A UK-US Covered Agreement could be in place as early as December this year, ready for when the UK departs the EU in March next year, according to the National Association of Insurance Commissioners (NAIC).
Last year, an EU-US Covered Agreement was signed into law to eliminate collateral and local presence requirements for qualified reinsurers and meaningfully streamline group supervision requirements for insurers and reinsurers operating in both jurisdictions.
Speaking at the European Captive Forum in Luxembourg, Steve Kinion, director, bureau of captive and financial insurance products at the Delaware Insurance Department, said: "US regulatory officials are considering developing a covered agreement with the UK before the UK’s withdrawal from the EU."
Kinion added: "The existing covered agreement between the US and EU includes the UK. As a result of the Brexit vote, the UK is scheduled to leave the EU on March 29, 2019. Once it departs, its reinsurers will no longer have the reinsurance collateral reduction benefits of the US-EU covered agreement."
In a statement, the NAIC said: “We appreciate outreach from Treasury in advance of announcing initiation of a possible US/UK covered agreement, and a commitment to ongoing coordination with state regulators as the process moves forward.”
The NAIC described the UK as an "important market" for US transatlantic insurance activity.
The NAIC statement continued: “Although we continue to have concerns with the covered agreement mechanism itself, given the unique circumstances, if a final agreement between the US and UK mirrors the terms, commitments, and US policy statement of the existing US/EU covered agreement and simply reestablishes or replicates its application to the UK, we do not oppose its use in this instance.”
The NAIC noted that "nothing in these negotiations should alter the direction or timing of our ongoing credit for reinsurance model law reforms".
It concluded: "As the recent devastating hurricanes have demonstrated, the reinsurance sector plays an important role in protecting US policyholders so it is paramount we conclude our work quickly to establish certainty in the rules for reinsurers from around the globe.”
