Bilateral Insurance Agreement between US & EU Signed
10/10/17 – The European Union and the United States have signed a Covered Agreement to open up access for insurance firms to each other’s markets and decrease collateral requirements for transatlantic reinsurers.
The agreement will eliminate obligations that reinsurers to post collateral when signing contracts across the Atlantic. Additionally, the agreement will terminate requirements for reinsurers to maintain a local branch or office in their host jurisdiction. Both sides will now meet regularly through a joint committee to discuss how the deal will be implemented. The new provisions are expected to apply in full force within around five years.
The Covered Agreement addresses three areas of prudential insurance supervision:
- The group supervision practices described in the Covered Agreement apply only to US and EU insurance groups operating in both territories.
- US insurance groups operating in the EU will be supervised at the worldwide group level only by the relevant US insurance supervisors.
- EU insurers operating in the US will be supervised at the worldwide group level only by the relevant EU insurance supervisors.
- US insurance groups operating in the EU will not have to meet EU worldwide group capital, reporting, or governance requirements.
- Supervisors in both the US and the EU can request information from insurance groups from the other party, and take appropriate action within their territory to protect policyholders and financial stability.
- US states have 60 months to adopt reinsurance reforms removing collateral requirements for EU reinsurers that meet the prescribed consumer protection conditions.
- For a US or EU reinsurer, conditions regarding financial strength, market conduct (e.g., whether the reinsurer pays claims promptly), and reporting requirements are the bases for relief from collateral and local presence requirements. Failure to meet these conditions and requirements can result in the reimposition of collateral or local presence requirements. Other conditions for reinsurers include consent to service of process and commitment to the payment of final, enforceable judgments.
- Within 24 months, EU Member States will revise existing laws so that US reinsurers can operate in the EU without establishing a branch or a subsidiary.
The exchange of information between supervisory authorities:
- The Covered Agreement encourages, in a non-binding manner, insurance supervisors in the US and the EU to share information.
For more information, please reference our previous blog on the Covered Insurance Agreement.