On December 11, 2018, the US Treasury and the US Trade Representative’s office announced the finalization of the Bilateral Agreement between the United Kingdom and the United States of America on Prudential Measures Regarding Insurance and Reinsurance (the “US-UK Bilateral Agreement”), which has been sent to the US Congress for review. It is subject to a 90-day notification period to the US Congress before it can be signed and come into effect. The US-UK Bilateral Agreement should preserve for the UK post-Brexit what the UK had gained as an EU member through the Bilateral Agreement between the United States of America and the European Union on Prudential Measures Regarding Insurance and Reinsurance (the “US-EU Covered Agreement”) that was agreed in 2017.
Briefly, the US-UK Bilateral Agreement, like the US-EU Covered Agreement, will cover three areas: (1) reinsurance, (2) group supervision, and (3) the exchange of information regarding (re)insurers between the UK and US regulators. Regarding reinsurance, it should mean the elimination of collateral and local presence requirements for US and UK reinsurers operating in each other’s jurisdiction. With respect to group supervision, the (re)insurers’ domiciliary jurisdiction will be recognized such that US and UK (re)insurers should only be subject to global insurance group oversight in their respective home jurisdictions (including US states of domicile for US (re)insurers). Finally, the agreement is intended to encourage the exchange of regulatory and supervisory information on (re)insurers that operate in the US and UK between insurance regulators in the two countries.
The US-EU Covered Agreement is being incorporated into the US state-based insurance laws and regulations through efforts of the National Association of Insurance Commissioners (“NAIC”). With respect to reinsurance, the NAIC is working on revisions to its Credit for Reinsurance Model Law (#785) and the Credit for Reinsurance Model Regulation (#786). The NAIC’s amendments to its model law and regulation should extend to cover the US-UK Bilateral Agreement. However, as NAIC model laws and regulations including amendments thereto are not automatically binding in the US states, the US states will need to make conforming amendments to their own insurance laws and regulations to give effect to the NAIC’s revised models regarding reinsurance.