Close Close

Life Health > Life Insurance

States Shrug at Feds' Emergency U.K. Insurance Pact

Your article was successfully shared with the contacts you provided.

The United Kingdom’s planned divorce from the European Union may have softened how some state insurance policymakers see federal government international insurance deals.

(Related: State Insurance Regulators Eye Their Rivals in Basel)

Officials at both the National Conference of Insurance Legislators (NCOIL) and the National Association of Insurance Commissioners (NAIC) say they can probably live with a new U.S.-United Kingdom insurance regulation agreement, even though they still dislike the process the federal government now uses to negotiate insurance deals.

The Deal

The U.S. Treasury Department and the Office of the U.S. Trade Representative negotiated the “bilateral agreement,” or two-country agreement, to help keep a system for regulating the solvency of the insurers and reinsurers in the two countries in place if the United Kingdom really ends up leaving the European Union.

The United Kingdom has said it is preparing to leave the European Union in March.

The United States now has a similar agreement in place with the European Union.

The new U.S.-U.K. “covered agreement,” or pact, would let regulators in the United States and the United Kingdom continue to share the information needed to track multinational insurers’ and reinsurers’ solvency, just as they do.

The text of the covered agreement appears to refer only to financial oversight issues, not to any issues related to sales or marketing of insurance, and none to any issues related specifically to life insurance, annuities, pensions or health insurance.

What Is a Covered Agreement?

In most countries, one national regulator oversees all or most insurers.

Insurers and insurance groups outside the United States see having to deal with local insurance regulators in the District of Columbia and all 50 states as a major trade barrier.

The Dodd-Frank Act tried to fix that, by giving the U.S. Treasury Department and the U.S. Trade Representative some ability to negotiate trade pacts applying to state and District of Columbia insurance regulators with foreign governments.

For Dodd-Frank Act insurance trade talk authority purposes, the term ”covered agreement” can refer to any insurance solvency or reinsurance solvency deal. Any deal negotiated must offer the insurance or reinsurance users a level of protection that is equivalent to the protection offered by state insurance or reinsurance rules.

In the past, the American Council of Life Insurers has generally supported giving the federal government the ability to negotiate solvency-related insurance deals through the covered agreement process.

The NAIC, NCOIL and property-casualty insurer groups have generally opposed the covered agreement process.

New Agreement Reactions

The NAIC says in a statement that it’s still reviewing the new U.S.-U.K. deal text but believes the new deal has largely replicated the current agreement with the European Union.

” As we have previously noted, the U.K. is an important market for the U.S. and is currently included in the existing U.S./EU covered agreement,” the NAIC says. “ Given these unique circumstances, despite our concerns with the covered agreement mechanism, we do not object to its use in this instance to replicate consistent treatment for the U.K.”

But the NAIC says federal regulators should put out a policy statement similar to a policy statement they put out regarding the U.S.-European Union covered agreement in September 2017.

The policy statement affirms the importance of the United States’ state-run insurance regulation system.

Louisiana state Sen. Dan Morrish, NCOIL’s president, said in a statement that he continues to oppose the manner in which the federal government negotiated the original covered agreement with the European Union, and the exclusion of state legislators from that negotiating process.

But “it is only fair that the U.K. is not penalized for leaving the European Union,” Morrish says. “We remain committed to state-based regulation of insurance and urge a policy statement that makes that certain.

NCOIL noted that Steven Dreyer, the director of the Treasury Department’s Federal Insurance Officer, did reach out to NCOIL about the U.S.-U.K. negotiations in advance.

(Related: Treasury’s Federal Insurance Office Director Dreyer Departs)

The American Council of Life Insurers welcomed the U.S.-U.K. agreement and said the text affirms the role of the U.S. state-based insurance regulatory system.


A copy of the covered agreement text is available here.

An NAIC look at covered agreements is available here.

— Read NCOIL: Trade Deal May Weaken State Regulatorson ThinkAdvisor.

— Connect with ThinkAdvisor Life/Health on LinkedIn and Twitter.