Insight and Intelligence on the London & International Insurance Markets 24 Jul 2017
Covered agreement gets greenlight from Trump officials
- 14 July 2017
Trump administration officials will sign the covered agreement with the EU that aims to harmonize rules dealing with insurance and reinsurance transactions, the Treasury Department said today.
A US policy statement is also planned regarding the implementation of the accord, which will be signed "in the coming weeks", the Treasury said. The agreement, announced in January, has been in limbo since then awaiting formal approval by the Trump administration.
"This is an important step in making US companies more competitive in domestic and foreign markets and making regulations efficient, effective and appropriately tailored," the Treasury said on its website. An identical statement was posted on the US Trade Representative's site.
The move to accept the accord represents a bow to insurance industry leaders who have urged the action for months despite objections mainly from the National Association of Insurance Commissioners (NAIC), which represents regulators who oversee the industry in each of the 50 states.
The NAIC argued that the agreement needed to be clarified and modified to preserve states' rights and the principles of state rulemaking authority and control of insurers within their boundaries.
The accord deals with supervision, reinsurance and information exchange between European and American industry regulators. It is expected to make it easier for US carriers to enter the EU and to significantly reduce the amount of collateral a European insurer must hold against business written in the US, among other things.
In its statement, the Treasury pointed out that the agreement affirms the US state-based system of industry regulation and that accepting the accord would help the nation's economy, consumers and industry by "providing regulatory certainty and increasing growth opportunities".
In Brussels, the European Council backed the deal at the end of May. The EU's strategic decision-making body cited the benefits of improved regulatory certainty for carriers and protection for policyholders it would ensure.
But US officials appointed by President Donald Trump, including Treasury Secretary Steve Mnuchin and US trade representative Robert Lighthizer, have until now remained noncommittal about the deal. The accord was among the final acts of the Obama administration and was crafted under the auspices of the Dodd-Frank Wall Street reform law that Trump reviled on the campaign trail last year.
Under terms laid out by Dodd-Frank, Mnuchin and Lighthizer must sign the accord to put it into effect.
Key members of Congress have also raised issues with the deal, including the chairmen of financial oversight panels in both the House of Representatives and the Senate. For instance, Senator Mike Crapo, a Republican from Idaho who leads the Senate banking committee, questioned the implications of capital requirements mandated by the accord.
But Congress can't prevent the administration from putting the agreement into effect.
Insurance industry leaders have supported ratification, calling it a win for the US industry as it would remove longstanding barriers to entering the European market, particularly for reinsurers under Solvency II rules.
In April, organisations including the American Insurance Association warned that rejecting the pact could further weaken the US system of overseeing the industry on a state-by-state basis. The agreement recognises states as the primary regulators of US insurers.
Industry advocates welcomed today's news.
Property Casualty Insurance Association of America vice president for international policy Dave Snyder said his group "looks forward to being an active participant in the dialogue on clarification and implementation" of the accord. He said the organization would be "a resource to regulators and policymakers".
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