The United States and the European Union have reached a covered agreement deal aimed at addressing the U.S. lack of equivalency related to the bloc’s Solvency II directive for the insurance industry.

The U.S. Department of the Treasury and the Office of the U.S. Trade Representative on Friday announced the successful completion of negotiations for a covered agreement with the European Union. 

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. 

This particular covered agreement 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. 
 
“The covered agreement enhances protections for U.S. insurance consumers and increases opportunities for U.S. insurers and reinsurers,” Treasury Secretary Jacob Lew said in a statement. 
 
“We are pleased the U.S. and E.U. were able to conclude this agreement, which resolves uncertainty for U.S. insurers and reinsurers,” U.S. Trade Representative Michael Froman said in the statement. “This agreement will provide opportunities for U.S. insurers and reinsurers doing business in the E.U. while continuing to ensure a high standard of protection for U.S. and E.U. consumers.”
 
In November 2015, the federal agencies notified Congress of their intention to jointly begin negotiations with the E.U., and negotiations began in February 2016. Per Dodd-Frank requirements, the agencies sent letters on Friday notifying several Senate and House of Representative committees of the deal reached on a covered agreement. 

The American Council of Life Insurers, the American Insurance Association and the Reinsurance Association of America released a joint statement on Friday welcoming the successful conclusion of the covered agreement negotiations. 

“This agreement, which was reached on January 13, seeks to resolve significant insurance and reinsurance regulatory issues for companies doing business in both jurisdictions,” the groups said in their statement. “We have long supported the covered agreement process and look forward to reviewing the details.
 
“We thank the U.S. and European Union parties who were involved in the negotiations for advancing this important initiative,” the statement continued. “We also applaud state regulators for their invaluable contributions and their continuing commitment to U.S. policyholders.”

Leigh Ann Pusey, president and CEO of the American Insurance Association in Washington, called the covered agreement “both a win for U.S. insurers and reinsurers competing in the E.U. and a win for the U.S. state-based system of regulation.” 

“In recent months, U.S. insurance groups with operations in Europe have increasingly become subject to discriminatory prudential measures due to the implementation of Solvency II,” she said in a statement. “Under today’s agreement, E.U. supervisors acknowledge and affirm the U.S. insurance regulatory framework and allow U.S. insurers and reinsurers to compete in their markets without the costly and duplicative regulations being imposed on them under Solvency II. In exchange, E.U. insurers and reinsurers will receive fair reciprocal treatment and be able to compete in U.S. markets.”