- Future of Covered Agreement Open to Question, Insurance Day
- November 10, 2017 | Authors: Jeffrey L. Kingsley; Frederick J. Pomerantz
- Law Firms: Goldberg Segalla LLP - New York Office; Goldberg Segalla LLP - Buffalo Office
The historical, multilateral “covered agreement” between the U.S. and EU, executed September 22, 2017, and lauded by many as a boon to insurers on both sides of the Atlantic. But its actual benefits are still very much “subject to interpretation,” Goldberg Segalla’s Jeffrey L. Kingsley and Frederick J. Pomerantz write in Insurance Day — and its future viability may be in doubt.
After negotiations concluded on January 13, 2017, many U.S. insurers and industry experts believed the covered agreement was intended:
1. To allow U.S. and EU insurers to rely on their home country regulators for worldwide prudential insurance group supervision
2. To eliminate for EU reinsurers the collateral requirements and local presence requirements for U.S. reinsurers that meet certain solvency and market conditions
3. To encourage information sharing between insurance supervisors
Within the U.S., an additional goal of the agreement was to affirm the authority of the Federal Insurance Office (FIO), established by the Dodd-Frank Wall Street Reform and Consumer Protection Act, passed in 2010, to preempt state laws that are inconsistent with the agreement.
However, since negotiations ended at the beginning of the year, “there have been developments signifying a cooling of enthusiasm by certain trade associations representing segments of the insurance industry and by state legislators,” Jeff and Fred write.
They point to a March 2017 newsletter from the Center for Insurance Policy and Research, written by Wisconsin Insurance Commissioner Ted Nickel, who is also president of the National Association of Insurance Commissioner (NAIC), an early architect and exponent of the covered agreement. In it, Nickel noted that the “two goals” of the process — gaining “equivalence for the treatment of U.S. insurers operating in the EU and recognition by EU insurers of the U.S. insurance regulatory system” — were not resolved. The NAIC followed this with a letter to the U.S. Department of the Treasury, asking it “to work with the EU to clarify details of the agreement and also to offer technical assistance and expertise in terms of implementation.”
In addition, FIO, which represents the U.S. insurance industry’s interests internationally and sits on the executive committee of the International Association of Insurance Supervisors, faces a revocation or reduction of power, and perhaps even an existential threat, following the Financial Choice Act, passed June 8, 2017 in the House of Representatives and awaiting debate in the Senate.With the agreement’s benefits thrown into doubt and FIO “facing elimination,” Jeff and Fred write, “it is easy to see that the covered agreement’s viability could be in question for the foreseeable future.”
Read the article:
• “Future of Covered Agreement Open to Question,” Insurance Day, October 16, 2017