Out-Law News 1 min. read

Path cleared for EU-US deal on reinsurance


EU countries have called on the European Commission to open talks with the US on agreeing a deal on reinsurance.

The Commission was given a mandate to open negotiations with the US on a reinsurance agreement by the General Affairs Council within the Council of Ministers, the EU law making body made up of representatives from each of the 28 EU countries. Under the mandate, the Commission will negotiate the agreement on behalf of the EU.

"An agreement with the US will greatly facilitate trade in reinsurance and related activities", Janis Reirs, minister for finance of Latvia, said. Latvia holds the current presidency of the Council of Ministers. "It will enable us for instance to recognise each others prudential rules and help supervisors exchange information."

The Council of Ministers said that once an EU-US reinsurance agreement has been negotiated it will conclude the deal "with the consent of the European Parliament".

Expert in insurance and reinsurance regulation Colin Read of Pinsent Masons, the law firm behind Out-Law.com, said: "Any measures to build confidence in international reinsurance are welcome. The US is the biggest global market for insurance and reinsurance with the UK alone the third largest."

"Regulation and supervisory challenge has the potential to inhibit reinsurance trade between the US and EU bloc. Greater clarity around both should make doing business easier. The time taken to get this far remains a concern; trade bodies need to continue to keep these issues on the agenda in order that this particular agreement can be reached and brought on stream before the end of the decade," Read said.

Reinsurers operating in the EU must adhere to the EU's Reinsurance Directive, a 2005 EU law that set out an EU-wide supervisory regime governing reinsurance business for the first time. The Directive was introduced to increase confidence in the market, avoid unnecessary regulatory duplication and remove barriers to cross-border trade. 

New controls over the way reinsurers operate will have effect from 1 January 2016, when the Solvency II regulatory regime comes into force.

The EU's Solvency II Directive codifies and harmonises EU insurance regulation. It sets out broader risk management requirements and requires firms to hold enough capital to cover all their expected future insurance or reinsurance liabilities.

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