BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.
To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.
To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.
State insurance regulators are concerned about a lack of transparency in talks between federal officials and their European counterparts, as well as the implementation of new regulatory requirements in some European countries that are complicating January renewals for U.S. insurers and reinsurers and even costing them some business.
The latest round of covered agreement talks between the European Union and the United States ended in December without a final resolution. The Treasury Department’s Federal Insurance Office and the Office of the U.S. Trade Representative are engaged with E.U. officials for a covered agreement — a mechanism established by the Dodd-Frank Wall Street Reform and Consumer Protection Act — to address the fact that the European Commission has not deemed the United States an equivalent jurisdiction, per the union’s Solvency II directive outlining a risk-based capital regime for insurers and reinsurers in Europe.
“We have multiple concerns with the notion of a covered agreement, including the way it’s being negotiated behind closed doors with little direct input from U.S. insurance regulators, and it could unnecessarily pre-empt state law,” Julie Mix McPeak, commissioner of the Tennessee Department of Commerce and Insurance and the 2017 president-elect of the National Association of Insurance Commissioners, said at the organization’s fall meeting in December.
Regulators vowed to be on the lookout for a potential eleventh-hour agreement by the Obama administration, but stakeholders urged the NAIC to be open to a covered agreement that achieves mutual recognition between the E.U. and U.S. regulatory regimes and could go a long way toward ensuring the uniformity needed by U.S.-based insurers and reinsurers doing business abroad.
It is “unfortunate” that some within the NAIC have taken a negative view of the covered agreement process, said Phillip Carson, associate general counsel and director of financial regulatory policy for the American Insurance Association in Washington.
“We believe that they can work together, but they need mutual recognition of both,” he said of the two regulatory systems. “We consider it an urgent matter.”
“Nobody wins if this doesn’t get resolved,” said Robert Woody, senior counsel for policy for the Property Casualty Insurers Association of America in Washington.
Since Solvency II came into force last year, U.S. insurance regulators have received anecdotal reports that U.S. insurers and reinsurers have encountered discriminatory actions by several European jurisdictions, which led to the NAIC’s qualifying jurisdiction working group initiating a review of the actions.
For example, this year the German Federal Financial Supervisory Authority began restricting third-country insurance undertakings so that U.S. reinsurers can no longer operate on a cross-border basis without forming and capitalizing a branch or subsidiary in Germany.
Establishing a branch is “costly,” Mr. Woody said. “It’s not something European reinsurers have to do to do business here, so that makes the playing field a little uneven.”
A similar requirement imposed in Belgium in mid-November is also creating regulatory uncertainty, said Tracey Wright Laws, senior vice president and general counsel of the Reinsurance Association of America in Washington. Jan. 1 renewals are being complicated because it is unclear what level of collateral U.S. reinsurers would be required to post to do business in the country or how they would even post collateral, she said.
“This is a huge problem for these companies,” she said. “They risk losing the business in Belgium.”
The United Kingdom’s vote to leave the European Union could further complicate the international regulatory discussions if the U.K. and the E.U. cannot reach a comparable agreement on these issues, particularly since many domestic insurers and reinsurers operate in the E.U. through London, experts say.
“That’s going to be a challenge,” Mr. Carson said. “Brexit is definitely an issue for us.”
The National Association of Insurance Commissioners has vowed to examine regulatory actions taken by certain European countries seen as putting U.S. insurers and reinsurers at a competitive disadvantage.