Chairman Royce Remarks on Covered Agreements at International Insurance Regulation Hearing

For those of you following the Subcommittee on Housing and Insurance hearing "The Impact of International Regulatory Standards on the Competitiveness of U.S. Insurers: Part II" that is ongoing, please see the below for text of Rep. Royce's opening remarks. Areas of interest are highlighted re: covered agreements.

Rep. Royce is Chairman of the House Foreign Affairs Committee in addition to being one of the most senior members of the House Financial Services Committee.

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"Let me say at the outset that I share the stated goals of increasing transparency and accountability in international regulatory discussions. I think we should also be looking at governance and transparency reforms in domestic regulatory decision-making.

I am concerned, however, that Congress may be exporting the state vs. federal 'turf war' into the international arena to the detriment of U.S. companies and consumers.

We are at a watershed moment in international insurance regulation.

The U.S. has much to gain by moving forward with a covered agreement on reinsurance collateral with the EU. Formal negotiations would give the U.S. leverage in discussions about equivalency under the European Solvency II regime.

Simply put: Without action, U.S. companies lose. They are either cut out of the European market or they are forced to post billions in additional capital, which is then unavailable to invest in the U.S. or emerging markets.

Reforming arbitrary and discriminatory state reinsurance collateral laws through a covered agreement has been a bipartisan goal of this Committee since 2010. Representative Kanjorski, the architect of the key language in Dodd-Frank, said that covered agreement and preemption were designed "to harmonize reinsurance standards across national borders."

These covered agreement negotiations, I might add, are already subject to substantial Congressional oversight including a 90-day layover period, so there is little we need to fear in terms of transparency.

In conclusion, Chairman [Luetkemeyer], there is widespread agreement on issues related to domestic capital standards and increased transparency in international negotiations.

Respectfully, if we are going to move legislation, we should stick to those issues, and ensure that we're not intruding on the important covered agreement negotiations already taking place."

Saat Alety

Communications Director

U.S. Representative Ed Royce (CA-39)

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