The US Department of the Treasury and the Office of the US Trade Representative confirmed they plan to sign the US-UK Covered Agreement (24 page / 704KB PDF), providing mutual recognition of the two countries’ regulatory frameworks. The agreement is consistent with the US-EU Covered Agreement signed in 2017.
According to the document, the two countries share the goal of protecting policyholders and respect each other’s regulatory system for insurance supervision and regulation. It confirms that the UK’s prudential measures, and the undertakings contained in the agreement, achieve a level of protection which is consistent with US rules.
As with the US-EU agreement, the deal reduces collateral requirements for reinsurers, and enables the sharing of information between supervisory bodies.
The US Treasury said the agreement would provide “regulatory certainty and market continuity” ahead of Brexit, while also making US insurers and reinsurers more competitive.
“The US-UK Covered Agreement also benefits the U.S. economy and consumers by affirming the US state-based system of insurance regulation and increasing growth opportunities for US insurers,” the Treasury said.
Insurance law expert Elaine Quinn of Pinsent Masons, the law firm behind Out-Law.com, said the news would bring reassurance to the market on both sides of the Atlantic.
“UK insurers and reinsurers will be delighted that this US-UK Covered Agreement has been able to be finalised in good time before the UK exit from the EU. Fortunately, it seems that the UK’s participation in the US-EU Covered Agreement negotiations to finalisation has eased the process as this new agreement has been concluded on equal terms,” Quinn said.
“It offers some stability for the London insurance market during these increasingly uncertain times, particularly given recent reports of wavering commitment from European underwriters to renewing London-based cover. It is also good for insurers to receive this news prior to the conclusion of 2018," she said.