TTIP of the iceberg - EU/US trade negotiations
How will the Transatlantic Trade and Investment Partnership (TTIP) - currently being negotiated between the EU and the US - impact on the insurance market?
The aim of the talks is to remove trade barriers (tariffs, unnecessary regulations, restrictions on investment etc.) across a wide range of sectors to facilitate the purchase and sale of goods and services between the two, and to make it easier to invest from one to the other. As you would expect, financial services is on the agenda. The negotiations began in July 2013 and the aim is that they conclude by the end of 2014.
Whilst the European Commission maintains an impressive website dedicated to the negotiations, precious little detail is provided (although this is understandable at this stage).
However, it would be fair to assume that the insurance sub-group discussions will be focussing on the question of convergence of the US and EU regulatory regimes and, in particular, the extent to which the covenant of a reinsurer on one side of the pond is recognised in the books of a cedant on the other. On the EU side, this is a question of establishing the relevant US regime as "equivalent" to that of the EU for the purposes of Solvency II. On the US side, this is a question of presenting a unified position that is broadly reflective of state-based regimes and quelling internal pressure for protectionist measures in favour of domestic reinsurers.
Some progress has already been made with the creation of the US Federal Insurance Office and the launch of an EU-US dialogue earlier last year. Achievements to date include the reversal of heavy collateral requirements for EEA (and other alien reinsurers) in certain key states, but there is some way to go. There is also pride at stake with US hackles rising at any suggestion that they should conform to EU standards. One must hope that the negotiators can reach a pragmatic position in a manner that will look beyond technicalities to an enhanced flow of premium both across the Atlantic and, of course, that these issues do not get horse-traded into the side-lines in favour of other issues.
The next (fourth) round of talks is due to be held in Brussels next month. We will keep you posted.