U.S. regulators recently revealed that they are closing in on a deal with the European Union (EU) that could throw the door wide open for U.S. insurers looking to do business in Europe.
On Tuesday, the Treasury Department and Office of the U.S. Trade Representative announced that progress has been made toward creating a covered agreement with the EU. Under a covered agreement, America’s insurance regulation could be viewed as equivalent to European oversight, allowing U.S. insurers to operate in the region with little issue. Under the EU’s current Solvency II insurance regime, jurisdictions not deemed equivalent face more stringent regulation from the bloc’s member countries.
The news comes as American insurers recently voiced their concerns that they have encountered increasing regulatory restrictions in the EU that have hamstringed their operations in the region.
Should the deal close, American insurers could potentially benefit from Solvency II’s approach to reinsurance.
“Although Solvency II is a European regulation, it’s built on principles that are applied in many other countries, including the United States,” said Effisoft USA CEO Grégory Moliner in a statement.
Moliner explained that Solvency II makes reinsurance more attractive. Previously, under Solvency I, insurers could use reinsurance to reduce their regulatory capital requirement—but only up to 50% of their premiums and for an insurer’s non-life proportional treaties. With Solvency II, none of those restrictions apply.
“Under Solvency II, reinsurance may also play a key role in the implementation of Own Risk and Solvency Assessment (ORSA),” Moliner added.
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