U.S. and EU agree on bilateral Agreement on insurance and reinsurance measures.
In particular in light of the latest discussions in German insurance regulatory law (see article on publication regarding regulatory requirements for third country reinsurers), the news of 16 January 2016 that the U.S. and EU successfully concluded negotiations on a U.S./EU Agreement on insurance and reinsurance is one of even greater relevance. The Agreement, which is the result of more than twenty years of discussions, simplifies the options for U.S. reinsurers to conduct business in Germany.
The German insurance supervisory law, in transposing the European law framework set by the Solvency II Directive, stipulates that the general authorisation requirement for third country insurers does not apply for insurance undertakings that wish to carry out solely reinsurance business in Germany. According to this exemption, the requirement for authorisation and the accompanying requirement to establish a branch office do not apply if the following two prerequisites are fulfilled cumulatively:
- if (re-)insurers from third countries carry on solely reinsurance business in Germany from their seat/head office, i.e. through provision of cross-border services, and
- if the European Commission has decided in accordance with Article 172(2) or (4) of Directive 2009/138/EC that the solvency regimes for reinsurance activities carried out by undertakings in the relevant country are equivalent to the regime described in that Directive (currently given only for Bermuda (except captives), Switzerland and Japan).
The new U.S./EU Agreement does now provide for a widely equal treatment of U.S./EU reinsurers, in particular these shall be able to conduct business in the respective other region without the obligation to establish a local presence or provide for a collateral.
Besides reinsurance, the Agreement covers two other areas of insurance supervision: group supervision and the exchange of insurance information between regulators. Insurance groups will as a general rule only be subject to worldwide prudential insurance group oversight by the supervisors in their home jurisdiction. EU and U.S. regulators intend to cooperate much closer in the future and enter into a productive exchange in order to ensure supervision at a high quality level.
The Agreement has not yet entered into force. In a next step, it has to be ratified by the European Parliament and the U.S. Congress.