Euro Parliament OKs Reinsurance Directive
June 7, 2005
The European Parliament today approved a European Union reinsurance directive that would standardize reinsurance regulation in all 25 member countries within three years.
Under the approved legislation, all EU member countries would adopt standardized supervisory rules and introduce level regulatory requirements for reinsurers operating across the continent.
The measure means licensed reinsurers would get a regulatory "passport" that allows them to operate anywhere in the EU, while reporting only to their home supervisor. This would eliminate the need for reinsurers to apply to be regulated in each EU country where they sell reinsurance.
Another advantage of the legislation will be the removal of deposit requirements in France, Spain and Portugal, cutting costs and helping to open up markets to international competition.
According to EU Internal Market and Services Commissioner Charlie McCreevy, the directive will "fill a gap in current EU legislation, which does not regulate specialized reinsurers, and give insurance companies greater confidence in seeking the best deal available wherever it is to be found in the EU."
Nick Lowe, director of government affairs for International Underwriting Association in London, also added: "The reinsurance directive imposes the same essential minimum standards of regulation everywhere in Europe, thereby removing competitive imbalances."
The adoption of a reinsurance directive is a major step forward for EU, which until now had no harmonized reinsurance supervision rules. Until now, the lack of an EU regulatory framework for reinsurance has resulted in major differences in the supervision of reinsurance between different EU countries, according to a statement by The European Commission.
These varying national rules, the commission said, have led to barriers to trade within the internal market and given rise to administrative burdens and costs.
Commenting on the EU's reinsurance directive, one U.S. reinsurance expert said it was high time that the United States also adopt standard reinsurance rules across state lines.
"I think the time is also very ripe for U.S. states to adopt similar or identical standards for reinsurers," said Debra Hall, senior vice president and general counsel at the Reinsurance Association of America in Washington, D.C.
"Here in the United States, we don't have New York recognizing California, or California recognizing Illinois," Ms. Hall said. "We ought to be subject to regulation by one regulator, not by 50."