Since 2012, representatives of the EU and the US have expressed their will to negotiate an agreement to improve the supervision of insurers and reinsurers operating in both countries.
In November 2015, the US Treasury Department and the US Trade Representative’s office announced their intention to begin negotiations on insurance and reinsurance measures with the EU with the aim of agreeing a bilateral agreement relating to the prudential governance of the insurance and reinsurance sector.
A new step towards a future bilateral agreement was initiated on 18 and 19 February 2016, as the EU’s and the US’s representatives met in Brussels and agreed to engage in a “meaningful stakeholder consultation” to move forward efficiently and expeditiously discussions on the issue.
One of the issues that will need to be addressed during the negotiations is the collateral that the US require from European reinsurance companies and whether the US are prepared to reduce or remove this collateral.
Currently, European reinsurance companies not only must comply with the EU solvency rules (Solvency II) but must also meet additional requirements when underwriting in the US: the US requires foreign companies that reinsure US insurers to put in place collateral in an amount representing a high percentage of the reinsurance cover provided to US insurance companies, sometimes up to 100% of the amounts reinsured. Such a requirement does not exist for US reinsurance companies.
In this regard, EU and US representatives also expressed their “good faith pursuit of an agreement on matters relating to group supervision, exchange of confidential information between supervisory authorities on both sides, and reinsurance supervision, including collateral”.