IUA calls for reinsurance agreement between EU and US to deliver free capital flow

In a separate note, Insurance Europe has warned that protectionist insurance regulations are creating barriers to economic growth and ultimately increasing the cost of insurance for policyholders. The IUA warned that improvements to the efficiency of reinsurance regulation are at risk if a covered agreement between Europe and the US is not reached. Over recent years collateral requirements for international firms reinsuring US risks have been substantially reduced. This has allowed capital to be deployed more effectively and reduced unnecessary cost pressures, explained the IUA. However the introduction of Solvency II has meant that US and EU insurers are not deemed equivalent to each other's regulatory regime. This could bring to a halt any further progress in reducing collateral barriers, said the IUA.hideIt argues that a bilateral trade deal covering reinsurance, known as a covered agreement, could solve the problem and ultimately result in zero collateral on both sides. Dave Matcham, chief executive of the IUA, said: "Covered agreement negotiations have started, albeit slowly, and there is a lot of support for them across the reinsurance industry in both Europe and the US. A lack of mutual recognition between regulatory regimes on each side of the Atlantic is causing problems and this could be an ideal way of solving them. It could potentially allow the US to be recognised as Solvency II equivalent and speed up the process of reducing US collateral requirements for international companies." "US business is incredibly important to the London market and more efficient cross-border trading is certainly in the best interests of clients. If the negotiations are successful it could send a powerful message against protectionist regulation," he added. Meanwhile Insurance Europe has warned that protectionist (re)insurance restrictions are creating barriers to economic growth, while increasing risk concentration and costs for domestic insurers and policyholders. Cristina Mihai, head of international affairs and investments at Insurance Europe, commented: "While jurisdictions may believe that protectionism will enable their domestic market players to grow, in reality it could endanger their entire economies. This is because, when a significant loss event occurs, that loss will have to be borne exclusively by the domestic market, rather than spread out over the international (re)insurance market." Insurance Europe argues that, in addition to capital, foreign (re)insurers bring operational expertise, skills and underwriting discipline, access to a wider range of products, a strong risk management culture, technological developments and training to new markets. "Limiting domestic insurers' access to foreign reinsurance could constrain their ability to manage their risk exposures and capital requirements. This could increase costs for both insurers and their customers. Such a move could also result in the accumulation of risks by insurers faced with less interesting opportunities to cede risks, therefore potentially compromising their underwriting performance," said Ms Mihai.

IUA calls for reinsurance agreement between EU and US to deliver free capital flow

Want to read this article?

Read Next

UK arenas face heightened terror threat, says Pool Re, as Martyn’s Law remains in draft form

Talanx ‘increasingly confident’ of beating full-year profit forecast on Q1 results

US property market stabilises but concern over casualty loss trends

AGCS’s revenue falls in Q1 as rate momentum slows

UK tells firms not to pay ransoms in cyberattacks

UK arenas face heightened terror threat, says Pool Re, as Martyn’s Law remains in draft form

Talanx ‘increasingly confident’ of beating full-year profit forecast on Q1 results

US property market stabilises but concern over casualty loss trends

AGCS’s revenue falls in Q1 as rate momentum slows

UK tells firms not to pay ransoms in cyberattacks

Want to read this article?

Read Next

UK arenas face heightened terror threat, says Pool Re, as Martyn’s Law remains in draft form

Talanx ‘increasingly confident’ of beating full-year profit forecast on Q1 results

US property market stabilises but concern over casualty loss trends

AGCS’s revenue falls in Q1 as rate momentum slows

UK tells firms not to pay ransoms in cyberattacks

Related Articles