Colodny, Fass, Talenfeld, Karlinsky, Abate & Webb Shareholder Fred Karlinsky Featured in Law360 Article on Uniformity in United States and European Union Insurance Regulations
July 20th, 2012
Above: Colodny, Fass, Talenfeld, Karlinsky, Abate & Webb Shareholder Fred Karlinsky
Colodny, Fass, Talenfeld, Karlinsky, Abate & Webb Shareholder Fred Karlinsky was quoted in a July 17, 2012 Law 360 article entitled "Insurers Face Headaches If US, EU Don't Sync Regulations."
The article is reprinted below.
Should you have any questions or comments, please contact Colodny, Fass, Talenfeld, Karlinsky, Abate & Webb.
Insurers Face Headaches If US, EU Don't Sync Regulations
By Bibeka Shrestha
Law360, New York (July 17, 2012, 10:04 PM ET) -- A high-stakes discussion between U.S. and European insurance officials on aligning regulatory approaches needs to produce a resolution by the end of the year to save U.S. and foreign insurers from massive compliance issues before European insurance regulations are overhauled in 2014, experts say.
Leaders from the Federal Insurance Office and the National Association of Insurance Commissioners met last week with officials from the European Insurance and Occupational Pensions Authority, the U.K.'s Financial Services Authority and the European Commission to discuss ways to resolve differences between the regulatory and supervisory regimes on both sides of the Atlantic.
The talks will be instrumental in determining whether the U.S. scheme for insurance regulation will be considered "equivalent" to the EU methods under Solvency II reforms, which beginning in January 2014 will bring tougher standards for the capital that insurers and reinsurers must hold to cover their risks. A finding of equivalence would reduce burdens for insurers and regulators alike.
Barry Weissman, a partner in Edwards Wildman Palmer LLP's insurance and reinsurance group, said Tuesday that both the European and U.S. insurance industries are anxious to see regulators come to an understanding sooner rather than later.
"It needs to be resolved by the end of this year because many things have to be implemented," Weissman said. "There is layer upon layer upon layer of regulation. In order for businesses to function in a proper manner and in order for them to provide what they need to provide to policyholders, there has to be some sort of reduction in regulations, as well as conformity in the regulations."
After meeting with U.S. insurance officials, EIOPA chairman Gabriel Bernardino acknowledged Friday that the EU and U.S. systems still had significant differences.
"Some of these are dictated by cultural differences and legitimate political options," Bernardino said in a statement Friday. "However, we believe it is the responsibility of public authorities to create conditions to foster consumer protection, facilitate business relationships and enhance the efficiency of supervision."
Without a finding of equivalence, U.S.-based companies with European operations would be confronted with a slew of accounting and governance issues while trying to comply with regulations in the EU as well as those in their home states, Weissman said.
"Unfortunately, the company might find that some of the regulations of the EU are contradictory to those of its U.S. domiciliary state," he said.
Guy Soussan, a Steptoe & Johnson LLP insurance regulatory partner in Brussels, said U.S. reinsurers operating in Europe would also be stuck with higher collateral requirements, while European companies with major operations in the U.S. would face much more complicated calculations for group solvency.
Soussan said it remained to be seen whether the EU and U.S. would be on the same page by the end of the year, especially as U.S. regulation of insurance happens on a state-by-state basis.
"How much those systems can evolve and get closer together is the big question mark," Soussan said, adding that the EU would probably need to recognize that both regulatory systems are not fundamentally different in terms of protecting consumers and that Solvency II is not the unique benchmark to progress toward an international convergence of regulations.
On Friday, Michael McRaith, the director of the Federal Insurance Office, said U.S. state regulators would continue to work with EU counterparts to benefit consumers as well as business opportunities in both jurisdictions. Another meeting of top U.S. and insurance officials is planned for October in Washington.
Attorneys say they are optimistic that some kind of resolution will be reached, though Weissman said it was still unclear whether that agreement would be friendly to the insurance industry.
Fred Karlinsky, a Colodny Fass Talenfeld Karlinsky & Abate PA shareholder who focuses on insurance regulation, said that so far, all sides have made concerted efforts to achieve more uniformity in regulations.
"The devil's always in the details on something like this," Karlinsky said. "At the end of the day, everyone understands that a goal of regulatory consistency is helpful not only to the regulators, but to the industry and consumers."
A representative for the American Insurance Association declined to comment, while representatives for the NAIC and the FIO were not immediately available for comment.
--Editing by Elizabeth Bowen and Richard McVay
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