EU and US sign bilateral agreement on insurance and reinsurance

The EU and the US are signing the  bilateral agreement on insurance and reinsurance today, the European Commission said on Sept. 22.

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 agreement will boost consumer protection and cut costs and red tape for EU insurers and reinsurers active in the US.

In their 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.”

In line with the objectives of the investment plan for Europe and the Capital Markets Union, the agreement will enable reinsurers to boost their investment capacity. 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.

The agreement will enhance consumer protection by facilitating the exchange of information between EU and US supervisors, according to the statement. The agreement also brings prudential benefits: for instance, EU insurers and reinsurers will have to prepare only one risk and solvency assessment (ORSA) in light of their specific risk profile, the EU Commission explained. This assessment will also be used by US supervisors. The signature allows parts of the agreement to become immediately applicable on a provisional basis. The European Parliament and the Council will need to approve the conclusion of the agreement.

Dave Matcham, chief executive of the International Underwriting Association, commented:

“The EU-US covered agreement offers a number of business advantages to both sides and I am pleased to see its signing today after several months of review and many years of formulation. I am looking forward now to a speedy implementation of the deal which sets an important standard for greater mutual recognition between regulatory authorities. I hope it will prove to be an example that others are able to follow creating a fairer and more efficient global insurance industry.”