The EU and US have reached a bilateral agreement on prudential measures regarding (re)insurance, which should improve the ability of EU (re)insurers to compete in the US. Among other things, the agreement eliminates collateral requirements for EU reinsurers doing business in the US.

The bilateral agreement, which was announced by the EU and US in a joint statement published on 13 January 2017, follows nearly a year of formal negotiations. It covers three areas of prudential oversight: reinsurance, group supervision and exchange of information between supervisors.

  • Reinsurance - currently, European reinsurers must comply with both Solvency II and US reinsurance collateral requirements. According to the EU Commission, EU reinsurers estimate that they have about $40 billion of collateral posted in the US, with an estimated opportunity cost of around $400 million per year. The agreement eliminates collateral and local presence requirements for EU and US reinsurers, subject to compliance with certain conditions (eg maintaining capital and solvency standards and a practice of prompt payment of claims under reinsurance agreements).
  • Group Supervision – an EU insurance group operating in the US will be supervised at the worldwide group level by the relevant EU supervisors (including group governance, solvency, capital and reporting requirements). US insurers operating in the EU will be supervised at the worldwide group level only by the relevant US insurance supervisors. However, EU and US supervisors will preserve the ability to request and obtain information about worldwide activities which could harm policyholders' interests or financial stability in their territory.
  • Exchange of Information – the agreement encourages EU and US supervisory authorities to continue to exchange supervisory information on (re)insurers operating in each other’s markets. To support such information exchange, the agreement includes model memorandum of understanding provisions.

The bilateral agreement has been broadly welcomed by insurance representative bodies in both the US and the EU. It must now be approved by the US Congress and by the European Parliament and the Council of the EU.

You may access the text of the agreement here.