US and UK sign bilateral regulatory agreement on (re)insurance

The US and the UK are to sign a bilateral agreement on the regulation and supervision of insurance and reinsurance, in a move that provides some certainty for insureds despite Brexit. The US Department of the Treasury and the Office of the US Trade Representative have announced their intent to sign the Bilateral Agreement between the United States of America and the United Kingdom on Prudential Measures Regarding Insurance and Reinsurance, known as the US-UK covered agreement. The US Treasury said the US-UK covered agreement is an important step in providing regulatory certainty and market continuity as the UK prepares to leave the EU. It added that it is also an important step “in making US companies more competitive in domestic and foreign markets and making regulations more efficient, effective and appropriately tailored, and benefits the US economy and consumers by affirming the US state-based system of insurance regulation and increasing growth opportunities for US insurers”. The agreement document affirms the goal of protecting insurance and reinsurance policyholders and other consumers, while respecting each country’s system for insurance and reinsurance supervision and regulation. “For the US, prudential measures applicable in the UK, together with the requirements and undertakings provided for in this agreement, achieve a level of protection for policyholders and other consumers with respect to reinsurance cessions and group supervision consistent with the requirements of the Federal Insurance Office Act of 2010,” it states. It also acknowledges the growing need for cooperation between UK and US supervisory authorities. This includes the exchange of confidential information, given the increased globalisation of insurance and reinsurance markets. The agreement also notes the importance of encouraging exchange of information between supervisory authorities to supervise insurers and reinsurers in the interest of policyholders and other consumers. Specifically, the agreement addresses the following: The elimination, under specified conditions, of local presence requirements imposed by a party or its supervisory authorities on an assuming reinsurer which has its head office or is domiciled in the other party, as a condition for entering into any reinsurance agreement with a ceding insurer which has its head office or is domiciled in its territory or for allowing the ceding insurer to recognise credit for reinsurance or credit for risk mitigation effects of such reinsurance agreement. The elimination, under specified conditions, of collateral requirements imposed by a party or its supervisory authorities on an assuming reinsurer which has its head office or is domiciled in the other party, as a condition for entering into any reinsurance agreement with a ceding insurer which has its head office or is domiciled in its territory or for allowing the ceding insurer to recognise credit for reinsurance or credit for risk mitigation effects of such reinsurance agreement. The role of the host and home supervisory authorities with respect to prudential group supervision of an insurance or reinsurance group whose worldwide parent undertaking is in the home party. In response, Dave Matcham, chief executive of the International Underwriting Association (IUA), said: “The IUA warmly welcomes the US Treasury’s announcement that it intends to sign a US-UK covered agreement. This move is the result of close cooperation between regulators on both sides of the Atlantic and provides important certainty for companies as they look to service their clients’ needs post-Brexit. It reflects both the strong trading relationships between the London market and the US and international nature of our industry.”

US and UK sign bilateral regulatory agreement on (re)insurance

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