EU, U.S. Reach Trans-Atlantic Agreement Over Insurance Rules - 3rd Update

By Julia-Ambra Verlaine and Jacob M. Schlesinger 

The U.S. and European Union have reached a trans-Atlantic agreement to smooth the ability of insurance companies to operate in the two regions, officials said Friday.

The agreement, reached after more than 20 years of discussions and almost a year of formal negotiations, aims to remove regulatory uncertainty for American insurers that do business in Europe. Meanwhile, EU reinsurers will benefit from changes to collateral requirements that could save them hundreds of millions of dollars.

American International Group Inc. and MetLife Inc. are among the biggest U.S. insurers with European operations. AIG declined to comment. MetLife didn't have an immediate comment.

"This is a very welcome development for U.S. insurers" as it "will enable them to write business in the EU insurance market and will alleviate their long-standing concern that lack of equivalence would restrict their ability to be globally competitive in an ever-increasingly competitive insurance marketplace," said Howard Mills, global insurance regulatory leader for consultancy Deloitte Services LP and a former New York state insurance commissioner.

Trade associations representing reinsurers and insurance companies across the U.S. -- the American Insurance Association, the American Council of Life Insurers and the Reinsurance Association of America -- in a joint statement said they welcome the deal, saying it "seeks to resolve significant insurance and reinsurance regulatory issues for companies doing business in both jurisdictions."

Negotiators worked to close out an agreement in the final days of President Barack Obama's administration, in part because the U.S. political transition could have led to further delays as new officials take over for the incoming Trump administration.

Under the agreement, American insurers won't be subject to new EU insurance regulations, known as Solvency II, that went into effect a year ago.

Europe's regime seeks to ensure insurers have enough capital to weather severe losses and to establish unified requirements across the bloc. The rules apply only to European firms, but EU representatives had called for "equivalent" regulatory oversight of non-European insurers operating in EU countries.

EU reinsurers could save about $400 million a year in collateral costs in the U.S., according to the European Commission, the EU's executive arm, because collateral requirements for reinsurers operating overseas will be eliminated.

A third pillar of the deal, which isn't binding, is a set of principles outlining how American and European insurance supervisors should exchange information with one another to mitigate risks in the sector.

EU national governments and the European Parliament have to approve the agreement. The commission hopes to expedite the process by requesting to sign on behalf of member states, which shortens the process.

The Office of the U.S. Trade Representative and the Treasury Department, which also joined in the negotiations, sent letters to Congress notifying members of the deal, kicking off the 90-day scrutiny period before U.S. authorities can sign the agreement.

"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," U.S. Trade Representative Michael Froman said in a statement.

Write to Jacob M. Schlesinger at [e-mail]

(END) Dow Jones Newswires

January 13, 2017 12:32 ET (17:32 GMT)

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