US Treasury Announces New Covered Agreement on Insurance and Reinsurance Regulation with UK

The U.S. Department of the Treasury and the Office of the U.S. Trade Representative announced on December 11, 2018 that they intend to sign a new Bilateral Agreement between the U.S. and the U.K. on Prudential Measures Regarding Insurance and Reinsurance (“Covered Agreement”).

In its press release, the U.S. Treasury noted that the Covered Agreement “is an important step in providing regulatory certainty and market continuity as the United Kingdom prepares to leave the European Union in March 2019, as well as in making U.S. companies more competitive in domestic and foreign markets and making regulations more efficient, effective, and appropriately tailored. The U.S.-UK Covered Agreement also benefits the U.S. economy and consumers by affirming the U.S. state-based system of insurance regulation and increasing growth opportunities for U.S. insurers.”

This agreement provides that it addresses the following objectives:

(a) the elimination, under specified conditions, of local presence requirements as a condition for entering into any reinsurance agreement with a ceding insurer or for allowing the ceding insurer to recognize credit for reinsurance or credit for risk mitigation effects of such reinsurance agreement;

(b) the elimination, under specified conditions, of collateral requirements on an assuming reinsurer as a condition for entering into any reinsurance agreement with a ceding insurer or for allowing the ceding insurer to recognize credit for reinsurance or credit for risk mitigation effects of such reinsurance agreement;

(c) the role of the host and home supervisory authorities with respect to prudential group supervision of an insurance or reinsurance group; and

(d) the mutual support for the exchange of information between supervisory authorities of each party, and recommended practices for such exchange.

The press release and a copy of the Covered Agreement can be found here.

On December 18, 2018, the US Department of the Treasury and the Office of the US Trade Representative signed the Bilateral Agreement between the US and the UK on Prudential Measures Regarding Insurance and Reinsurance (the “US-UK Covered Agreement”).

The press release regarding the signing can be found here together with the text of the US-UK Covered Agreement.