Following the successful conclusion in January 2017 of the bilateral agreement on insurance and reinsurance between the European Union and the U.S., industry body Insurance Europe welcomed the deal, supporting in particular the removal of the discriminatory collateral requirements that E.U. reinsurers were subject to when placing business in the U.S.. This change is expected to support bilateral trade in insurance and reinsurance.

However, the National Conference of Insurance Legislators, a U.S. lobby, quickly objected that the new agreement “intrudes on the U.S. state-based regulatory system and has objectionable provisions preventing U.S. regulators from requiring reinsurance collateral for Europe-based companies”.

In fact, in the future U.S. regulators will continue to require reinsurance collateral but they will no longer be able to request that such collateral be deposited in the U.S. Instead, Europe-domiciled collateral will be deemed to be U.S.-compliant as well, eliminating the costs associated with depositing assets in the U.S. in addition to Europe.

The agreement covers many subjects other than reinsurance collateral and essentially provides for a (partial) mutual recognition of the U.S. and E.U. insurance regulatory regimes, a most welcome development in the opinion of this publication. Mutual recognition does not mean or imply harmonization, though; nevertheless, the agreement will facilitate cross-border and bilateral trade in insurance and reinsurance, a matter of importance for global employee benefits.

For the time being, the U.K. is included in the scope of the agreement but once Brexit has come into force around mid-2019 it will have to negotiate a new, separate agreement with the U.S. (and another with the E.U., for that matter).

The full text of the January 2017 U.S.-E.U. agreement is available here as a PDF file.