U.S., E.U. Announce Successful Completion of Negotiations on Insurance, Reinsurance Covered Agreement
Jan 13, 2017
The U.S. Department of the Treasury and the Office of the U.S. Trade Representative (“USTR”) announced the successful completion of negotiations for a covered agreement with the European Union (“EU”) today, January 13, 2017. Under Title V of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Secretary of the Treasury, through the Federal Insurance Office (“FIO”), and the USTR are authorized to jointly negotiate a covered agreement with one or more foreign governments, authorities, or regulatory entities.
A covered agreement is an agreement between the United States and one or more foreign governments, authorities or regulatory entities, regarding prudential measures with respect to insurance or reinsurance. The Treasury had publicly called for a covered agreement in the FIO’s 2013 Report, “How to Modernize and Improve the System of Insurance Regulation in the United States.”
“The covered agreement enhances protections for U.S. insurance consumers and increases opportunities for U.S. insurers and reinsurers,” said Treasury Secretary Jacob J. Lew. “We congratulate all involved for an agreement that serves the best interests of both the United States and the European Union.”
“We are pleased the U.S. and EU were able to conclude this Agreement which resolves uncertainty for U.S. insurers and reinsurers,” said U.S. Trade Representative Michael Froman. “This agreement will provide opportunities for U.S. insurers and reinsurers doing business in the EU while continuing to ensure a high standard of protection for U.S. and EU consumers.”
The Dodd-Frank Act requires that the Treasury and the USTR jointly consult with the House Committee on Financial Services, the House Committee on Ways and Means, the Senate Committee on Banking, Housing, and Urban Affairs, and the Senate Committee on Finance for any covered agreement.
The Treasury and USTR earlier today sent letters to each of the four committees informing them that covered agreement negotiations have been completed. The text of the letters, as well as the final legal text of the agreement, is available here.
On November 20, 2015, the Treasury and USTR notified Congress of their intention to jointly begin negotiations with the EU. Those negotiations began in February 2016.
A joint statement issued today by the Treasury on the development said:
“U.S. and EU representatives are pleased to announce the conclusion of successful negotiations on an agreement that will ensure ongoing robust insurance consumer protection and provide enhanced regulatory certainty for insurers and reinsurers operating in both the U.S. and the EU. These negotiations resulted in a written Agreement that is a ‘covered agreement’ in the meaning of the Dodd-Frank Act for the United States and an Agreement under Article 218 of the Treaty on the Functioning of the European Union for the EU.
“The Agreement covers three areas of prudential insurance oversight: (1) reinsurance; (2) group supervision; and (3) the exchange of insurance information between supervisors.
“With regard to reinsurance, the Agreement will enhance consumer protection and will lead to the elimination of collateral and local presence requirements for EU and U.S. reinsurers operating in these markets.
“By virtue of the Agreement, U.S. and EU insurers operating in the other market will only be subject to worldwide prudential insurance group oversight by the supervisors in their home jurisdiction. For the United States, this preserves the primacy of the U.S. regulators with respect to oversight of U.S. insurance groups. For the EU, this preserves the primacy of EU oversight of EU insurance groups. The limitations on the exercise of worldwide group oversight outside of the home jurisdiction include limits on matters involving solvency and capital, reporting, and governance. Supervisors nevertheless preserve the ability to request and obtain information about worldwide activities which could harm policyholders’ interests or financial stability in their territory.
“The Agreement also encourages insurance supervisory authorities in the United States and the EU to continue to exchange supervisory information on insurers and reinsurers that operate in the U.S. and EU markets. To support such information exchange, the Agreement includes model memorandum of understanding provisions.
“The final legal text of the Agreement was provided to Congress on January 13, 2017 in accordance with the Dodd-Frank Act. The European Union will follow the necessary steps, involving the Council and the European Parliament and pursuant to the Treaty on the Functioning of the European Union, to sign and formally conclude the Agreement. U.S. and EU negotiators affirm that the Agreement is balanced, in the mutual interest of both the U.S. and the EU, and provides meaningful benefits for U.S. and EU insurance consumers and for U.S. and EU insurers and reinsurers that operate in both markets.”
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