EU-US reinsurance agreement endorsed by Council of Ministers

The bilateral agreement on prudential measures regarding insurance and reinsurance (45-page / 334KB PDF) was finalised earlier this year following negotiations between EU and US officials, which began in 2015. To take full effect, however, the agreement needs to be approved by EU authorities and US Congress.

The Council of Ministers adopted a decision to approve the agreement (5-page / 203KB PDF) on Monday. The European Parliament must also approve the agreement.

"The agreement will provide legal certainty for EU and US insurers and reinsurers in the application of regulatory frameworks," the Council of Ministers said in a statement. "It will enable improved protection for policyholders and other consumers through cooperation between supervisors and the exchange of information." 

The agreement deals with three areas of insurance regulation: reinsurance, group supervision and information exchange. 

Under the agreement, EU-based insurance firms will not need to have a local presence in the US to conclude reinsurance agreements in the US, and vice-versa. In addition, EU insurers will no longer have to post collateral before they can reinsure risks underwritten in the US.

Prudential regulation of insurance groups will also be simplified, with US and EU groups operating in the other market subject only to oversight in their home jurisdiction.

"It is just over two years since the European Council authorised the European Commission to open negotiations with the United States for an agreement on reinsurance," said Alexis Roberts, expert in insurance law at Pinsent Masons, the law firm behind Out-Law.com. "The speed with which these negotiations have progressed, been concluded and have led now to a near-finalised and approved bilateral agreement is impressive."

"Although the UK – when it exits the EU – will not directly benefit from this agreement and will have to negotiate separately on reinsurance with the US; reinsurers in the UK will no doubt welcome this important step forward as it is building greater confidence, and stronger relations, in the international reinsurance landscape," Roberts said.