The covered agreement between the United States and the United Kingdom operates on the same schedule, although the agreement only “enters into force” when the governments of the United Kingdom and the United States exchange written information indicating that they have met internal requirements and procedures. This is expected to be the time when the UK will no longer be covered by the covered agreement between the US and the EU after its withdrawal from the EU. With respect to reinsurance, the covered contract removes local guarantees and requirements for presence as the terms of a reinsurance contract. Therefore, it prohibits an American regulator, an EU, from accepting to reinsurers either guarantees or local presence requirements that it does not impose on a local US company that accepts the reinsurer as a condition of a reinsurance contract, and vice versa. There are certain financial and contractual conditions that need to be met, but this should not be a problem for international insurance companies. Finally, it should be noted that the covered agreements apply to cross-border reinsurance between US and EU/UK insurers and do not apply to reinsurers and reinsurers operating from or from other countries. In order to discourage future covered agreements with other countries, NAIC has adopted further changes to reinsurance models that extend the guarantee provisions of the covered agreement to reinsurers residing in “reciprocal jurisdictions” within or outside the EU or the UK. Certain group control requirements were made on an interim basis as of November 7, 2017, prior to the agreement`s entry into force. In particular, with regard to limiting the application of Solvency II requirements to US insurance companies until the full implementation of the covered agreement, the EU has expressed its readiness to ensure that supervisory authorities comply with its group control rules, while the Us has expressed its readiness to “encourage” supervisory authorities to comply with these provisions. The EU had to start removing local presence requirements by 22 September 2019 (i.e. within 24 months of signing). It is difficult to say with certainty whether the Uk will be able to secure a covered agreement with the United States or the terms of an agreement.
The consensus is that an agreement is more than likely, but the UK`s agreement with the EU could complicate a deal with the US. Historically, the United States has been more important than the EU for the development of the London market and the Us may be focusing again. The United Kingdom has a recognized regulatory system and will likely provide the equivalence of Solvency II, but the alignment of British regulations with the United States may be wise. After Brexit, there will be an appetite to expand and expand into new markets, so insurers could try to expand their connections. Whatever the outcome and the first phase of change, there is no indication that the UK cannot adapt and continue to prosper. Although the text of the covered agreement is final and binding, the agreement provides for a mechanism through which the parties meet regularly to discuss their effectiveness and to consider whether changes are needed.