Leaders of Major House Committee Wade into Equivalency Discussions
On August 17, 2016, the Chairman and Ranking Member of the House Ways and Means Committee waded into the ongoing discussions between U.S. and EU leaders regarding equivalency with the EU’s Solvency II and negotiation of a covered agreement. Chairman Kevin Brady and Ranking Member Sander Levin sent a letter to U.S. Treasury Secretary Jacob Lew and United States Trade Representative (USTR) Michael Froman expressing concern that Solvency II “unfairly discriminates against U.S. insurance and reinsurance (“(re)insurance”) business.”
EU regulators are concerned about the lack of uniformity with respect to collateralization reduction rules in the United States and the negative impact that has on European companies operating in the United States. For that reason, the EU has only granted the U.S. provisional equivalency. The Committee’s leaders specifically cited what they perceive to be a double standard by EU regulators:
[T]he EU recognizes other countries’ prudential regimes as having ‘equivalence’ to Solvency II requirements for their non-EU operations. At the same time, the EU has deemed the U.S. to be only ‘provisionally’ equivalent, which creates a double standard that discriminates against U.S. insurers while benefitting EU insurers. With respect to the U.S. insurance regulatory system, the EU regulations permit EU insurers and reinsurers with U.S. affiliates to rely on U.S. state-based capital requirements as sufficient to meet EU Solvency II requirements. However, the EU will not allow U.S. (re)insurers to rely on the very same standards when seeking to provide (re)insurance in the EU Market.
The letter urges the Secretary and USTR “to continue to take steps to address this discrimination against U.S. insurers by member state governments in the EU, including through the negotiation of a ‘covered agreement’ under the authority provided in the Federal Insurance Office Act of 2010 [Title V, Subtitle A of the Dodd Frank Act].”