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US to seek 'prudential' assurances from EU as part of reinsurance deal


The US Treasury and US Trade Representative (USTR) will be seeking "recognition of certain prudential measures" from the EU as part of negotiations for a covered agreement on insurance, according to an announcement.

The departments, which have the right to negotiate covered agreements with foreign governments on behalf of the US government, said that any deal would be based on the creation of "a more level playing field for US firms". Covered agreements allow the US to agree prudential measures for non-US insurers and reinsurers with the relevant governments, authorities or regulatory entities.

Trade body Insurance Europe, which acts on behalf of 34 national insurance associations, welcomed an announcement by the Treasury and USTR that they were ready to begin negotiations on the agreement. The European Commission was given a mandate to negotiate the agreement on behalf of the EU in April.

"Insurance Europe is pleased that negotiations can finally begin for a covered agreement on (re)insurance between the EU and the US," said Cristina Mihai, Insurance Europe's head of international affairs.

"In particular, Insurance Europe welcomes the intention to afford nationally uniform treatment to all EU (re)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 (re)insurers, by eliminating the current discriminatory collateral requirements that are applied to EU re(insurers)," she said.

US law requires non-US insurers and reinsurers to set aside a certain amount of collateral against policies underwritten in the US. European insurers believe that these requirements are unnecessarily burdensome, and will become even more so when the new Solvency II regime comes into force next year.

Trade body the American Insurance Association (AIA) said that the covered agreement negotiations would also give regulators the opportunity to address third country equivalence for the US under Solvency II. If US insurance supervision is not deemed 'equivalent' to that under Solvency II, US insurers operating in the EU could have to adjust to two different sets of regulatory rules, according to Steve Simchak, AIA's director of international affairs.

"Our member companies have a substantial presence in Europe and as a result, AIA has a considerable interest in ensuring that a level, competitive playing field exists in the EU and the US," he said.

"Without an equivalence determination, US groups in the EU could face duplication of group supervision and other regulatory burdens. It will become more difficult for US insurers to operate in the European markets. We hope that insurance regulators in Europe will recognise that the launch of negotiations puts the US and the EU on a path toward prudential recognition, and act accordingly as they plan for Solvency II's implementation on January 1," he said.

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