22 September 2017
Reporter: Becky Butcher

US and EU sign covered agreement

The US and EU have signed the bilateral covered agreement on insurance and reinsurance.

The signature marks the final step in more than 20 years of discussions and a year of formal negotiations between the European Commission and the US Department of the Treasury and Office of the Trade Representative.

The covered agreement eliminates collateral and local presence requirements for qualified reinsurers and meaningfully streamlines group supervision requirements for insurers and reinsurers operating in both jurisdictions.

In a joint statement, the EU and the US said: “The agreement represents a major step forward in US-EU cooperation on insurance and reinsurance, conveying benefits to EU and US insurers and reinsurers operating across the Atlantic, by offering them enhanced regulatory certainty, while maintaining robust consumer protections.”

Without a signed agreement, US companies would have been unable to renew or write new business in the EU without first establishing a local presence in each EU member state in which they intend to write business.

A statement from the European Commission said: “EU reinsurers estimate that they have about $40 billion of collateral posted in the US, which could instead be invested to create jobs and growth. The opportunity cost is estimated at around $400 million per year.”

It also explained that the agreement brings “prudential benefits” including a change that means EU insurers and reinsurers must prepare only one risk and solvency assessment in light of their specific risk profile. US supervisors will also use this assessment.

The signature allows parts of the agreement to become immediately applicable on a provisional basis. The European Parliament and Council will need to approve the conclusion of the agreement.

Earlier this year S&P Global Ratings suggested that the covered agreement is one key area where the Dodd-Frank Act worked as intended.

The rating agency suggested that Dodd-Frank “empowers the Federal Insurance Office to advise the US Treasury and the US Trade Representative in international insurance negotiations, including areas of differentiating regulatory treatments”, which the covered agreement is designed to overcome.

More regulation news
The latest news from Captive Insurance Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
PRA proposes Solvency II reporting amendments
15 January 2018 | London | Reporter: Ned Holmes
The PRA has proposed multiple changes to insurance reporting requirements under the Solvency II directive
AHPs rule could have future effect on captive market
12 January 2018 | New York | Reporter: Ned Holmes
The DOL proposed rules on AHPs could have a future impact on the medical stop-loss captive insurance market, according to Phillip Giles, vice president of sales and marketing at QBE North America
John Dies: Captives must be mindful of Trump’s tax reform
10 January 2018 | Houston | Reporter: Ned Holmes
Captives need to be mindful of the changes brought by Trump’s US tax reform plan, despite its positive effect on the insurance industry in general, according to John Dies, managing director of tax controversy at alliantgroup
UK’s ILS legislation approved
29 November 2017 | London | Reporter: Becky Butcher
A UK government cross-party committee has approved the UK’s Risk Transformation Regulations 2017 and the Risk Transformation (Tax) Regulations 2017, which make up the UK’s insurance linked-securities (ILS) legislation
Avrahami motion for reconsiderations denied
20 November 2017 | Washington DC | Reporter: Becky Butcher
Judge Mark Holmes has denied the Avrahamis’ motion for reconsideration concluding that at least one policy was so “ill-drafted” that it was both a claims-made and an occurrence policy
CIC Services: IRS court case ruling ‘disappointing’
06 November 2017 | Tennessee | Reporter: Becky Butcher
CIC Services has said losing its court case to the Internal Revenue Service (IRS) was “disappointing”
PRA to improve Solvency II directive
25 October 2017 | London | Reporter: Becky Butcher
The Prudential Regulation Authority (PRA) has revealed it is to make improvements the Solvency II directive, less than two years after its implementation date