On July 14, 2017, the Trump administration released a statement indicating that the United States intends to sign the U.S. – EU bilateral insurance agreement. The announcement came several weeks after the Council of the European Union adopted a decision authorizing the signing of this agreement. The agreement attempts to “level the playing field for U.S. insurers and reinsurers operating in the EU.” This U.S. – EU bilateral agreement is a direct response to EU’s January 2016 enactment of Solvency II. Solvency II is a legislative program implemented in all twenty-eight Member States, aimed at codifying EU insurance regulations in an attempt to protect policy holders and to incentivize risk management. We previously wrote about this comprehensive program of insurer regulatory requirements here.
How the Agreement Works
Under the U.S. – EU agreement, the European Insurance and Occupational Pensions Authority (EIOPA) will recognize the insurance regulatory framework of the United States, allowing U.S. insurers and reinsurers to compete in the EU market without being subjected to the worldwide group capital, reporting or governance requirements. Similarly, EU insurers and reinsurers will have equal treatment in the United States, which will allow EU insurers and reinsurers to compete in U.S. markets. Additionally, the bilateral agreement will encourage information sharing between insurance regulators on both sides and eliminate the prior requirement for reinsurers to establish local branches or offices across the Atlantic, away from their home bases.
Although the United States has agreed to sign the bilateral agreement, the agreement is not self-executing. The agreement allows states to supervise insurance activities within their own borders. In other words, states are free to change existing law. States may choose to impose additional capital or more stringent requirements, so long as they apply across-the-board to all reinsurance transactions.
Stay tuned for more updates and analysis on the U.S. – EU bilateral insurance agreement and Solvency II from SDV’s International practice group.
This blog post was written with assistance from Miguel G. Fernandez, a summer associate at SDV from the University of Miami School of Law.