June 30, 2014, Washington–The European Commission will host a sixth round of EU-US trade talks in Brussels from July 14th to July 18th and insurers are pushing for the inclusion of financial services in any final treaty or deal.
What happens there is anyone’s guess, but there is a lot of “happy talk” now about progress on pushing insurance into the mix.
Life and property casualty trade groups united to state that there should be a framework to enhance and support trans-Atlantic regulatory cooperation in financial services.
Insurance Europe, the American Insurance Association (AIA), and the American Council of Life Insurers (ACLI) stated they continue to support TTIP as a comprehensive agreement.
“We believe it is essential for financial services to be included fully in any final outcome, given the current size of our bilateral financial services trade and the opportunity that this would present to drive economic growth in both Europe and the United States,” they said jointly.
One of the most contentious issues in TTIP is inclusion or non-inclusion of financial services, including insurance,” notes the Property Casualty Association of America (PCI).
“Our greatest concern lies with the need for the U.S. to be found equivalent by the European Commission for group capital, group supervision and reinsurance supervision under Solvency II. If that is not done (i.e. a finding of Solvency II equivalence for the U.S.), barriers to trade that do not exist will be created, inviting retaliation. Ironically, this would result in inhibiting the transatlantic insurance market, which is currently relatively open and well serves both individuals and businesses. In the end, this would result in less competition and capacity on both sides of the Atlantic, thereby hurting consumers,” PCI has argued.
Indeed, the financial regulatory sector of the U.S. government and some consumer groups said to have problems with opening up the 2010 Dodd-Frank Act to possible weakening or dilution.
Presidents Obama and European leaders European Council President Van Rompuy and European Commission President Barroso a year ago June announced that the United States and the European Union (EU) would launch negotiations on the Transatlantic Trade and Investment Partnership (TTIP) agreement. They have supported in general reducing regulatory barriers to trade by cutting regulatory red tape while still protecting consumers at the same level.
“TTIP will help unlock opportunity for American families, workers, businesses, farmers and ranchers through increased access to European markets for Made-in-America goods and services. This will help to promote U.S. international competitiveness, jobs and growth,” states the Office of the U.S. Trade Representative (USTR).
The United States is the largest services exporter in the world, and lowering barriers in the services sector will have a beneficial impact on the entire U.S. economy, states the USTR, mentioning as examples telecommunications and the shipping business
Ways forward on an agreement include equivalence –complying with one set of rules in order to sell in both markets, some international standards, and regulatory cooperation in the different sectors, which include auto, textiles and apparels, chemicals, architectural and structural codes and mechanical/transportation.
For insurance, for example, there could be a a framework for discussion that resolves reinsurance collateral equivalence issue through the U.S. states or covered agreements where the US is granted equivalence. Europeans might want a covered agreement from Treasury’s Federal Insurance Office (FIO.)
A covered agreement with Europe in part forged by Treasury (and under development now) and USTR and insurers is of higher importance to some now in the insurance sector, especially with resistance by state insurance regulators and Treasury to including insurance in TTIP.
“We do think that the trade agreement can stand for mutual recognition,” said PCI’s international executive, Dave Snyder.
Pre-emption, transparency and regulatory arbitrage vulnerability issues persist, however, on the U.S. side, for many parties.
Although officials weren’t readily available Monday–everyone is reading the Hobby Lobby Supreme Court decision anyway–states and consumer advocates have noted, as Birny Birnbaum from the Center for Economic Justice (CEJ) has written, “compared to issues before the International Association of Insurance Supervisors (IAIS), the TPP (Trans Pacific Partnership ) and TTIP have potentially greater impact on pre-empting state regulation of insurance and are far less transparent with far less participation by state legislators and regulators.”
Let’s see them talk and see whether there is any progress made–depending on how one charts progress, of course.