International Affairs and Reinsurance
In the area of International Affairs and Reinsurance CEA aims to:
- to follow closely all the international developments related to the reinsurance market
- to lift market-access barriers for European insurance and reinsurance companies in the major markets outside the EU. To promote free trade in financial services, in particular in insurance, and to create a level-playing field around the world.
US Collateral
The removal of discriminatory collateral requirements for foreign reinsurers in the USA has been a longstanding priority for CEA. Under the current system, reinsurers that are licensed in the US do not face a collateral requirement, whilst foreign-based reinsurers must post collateral equal to 100% of their U.S. liabilities before a ceding company can take full credit for the reinsurance. This regulation is estimated to cost European reinsurance companies more than $50bn.
The latest proposals by the National Association of Insurance Commissioners (NAIC) include the ‘port of entry’ concept and the creation of a Reinsurance Supervision Review Department. These are positive ideas, but there are remaining negative points to overcome, such as the unequal treatment of US and non-US reinsurers and the fact that an individual US state would still have the option to impose its own rules over and above the ‘port of entry’ requirements.
CEA will continue to point to the unjustified unequal treatment between US and alien insurers and will reinforce the cooperation between CEA and key stakeholders such as the NAIC, the NCOIL, the regulators of individual states and the private US sector to seek adequate treatment of EU (re)insurers.
Mutual recognition
In its work programme for 2008, the IAIS considers the project on mutual recognition a high priority. The IAIS’ latest draft Paper on group-wide supervision paves the way to a stringent group supervisory regime. Mutual recognition takes account of the fact that risk is spread globally, and contributes to the efficiency of the insurance markets as it reduces regulatory arbitrage.
This is a long-term project which is linked to the US collateral requirement. The ultimate goal is mutual recognition between EU and non-EU regulations, in particular the US. Mutual recognition would enable a free reinsurance market on both sides of the Atlantic. It is therefore a priority for the CEA to contribute to the IAIS work to develop the mutual recognition concept.