The U.S. solvency regime for insurers should achieve equivalence with the European Union’s Solvency II requirements, despite the fact that the U.S. was not included in the first wave of third-country assessments announced last week, according to Fitch Ratings Ltd.
Fitch Ratings, a unit of Fitch Inc., New York, says the equivalence would be mutually beneficial for both markets. The equivalence would help European insurers and reinsurers with U.S. operations, which would otherwise face the same capital requirements in the US as locally-owned companies plus the extra capital requirements of Solvency II, a competitive disadvantage when pricing products.
Fitch add the U.S. insurance market would gain the capital and investment that European companies bring via their U.S. subsidiaries.
Fitch notes the U.S. has a long-standing, risk-based solvency regime that gives policyholders the same protection as Solvency II. Despite differences in the methodologies, Fitch expects the protection will result in equivalence recognition from the European Union.