SPECIAL REPORT / Insurers from the US and EU are amongst leading backers of a financial services chapter within the Transatlantic Trade & Investment Partnership (TTIP), although the US remains opposed officially.
European negotiators meeting this week in New York for the ninth round of TTIP negotiations have repeated requests to include a financial services chapter within the comprehensive trade deal.
The US remains reluctant, but the position of its insurance sector reinforces the impression that US opposition to financial services in TTIP emanates from regulators rather than industry.
For its part, the EU is pushing for the inclusion of financial services as, in the European Commission’s view, “Financial stability is not served by a fragmented regulatory approach, inconsistent rules and low levels of co-operation.”
Cooperation between the US and the EU on financial services regulation is nothing new. The Financial Markets Regulatory Dialogue (FMRD) provides a forum for discussing rules affecting insurance, among other things.
European insurance industry favours strong TTIP
TTIP could take cooperation one step further, going so far as to offer mutual reliance on the rules of the other bloc’s regulatory authorities.
Insurance is a highly regulated sector and insurers frequently find themselves subject to costly duplicative regulatory requirements.
Insurance Europe, the body representing the industry, believes that the inclusion of financial services in the negotiations has the potential to stimulate economic growth and job creation on both sides of the Atlantic.
“We encourage the EU and US to work towards full market access and national treatment for the insurance sector,” the group said in a position paper on TTIP published in December last year.
The group strongly welcomed a European Commission proposal to establish a framework for regulatory cooperation in financial services.
US insurers stand to gain from TTIP
Support for the initiative has come from the other side of the Atlantic as well.
The insurance services sector accounted for about 2.9% of total US GDP in 2011, according to a report on the potential impact of TTIP published last year by the UK embassy in Washington.
In 2011, the US exported $3.5 billion worth of insurance services to the EU. Nearly $1 out of every $4 in US insurance services exports went to the EU in 2011.
A variety of non-tariff measures restrict US insurance services exporters’ access to the EU market, according to the report, and these are equivalent to a 10.8% tariff on US exports.
“Implementation of an ambitious TTIP by 2027 is expected to increase US insurance services exports to the EU by $340 million annually when fully implemented, a rise of almost 10% from 2011 levels. The vast majority of these gains would result from the non-tariff measures’ reductions,” the report found.
Little wonder that the insurance sector on both sides of the Atlantic would welcome the inclusion of a financial services chapter within the trade deal. This was underscored by a statement issued by business organisations and related professional trade associations based in both the US and EU, issued ahead of the eighth round of TTIP negotiations which took place in Brussels earlier this year (2-6 February).
The 11 signatories included Insurance Europe, the Association for Financial Markets in Europe, the American Council of Life Insurers and the American Insurance Association.
Ninth round of talks concluding in New York
The statement called on TTIP to include an ambitious chapter on financial regulatory cooperation between the two jurisdictions, without discriminating against appropriately regulated third countries.
On regulation, the insurance representatives said: “We believe that a financial services chapter in the TTIP would enhance coherence and clarity of the respective rules of both jurisdictions, and improve the efficiency and timeliness of the implementation of cross-border regulation.”
The unity of the key players in the insurance sector on both sides of the negotiations reflects a broader unity amongst industry to see a chapter on financial services within the deal.
The main opposition to this appears to emanate from US regulatory agencies and supervisory bodies, rather than industry itself.
“The US regulators and agencies are wary of allowing a trade agreement to effectively sign over their ultimate regulatory powers to the central US government,” one US source close to the negotiations told EurActiv on condition of anonymity.
As the ninth round of talks conclude tomorrow in New York, the relative weight of those agencies within the negotiations as against the more united heft of the financial services industry itself, will the prove critical to the question of whether a financial services chapter is eventually included within TTIP.
In June 2013, the European Union's heads of state and heads of government gave the Commission the responsibility for the free-trade negotiations between the EU and the United States.
The European Commission is seeking agreement on a number of issues, including the protection of investments and the proposed mechanism of dispute settlement between investors and states.
Negotiations between the United States and the European Union on the Transatlantic Trade and Investment Partnership began in July 2013. The guidelines stated that the EU should seek to include provisions on investment protection and investor-state dispute settlement (ISDS) in the proposed agreement.
The EU executive consulted the public on its possible approach to investment protection and ISDS in the TTIP, asking whether the EU’s proposed approach for TTIP achieves the right balance between protecting investors and safeguarding the EU's right and ability to regulate in the public interest.
>> Read: Linksdossier: TTIP for dummies
- 20-24 April: 9th round of TTIP negotiations.