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The US-UK Covered Agreement

News / / The US-UK Covered Agreement

This was somewhat answered by the announcement of an equivalent agreement between the US and the UK (the US-UK Covered Agreement) The press announcement for the agreement stated that it was aimed at regulatory certainty, market continuity, and protection of policyholders going forward, as well as to maximize business opportunities and cut red tape for (re)insurers' cross-border operations The US-UK Covered Agreement mirrors the US-EU Agreement and covers three areas reinsurance collateral, group supervision, and the exchange of information regarding (re)insurers between UK and US regulators The US-EU Covered Agreement entered into force on 4 April 2018 The Agreement sets out the timeline of implementation over a five-year period from the date of signature of the Agreement The US-UK Covered Agreement follows the same timetable save that the US-UK Covered Agreement does not enter in force until the UK and US governments exchange written notifications to the effect that they have each completed domestic internal requirements This will likely not happen until Brexit, ie when the UK is no longer entitled to rely on the US-EU Covered Agreement Once the US-UK Covered Agreement is fully implemented, reinsurance collateral (which will on its own require the enactment of legislation) and local presence requirements for US and UK reinsurers operating in each other's jurisdictions will be removed Essentially, less favourable treatment cannot be doled out by one party on a reinsurer from a counterparty market, and reinsurers need not establish a local presence in a counterparty market in order to operate there As regards group supervision, insurance and reinsurance groups' domiciliary jurisdictions will be recognised so 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 groups) In particular this relates to group capital requirements For example, US (re)insurers will not need to comply with Solvency II reporting requirements (or indeed the English law equivalent post-Brexit) in order to write business in the UK Lastly, the agreement is intended to encourage the bilateral exchange of regulatory and supervisory information on (re)insurers that operate in the US and UK between insurance regulators in the two countriesThis is good news for UK (re)insurers as it will enable their UK entities to enjoy the same benefits as their EU counterparts and provides a certain element of continuity in a post-Brexit world

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