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The United States' regulatory regime likely will achieve equivalence with the European Union's Solvency II rules even though the United States is not included in the first wave of nations being assessed for third-party equivalence, Fitch Ratings Ltd. said Tuesday.
“The United States has a longstanding risk-based solvency regime. If it is seen to give policyholders the same protection as Solvency II, despite fundamental differences in the underlying methodologies, we expect this to result in equivalence recognition from the European Union,” Fitch said.
Solvency II is slated for gradual introduction across the European Union starting Jan. 1, 2013.
In 2008, the United States began a Solvency modernization initiative in response to the development of Solvency II in Europe, Fitch said in a briefing note Tuesday. The initiative adopt elements of the “own risk” and solvency assessment steps and possibly the group supervision rules of Solvency II for U.S. companies, though it is not yet clear what form these changes will take, Fitch said.
In recent months, cooperation between U.S. and European regulators has increased, Fitch said.
For example, several U.S. states have relaxed the collateral requirements previously imposed on overseas insurers and reinsurers, which Fitch said it sees as “a positive sign that cooperation will lead to an agreement on equivalence.”
European companies that have large U.S. subsidiaries, U.S. companies that sell reinsurance to European companies and U.S. companies with subsidiaries in Europe are likely to benefit from any move to equivalence, Fitch said.
On a related front, the European Insurance and Occupational Pensions Authority, which regulates E.U. insurers, last week advised the European Commission that it sees the regulatory regimes of Bermuda, Japan and Switzerland as being equivalent with Solvency II, with certain caveats.
HAMILTON, Bermuda—The Bermuda Monetary Authority said it is “pleased” that the European Insurance and Occupational Pensions Authority’s preliminary assessment of Bermuda’s regulatory framework in relation to Solvency II indicated that the island’s regulatory system for commercial insurers generally meets the criteria for Solvency II equivalence.