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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.
In August, NAIC’s reinsurance task force directed its qualified jurisdiction working group to study and report on E.U. member state implementation of Solvency II and whether any actions taken by them to date affected their statuses as qualified jurisdictions.
In January 2015, France, Germany, Ireland and the United Kingdom were all approved as qualified jurisdictions, which facilitates their eligibility as a certified reinsurer for collateral reduction purposes.
The working group is not engaged in any formal review of their statuses, but it is examining whether their actions constitute a material change that could affect their statuses, Brett Barratt, deputy commissioner of the Utah Insurance Department and chair of the qualified jurisdiction working group, said at NAIC’s fall meeting 2016 last month.
A November request for information about the effect of Solvency II implementation resulted in several respondents, including U.S. reinsurers, reporting that the actions of one or more of the four jurisdictions have already had a quantifiable negative effect on the capacity to do business in the European Union.
But many of these same respondents warned that termination of the qualified jurisdiction status may also have a negative effect on reinsurance capacity in the U.S. marketplace, according to the working group’s report.
However, multiple respondents stated that the actions taken by these four jurisdictions constitute a material change in circumstances and recommended that the qualified jurisdiction status should be terminated.
If the working group finds a jurisdiction is out of compliance, a jurisdiction’s status could be placed on probation, suspended or revoked, Mr. Barratt said.
“Although it is too early to start talking about revoking the status as qualified jurisdictions, it is important to understand that there are potential consequences of such action,” he said.
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.