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U.S. and European Union regulators are expected to announce Jan. 13 that they have reached an agreement to secure equal treatment of insurers and reinsurers in both jurisdictions, likely bringing an end to rising EU regulations on U.S. underwriters in Europe, an EU government source and two industry sources told Bloomberg BNA.
The deal, officially called a covered agreement, is authorized under the Dodd-Frank Act and is being negotiated by the Treasury Department’s Federal Insurance Office and U.S. Trade Representative with the European Commission, the EU’s executive branch.
The agreement is expected to be filed Jan. 13 with the required congressional committees for a 90 calendar-day review, after which point it will be considered agreed to. Opposition is not expected from U.S. lawmakers, some of whom have pressed U.S. federal regulators to get the deal done quickly.
The agreement must be filed with the House Ways and Means Committee, the House Financial Services Committee, the Senate Banking Committee and the Senate Finance Committee by Jan. 13 or would likely need to be postponed until after the Trump transition, as agency leaders will change with the new administration and Congress is going to be out next week.
The announcement is planned to be simultaneous in the U.S. and Europe, and is expected to come in the morning in the U.S.
The U.S. has not been deemed an equivalent regulatory jurisdiction under the EU’s insurance regime called Solvency II, leading to steadily increasing regulations on U.S. insurers and reinsurers operating in Europe, industry officials say.
Meanwhile, EU regulators want the U.S. federal regulators to supersede state rules by eliminating high collateral requirements that are a pre-condition for foreign reinsurers to offer coverage for U.S. insurers. High collateral requirements mean less money is available for investments and other activities.
States have previously maintained that such a federal preemption is unnecessary because states were already in the midst of lowering the collateral requirements, though not all states had yet complied with the standard to do so—a standard decided by the national organization representing state insurance regulators, the National Association of Insurance Commissioners.
Solvency II rules started going into full effect in January 2016, and since then, American companies have said they have faced new regulatory requirements like needing to open a subsidiary in a particular EU member country to continue doing business in that country—instead of getting the cross-border access benefits that operating in the EU generally provides.
If no agreement is reached, some leading U.S. lawmakers have urged U.S. federal regulators to find creative ways of retaliating against EU companies, underscoring the importance of a deal.
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