Legal Translation Services for Insurance Industry
Legal translation services for the insurance industry play an important role in the U.S. in and Europe. If insurance officials from the US and the European Union don’t start speaking a similar language, it looks like things will get tough for insurers doing business on both sides of the Atlantic. According to a recent EU Report, “A high-stakes discussion between US and European insurance officials on aligning regulatory approaches needs to produce a resolution by the end of the year to save US and foreign insurers from massive compliance issues before European insurance regulations are overhauled in 2014”.
The article states that leaders from both the Federal Insurance Office and the National Association of Insurance Commissioners recently met with their counters from the European Insurance and Occupational Pensions Authority, the UK Financial Services Authority and the European Commission in order to resolve differences between the regulatory and supervisory regimes on both sides of the pond.
“The talks will be instrumental in determining whether the US scheme for insurance regulation will be considered equivalent to the EU methods under Solvency II reforms, which – as of January 2014 – will bring tougher standards for the capital that insurers and reinsurers must hold to cover their risks,” said one official. “A finding of equivalence would reduce burdens for insurers and regulators alike.”
Needless to say, this is a topic on the minds of any attorney practicing international insurance law as, if no agreement is reached, many will be scrambling attempting to get their clients compliant in a very short time. Furthermore, the issue of compliance becomes all the more complicated considered the issue of languages between the various entities and the need to ensure compliance via foreign language translations.
In fact, one insurance attorney specifically states that the issue must be resolved by the end of 2012, stating: “There is layer upon layer upon layer of regulation and, 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 both some sort of reduction in regulations and conformity in the regulations.”
However, one EIOPA official acknowledges that there are still significant differences between the systems: “Some of these are dictated by cultural differences and legitimate political options. Yet, 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.”
In practice, if no equivalence is found, any US-based company with a European operation would find themselves facing a slew of accounting and governance issues while trying to juggle the compliance regulations of both the EU and their home states – something that becomes near impossible with a particular EU regulation is in contradiction to a US state regulation.
Furthermore, although US companies with European operations would be stuck with higher collateral requirements, their counterparts with operations in the US would face overly complicated calculations for group solvency.
But don’t expect change to happen quickly. Says one EU insurance lawyer: “For this to happen, 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.”