IUA hail US reinsurance deal

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The International Underwriting Association (IUA) has welcomed the agreement of a new deal to cover access to the US reinsurance sector by European underwriters.

It said the announcement of a covered agreement between Europe and the US will greatly enhance international reinsurance regulation. A bilateral trade deal between the two sides promises to make cross-border trading more efficient and promote more open global access to reinsurance services.

The association said in reaching agreement, negotiators have addressed difficulties that have arisen in recent years with restrictions imposed on US firms that are not deemed to be subject to a regulatory regime equivalent to Europe’s Solvency II. At the same time a path has been opened up for the removal of collateral requirements demanded of international firms reinsuring US risks.

Before 2012 non-US reinsurance businesses were forced to post collateral equal to 100{742ba7ad51624ece1866c66a287646d5d83f8799e500770110b1206b0cd9ae23} of the gross reported loss when writing US risks. The Dodd-Frank Act eventually allowed states to enact changes to this rule, reducing the collateral requirement to 10-20{742ba7ad51624ece1866c66a287646d5d83f8799e500770110b1206b0cd9ae23}. The Act also created the Federal Insurance Office which could represent the US industry to negotiate a bilateral trade deal on reinsurance.

Some important efforts to reduce collateral have already been made at the state level, but this process has been time consuming and is incomplete. A covered agreement, therefore, will be an effective resolution that also offers multiple other benefits.

Chris Jones, Director of Legal and Market Services at the IUA, said: “There has been a great deal of support for a covered agreement across our industry and it is a resolution that the IUA has long advocated, in cooperation with a coalition of other industry representatives on both sides of the Atlantic.

“A more level playing field can now be established between EU and US reinsurers, both in terms of collateral treatment and mutual recognition of two powerful and respected trading blocs. Furthermore, it sends a powerful message to other jurisdictions that protectionist regulation is not in the long term interests of clients.

“The London Market is a major reinsurer of US risks and, whilst we are still reviewing the exact detail of the agreement, the IUA is pleased to see such effective cooperation between regulators and federal negotiators in the US and Europe. We hope the approval process for this deal can now be completed as quickly as possible to guarantee more efficient international reinsurance regulation.”