IUA welcomes EU-US reinsurance regulation agreement
The London-based International Underwriting Association said that the agreement will benefit international reinsurance regulation.
The London-based International Underwriting Association said that the agreement will benefit international reinsurance regulation.
The International Underwriting Association (IUA) has welcomed the announcement of a covered agreement between Europe and the US to enhance international reinsurance regulation. “A bilateral trade deal between the two sides promises to make cross-border trading more efficient and promote more open global access to reinsurance services,” the association stated
The IUA noted that in reaching agreement, negotiators have addressed difficulties that have arisen in recent years with restrictions imposed on US firms that are not deemed to be subject to a regulatory regime equivalent to Europe’s Solvency II. At the same time a path has been opened up for the removal of collateral requirements demanded of international firms reinsuring US risks.
The IUA represents international and wholesale insurance and reinsurance companies operating in or through the London Market, with a remit to promote and enhance the business environment for members.
Chris Jones, the IUA’s director of legal and market services at the IUA, noted that the London Market is a major reinsurer of US risks. He added: “A more level playing field can now be established between EU and US reinsurers, both in terms of collateral treatment and mutual recognition of two powerful and respected trading blocs. Furthermore, it sends a powerful message to other jurisdictions that protectionist regulation is not in the long-term interests of clients.”
Before 2012 non-US reinsurance businesses were forced to post collateral equal to 100% of the gross reported loss when writing US risks. The Dodd-Frank Act eventually allowed states to enact changes to this rule, reducing the collateral requirement to 10-20%. The Act also created the Federal Insurance Office which could represent the US industry to negotiate a bilateral trade deal on reinsurance.
While efforts to reduce collateral have already been made at the state level, the process has been time consuming and is incomplete. A covered agreement “will be an effective resolution that also offers multiple other benefits,” said the IUA.