NAIC Paves the Way for Covered Agreement Implementation

The National Association of Insurance Commissioners (NAIC) has approved revisions to the Credit for Reinsurance Model Law and Credit for Reinsurance Model Regulation. The changes pave the way for the implementation of covered agreements with the European Union and United Kingdom by making the models consistent with provisions of the covered agreements concerning reinsurance collateral requirements.

Signed on September 22, 2017, the covered agreement between the United States and the European Union is meant to reduce the regulatory burden on insurers and reinsurers based on both sides of the Atlantic as they do business in one another's markets.

Consistent with the US-EU covered agreement, the US-UK covered agreement was implemented in 2018 in preparation for the United Kingdom's exit from the European Union.

In addition to conforming to the requirements in the covered agreements, these changes will provide reinsurers domiciled in NAIC-qualified jurisdictions other than within the European Union (currently Bermuda, Japan, and Switzerland) with the possibility of similar reinsurance collateral reductions.

"These changes underscore the commitment of US insurance regulators to resolving any disparate treatment of US insurance firms operating abroad," said Eric A. Cioppa, NAIC president and Maine insurance superintendent. "I encourage my colleagues to work with their state legislatures to pass these updates quickly."

States must comply with the provisions in the covered agreement within 5 years of the signing of the covered agreement with the European Union or face potential preemption by the Federal Insurance Office.