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However, this apparent disharmony which exists amongst EU member states can no longer be said to apply to the reinsurance community, following the announcement that the EU Reinsurance Directive was approved by the European Parliament on 07 June.

The purpose of the directive is to create a level playing field across the EU for the regulation and supervision of reinsurers operating in Member States through the establishment of minimum standards governing reinsurance activities. Under the directive reinsurers will only be beholden to the supervising authority in their home state, thereby removing any barriers to cross-border trade and creating a more competitive environment for the transacting of reinsurance business.

Furthermore, as Nick Lowe, director of government affairs at the International Underwriting Association, said following the announcement of the directive's approval, "Perhaps the most important reason for the directive, however, is to stem the rising tide of regulation." He added, "There can be little doubt that if this measure had not been introduced our industry would instead have been faced with regulators from each individual EU member state developing and operating their own separate regimes. Such a situation would have represented a much more complicated, expensive, onerous and divergent regulatory environment than we now face."

The process leading up to the directive's approval has been far from harmonious. A key stumbling block to its creation has been the removal of collateral requirements, which have long formed a mainstay of the supervisory environment for reinsurers in countries such as France and Portugal. Compromise, however, has prevailed. Despite initial stiff opposition to the phasing out of collateral, under the directive, which has an implementation period of 24 months, a further 12-month period has been added to the deadline to allow sufficient time for those countries which applied such requirements to ensure the adequate replacement of the collateral supervisory props.

There are also question marks over the level of regulatory harmony that can be achieved under the directive, as there is a degree of flexibility included within the framework. In relation to Special Purpose Vehicles and finite reinsurance, the directive allows for each member state to compile its own particular guidelines for each. This flexibility would appear to be founded on pragmatism, however, as the addition of SPVs to the table only occurred relatively late on in the process, while the issue of finite reinsurance continues to rumble on, so any attempt to provide concrete standards to such an unstable environment would be pointless.

What the directive also means is that EU Member States can now become much more vocal in their calls for the removal of the US collateral requirements for "alien" reinsurers. As Peter Skinner, MEP and European Parliament rapporteur for the directive, points out, the US arguments for the maintaining of such requirements are now severely weakened. "25 Member States have just proved that you can do it (do away with collateral requirements) and the biggest reinsurance companies in the world have shown that they want to do it." But it should not be taken for granted that the US will even move to reduce its collateral requirements never mind remove them. This collateral dependency appears ingrained in the US reinsurance supervision psyche and is also "a nice little earner" as some cynics point out. With the potential there for the EU to knock on the door of the WTO on this one, a route which Mr Skinner explains they are keen to avoid, this "debate" could escalate in the coming months or years.