement, which was finalised in January but has yet to be signed, provides a mutual agreement of prudential supervision in the EU and the US, which will eliminate the increasing barriers to US groups operating in Europe.
Under the agreement, EU supervisors will acknowledge and affirm the US insurance regulatory framework, promising to allow US insurers and reinsurers to compete in their markets without the regulations being imposed on them under Solvency II. In exchange, EU insurers and reinsurers will receive fair reciprocal treatment and be able to compete in US markets.
The agreement covers a number of areas of prudential insurance oversight, including reinsurance, group supervision and the exchange of insurance information between supervisors.
According to a joint statement from EU and US representatives, insurers operating in the other market will only be subject to worldwide prudential insurance group oversight by the supervisors in their home jurisdiction.
The RIMS president added: “For risk professionals to support their organisations’ expansion into global markets, it is important that RIMS advocates for regulation that facilitates opportunities for our members’ to effectively achieve their objectives. RIMS is encouraged by the US-EU covered agreement on reinsurance and looks forward to working with the Department of the Treasury to help bring this agreement to fruition.”