The European Union and the United States have notified each other that all procedures have been completed to enable the bilateral agreement on prudential measures relating to insurance and reinsurance (the Agreement) to enter into force. Accordingly notice has now been published in the Official Journal of the European Union stating that the Agreement entered into force on 4 April 2018.
Historically, US states have been able to impose collateral requirements where risks are ceded to European reinsurers. This has been applied as a consumer protection measure. Collateral can be up to 100 per cent of the risk reinsured, depending on the US state (some states have a sliding scale). The covered agreement was signed by representatives from the EU and the US on 22 September 2017. The agreement will principally benefit European reinsurers by progressively (over 5 years from formal adoption) removing collateral requirements. In addition, however, US reinsurers will no longer need to have a local presence in the EU in order to cover EU risks.
The text, negotiated by the Commission on the basis of a mandate approved by the Council in April 2015, includes provisions on:
- reinsurance – benefitting EU reinsurers active in the US by removing collateral requirements, and by clarifying responsibilities for group supervision;
- group supervision – US and EU insurers operating in the other’s markets will only be subject to worldwide prudential insurance group oversight by supervisors in their home jurisdiction; and
- the exchange of insurance information between supervisors – the Agreement encourages insurance supervisory authorities in the US and the EU to continue to exchange supervisory information on insurers and reinsurers that operate in the US and EU markets.
Some of the Agreement’s provisions have been applied provisionally since it was signed in September 2017. The Agreement will fully apply for both sides 60 months post-signature and a Joint Committee will oversee its implementation.