After formally negotiating the terms for more than 12 months, the European Union (EU) and the United States (U.S.) today agreed on a deal that aims to boost the $3 billion transatlantic insurance and reinsurance industry.
Discussions of a proposed deal had been ongoing for some time between the EU and the U.S., but the U.S. Department of the Treasury and the Office of the U.S. Trade Representative (USTR) has announced the completion of negotiations for a covered agreement with the EU.
According to industry reports on the matter, the agreement will see legal and capital requirements reduced in an effort to boost the $3 billion transatlantic re/insurance marketplace.
“The covered agreement enhances protections for U.S. insurance consumers and increases opportunities for U.S. insurers and reinsurers. We congratulate all involved for an agreement that serves the best interests of both the United States and the European Union,” said Treasury Secretary, Jacob J. Lew.
Insurers in the U.S. that operate in the EU stand to benefit from the removal of regulatory uncertainty, while EU domiciled reinsurers should benefit from changes to capital requirements.
“We are pleased the U.S. and EU were able to conclude this Agreement which resolves uncertainty for U.S. insurers and reinsurers. This agreement will provide opportunities for U.S. insurers and reinsurers doing business in the EU while continuing to ensure a high standard of protection for U.S. and EU consumers.” said U.S. Trade Representative, Michael Froman.
Both EU and U.S. authorities are set to remove requirements for reinsurance companies to hold more capital against risks if they do business from the other side of the Atlantic, a key element of the new agreement as it mitigates cross-border expansion hurdles, reported Reuters.
Furthermore, insurance companies are expected to experience reduced costs from the proposed, reduced regulatory requirements, while EU-based companies should find it easier to increase their U.S. market share. At the same time, the deal enables U.S. domiciled firms to be able to more easily sell their products across the EU.
“This is a major deal that is set to benefit insurers, reinsurers and policy holders on both sides of the Atlantic,” said the EU financial services commissioner Valdis Dombrovskis, as reported by Reuters.
In a joint statement on the matter, EU and U.S. representatives said the deal “will ensure ongoing robust insurance consumer protection and provide enhanced regulatory certainty for insurers and reinsurers operating in both the U.S. and the EU.”
Despite an agreement between the EU and the U.S. finally being reached, the deal still requires approval from the European Parliament and U.S. Congress.