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Statement of the United States 

on the Covered Agreement with the European Union 

September 22, 2017 

The United States provides the following information concerning the Bilateral Agreement 

between the United States of America and European Union on Prudential Measures Regarding 

Insurance and Reinsurance (the “Agreement”) to provide additional clarity for U.S. insurance 

regulators and industry participants with respect to implementation of the Agreement. 

The Agreement affirms the U.S. system of insurance regulation, including the role of state 

insurance regulators as the primary supervisors of the business of insurance. The Agreement 

will deliver lasting benefits to the United States. It provides regulatory certainty for U.S. 

insurers and reinsurers operating in the EU, and is expected to reduce costs for insurers and 

personal and commercial policyholders in the United States, while preserving important 

consumer protection provisions. The United States commits to regular and substantive 

engagement with stakeholders throughout its implementation of this Agreement. The United 

States will make every effort to ensure that the EU implements its obligations, while carrying out 

the United States’ own obligations. 

Reinsurance (Article 3) 

Building on the State Approach 

For the United States, the collateral elimination requirements of the Agreement do not call for 

full implementation until the conclusion of a five-year transition period and only apply with 

respect to reinsurers that meet the specified financial strength and market conduct requirements. 

In accordance with Article 9, the United States encourages each U.S. state to promptly adopt 

relevant credit for reinsurance laws and regulations consistent with Article 3, and to phase-out 

the amount of collateral required by each U.S. state to allow full credit for reinsurance cessions 

to EU reinsurers. 

The collateral elimination requirements of the Agreement do not apply to reinsurance agreements 

that were entered into before the Agreement’s application, or to losses that were incurred or to 

reserves that were posted before the Agreement’s application. Nothing in the Agreement alters 

the capacity of parties to any reinsurance agreement to renegotiate such reinsurance agreement or 

to agree on requirements for collateral on a contractual basis in excess of those required by law. 

Under the Agreement, the provisions of Article 3 apply to EU reinsurers that meet specified 

financial strength and market conduct requirements. Among other things, Article 3 clarifies that 

the Agreement does not prevent a state insurance regulator from imposing non-collateral 

requirements that do not have substantially the same regulatory impact as collateral requirements 

as conditions for ceding companies to enter into reinsurance agreements with EU reinsurers or to 

allow credit for such reinsurance, if the state insurance regulator applies the same requirements 

in the case of reinsurance agreements with U.S. reinsurers domiciled in that state. 
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Group Supervision (Article 4) 

Preserving the U.S. Entity-Based Regulatory System 

The Agreement limits the worldwide application of EU prudential group insurance measures on 

U.S. insurers operating in the EU. The Agreement provides that U.S. insurers and reinsurers can 

operate in the EU without the U.S. parent being subject to the group level governance, solvency 

and capital, and reporting requirements of Solvency II, and reinforces that the EU system of 

prudential insurance supervision is not the system in the United States. The Agreement does not 

require development of a group capital standard or group capital requirement in the United 

States. Article 4(h) contemplates that the states will develop a group-wide capital assessment. 

Through the National Association of Insurance Commissioners (NAIC), the states are in the 

process of developing a group capital calculation which is intended to serve as an analytical tool 

for evaluating a firm’s capital position at the group level. The United States expects that the 

NAIC’s group capital calculation will satisfy the “group capital assessment” condition of Article 

4(h), provided that the work is completed and implemented within five years of the date on 

which the Agreement is signed. The Agreement does not require a group capital assessment with 

respect to U.S. insurance groups that do not have operations in the EU. 

The United States recognizes that existing state law already allows for application of capital 

measures at the insurance entity level as a means of imposing preventive, corrective, or 

otherwise responsive measures, and understands that the state regulators’ ability to impose such 

measures is consistent with the terms of Article 4 of the Agreement. In addition, nothing in 

Article 4 requires states to impose such capital measures on the basis of a capital assessment, as 

opposed to imposing other preventive, corrective, or otherwise responsive measures. 

The reporting provisions of the Agreement will protect U.S. insurance groups that have affiliates 

in the EU from expansive EU reporting requirements relating to worldwide operations at the 

group level, while enhancing regulatory cooperation. U.S. insurance supervisors are able to 

obtain information about the EU parent of insurers that are active in the United States, if 

necessary, to protect against serious harm to U.S. policyholders, or a serious threat to financial 

stability, or a serious impact on the ability of an insurer to pay its claims in the United States. In 

addition, under Article 4(c), U.S. insurance supervisors will receive from EU insurance 

supervisors an Own Risk Solvency Assessment (ORSA) summary report for the worldwide 

group ORSA, or equivalent documentation, for EU insurance companies operating in their 

territory. Under Article 4(f), U.S. state prudential insurance group supervision reporting 

requirements continue to apply at the level of the EU parent insurer if such requirements directly 

relate to the risk of a serious impact on the ability of insurers in the group to pay claims in the 

United States. The United States expects that close supervisory cooperation between and among 

U.S. and EU insurance supervisory authorities will continue, which may include supervisory 

colleges and the exchange of information under Article 5 of the Agreement. The United States 

does not see a basis to expect that state regulators, in adhering to Article 4 reporting provisions, 

will encounter conflicts with state law based on the NAIC’s “Insurance Holding Company 

System Model Regulatory Act.” 
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Exchange of Information (Article 5) 

Facilitating Supervisory Cooperation 

The Agreement acknowledges the increased globalization of insurance and reinsurance markets 

and the associated need for cooperation between U.S. and EU insurance supervisors regarding 

the exchange of confidential information. Accordingly, the United States encourages U.S. 

insurance supervisory authorities to cooperate in exchanging information with EU insurance 

supervisory authorities consistent with the practices set forth in the Model Memorandum of 

Understanding Provisions on Exchange of Information between Supervisory Authorities, 

annexed to the Agreement, in order to enhance cooperation and information sharing, while 

respecting a high standard of confidentiality protection.

The Joint Committee (Article 7) 

Administration and Transparent Implementation

The Agreement can be amended only by agreement of the Parties, in writing, in accordance with 

Article 12 (Amendment). As described in Article 7, the Joint Committee will serve as a forum 

for consultation and to exchange information on the administration and proper implementation of 

the Agreement. The Joint Committee will not have the ability to regulate the business of 

insurance and reinsurance in the United States or in the EU. The United States believes that 

proper implementation of the Agreement requires appropriate transparency and engagement with 

stakeholders, as well as advocacy for U.S. interests. Because U.S. state regulators will be largely 

responsible for implementing the Agreement, the United States is committed to the direct 

involvement of state insurance regulators, including their staff, in the work of the Joint 

Committee. To this end, the United States will consult with state insurance regulators, and will 

establish a robust consultative process to ensure that discussions in the Joint Committee will be 

well-informed of the views and interests of state insurance regulators. 

Conclusion 

The Agreement supports the principles specified in the Presidential Executive Order on Core 

Principles for Regulating the United States Financial System (Feb. 3, 2017) by enabling U.S. 

companies to be competitive with foreign firms in domestic and foreign markets; advancing U.S. 

interests in international financial regulatory negotiations and meetings; and making regulation 

efficient, effective, and appropriately tailored. The United States looks forward to promoting the 

interests of U.S. stakeholders, U.S. insurance regulators, and the U.S. economy as the Agreement 

is implemented. The United States also shares with the EU the goal of protecting insurance and 

reinsurance consumers while respecting one another’s system for supervision and regulation. 

The Agreement is the final and controlling legal text negotiated between the Parties and contains 

important legal conditions and other terms not summarized above. This document should be 

reviewed in conjunction with the Agreement and the Federal Insurance Office Act.