The US Treasury and Trade Representative are planning to begin negotiating a covered agreement with the EU over reinsurance collateral requirements.
The aim of the agreement will be recognition of certain prudential measures to ensure a more level playing field for reinsurers in the US.
In 2013, the Federal Insurance Office (FIO) recommended the US pursue a covered agreement for reinsurance collateral requirements based on the National Association of Insurance Commissioners’s (NAIC) Credit for Reinsurance Model Law and Regulation.
Under current rules, foreign reinsurers must post qualifying collateral equal to 100 percent of the actuarially estimated reinsurance liabilities that it has assumed from the ceding insurer.
The NAIC has attempted to overcome this requirement, which does not apply to US reinsurers, by introducing the Credit for Reinsurance Model Law and Regulation on a state-by-state basis, but this “is not uniform in structure or implementation”, according to the FIO.
The FIO recommended a covered agreement between the US and the EU that would recognise prudential measures in Europe that achieve a level of protection for insurance or reinsurance consumers that is substantially equivalent to the level of protection achieved under US state regulation, based on the NAIC's Credit for Reinsurance Model Law and Regulation.
“Negotiating a covered agreement with the EU is a critical step toward levelling the playing field for American insurers and reinsurers,” said FIO director Michael McRaith. “As we begin negotiations with our European counterparts, I look forward to consultation and engagement with Congress, state regulators, and other stakeholders so that we can pursue a covered agreement that provides tangible benefits for the US insurance industry and consumers.”
Cristina Mihai, head of international affairs and reinsurance at Insurance Europe, commented: “Insurance Europe is pleased that negotiations can finally begin for a covered agreement on reinsurance and insurance between the EU and the US.”
“In particular, Insurance Europe welcomes the intention to afford nationally uniform treatment to all EU reinsurers and insurers operating in the US. At the same time, it hopes that the final agreement will be ambitious and will include equal treatment for both EU and US reinsurers and insurers, by eliminating the current discriminatory collateral requirements that are applied to EU reinsurers and insurers.”
NAIC president Monica Lindeen added: “We have assurances from both agencies that state regulators will have direct and meaningful participation in those discussions, and our goal will be to preserve the integrity and strength of the state-based regulatory system for the benefit of US consumers and companies.”
