Solvency II Equivalence In The International (Re)insurance Landscape: Part III: The US and Solvency II Equivalency
Separate but related negotiations continue between the EC, European Insurance and Occupational Pensions Authority, and in the United States, the National Association of Insurance Commissioners (NAIC) and the Federal Insurance Office (FIO).
The 2012 NAIC model law on credit for reinsurance has been adopted by regulators in 35 states in the United States. While this law reduces collateralization requirements for seven countries, it has not yet been fully adopted by all 50 U.S. states.
As such, it remains a point of contention for European and London reinsurers and others who favor the European Union’s (EU) single-market approach, and have been seeking reductions in their collateralized obligations in the United States for decades.
The United States and the EU have announced negotiated agreements that would address such collateral issues, including a covered agreement between the United States and one or more foreign governments, authorities or regulatory entities regarding prudential measures with respect to insurance or reinsurance.
Most recently, trade representatives for the United States and the EU met in early January and concluded negotiations of a bilateral covered agreement on regulations for insurers and reinsurers. The agreement must be reviewed by Congress and approved by the EU before adoption.
If adopted, the covered agreement could make it easier for EU reinsurers to operate in the United States and may also be a stepping stone towards Solvency II equivalence, easing the way for US reinsurers to operate in the European market under permanent, rather than provisional equivalence.