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Lawmakers debate US Solvency II deal with EU

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The chair of a House of Representatives subcommittee expressed skepticism about the covered agreement reached between the United States and the European Union to address the U.S. lack of equivalency related to the bloc’s Solvency II directive for the insurance industry even as he acknowledged Congress has a limited ability to object to the deal. 

The covered agreement negotiated by the U.S. Department of the Treasury and the Office of the U.S. Trade Representative, announced on Jan. 13, aims to address the fact that the European Commission has not deemed the United States an equivalent jurisdiction, per the E.U.’s Solvency II directive outlining a risk-based capital regime for insurers and reinsurers in Europe. 

Under Title V of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the treasury secretary, through the Federal Insurance Office, and USTR are authorized to jointly negotiate a covered agreement with one or more foreign governments, authorities or regulatory entities regarding prudential measures with respect to insurance or reinsurance. Per Title V, the agreement was submitted on Jan. 13 to four Congressional committees — House Financial Services, House Ways and Means, Senate Banking and Senate Finance Committees — for review, starting a 90-day clock. 

Rep. Sean Duffy, R-Wis., chairman of the House Housing and Insurance subcommittee, expressed skepticism over the agreement during a subcommittee hearing on Thursday and said the 90-day period was “an insult to this institution and does nothing more than pay lip service to the notion of congressional consultation and input.” But he acknowledged Congress does not have a mechanism to vote to approve or disapprove of the agreement.   

“The centerpiece of Donald Trump’s campaign for president was negotiating better international deals,” he said. “The president and his new treasury secretary should be afforded the chance to decide for themselves whether to negotiate or sign this agreement.” 

Commissioner Ted Nickel of Wisconsin’s Office of the Commissioner of Insurance, speaking on behalf of the National Association of Insurance Commissioners, urged the Trump administration to renegotiate the terms of the covered agreement, which he said encroaches on and undermines the U.S. state-based insurance regulatory system. 

But Leigh Ann Pusey, president and CEO of the American Insurance Association in Washington, defended the agreement, arguing it “does not threaten the state-based system,” she said. “It preserves it.”

Charles Chamness, President and CEO, National Association of Mutual Insurance Companies, said the covered agreement is a bad deal for U.S. insurers who do not have European operations. 

However, Rep. Blaine Luetkemeyer, R-Mo., a member of the subcommittee, said the fact that two insurance associations testifying at the hearing have different opinions on the agreement is an example of the problem within the insurance industry, which he called dysfunctional. He also blamed the inaction of regulators who had five years to work toward a solution, but “did nothing.” 

“Is it a perfect agreement? Probably not,” he said. “Can it be tweaked? Probably. If the industry is serious about getting some work done … you better get on the same page because I’ve had it up to here with this dysfunctional infighting.”