U.S. property/casualty insurers are welcoming the news that the Trans-Pacific Partnership (TPP) parties have reached an agreement. Although details of the pact are unknown, the U.S. insurers say they believe the agreement will level the playing field for them in foreign countries while creating growth opportunities for them abroad and additional high-paying jobs here at home.
“Our insurance market is already open to foreign insurers. It is time for markets in this important region to be more open to U.S. insurers,” said Steve Simchak, director of international affairs for the American Insurance Association (AIA) and a member of a U.S. Trade Representative’s (USTR) advisory committee.
“Just the geographic scope of it alone creates the potential for unprecedented opportunity for U.S. insurers. We believe that it will encompass commitments that address 21st century issues faced by U.S. insurers abroad,” the insurance trade executive said.
He urged insurers to speak up in support of the TPP as the debate moves to Congress, which must vote it up or down without amendments under fast-track legislation passed in June.
Simchak said U.S. insurers are increasingly looking to international markets for opportunities but often face access barriers.
“Even if U.S. insurers are permitted in foreign markets, they frequently face discriminatory treatment relative to domestic insurers. Breaking down those barriers, both at the border and behind the border, creates enormous opportunities for the U.S.,” he said.
Simchak said the U.S. International Trade Commission estimates that eliminating insurance trade barriers would result in “significant increases in U.S. insurance trade and investment abroad” and, as a result, “high paying jobs will be created here in the U.S. as well.”
The TPP negotiations have been going on for five years. The agreement reduces tariffs on hundreds of imported products. It also sets workers’ rights and environmental standards and establishes guidelines for settling disputes between governments and foreign investors.
Financial Services Chapter
The USTR summary says that the TPP financial services chapter will provide opportunities for cross-border market access while ensuring that countries retain their control over regulating their financial markets and institutions. It provides for the sale of certain financial services across borders without requiring suppliers to establish operations in the other country. A supplier of a TPP party may provide a new financial service in another TPP market if domestic companies in that market are allowed to do so, with some exceptions.
Also, according to the USTR, the TPP financial services section sets out rules that “formally recognize the importance of regulatory procedures to expedite the offering of insurance services by licensed suppliers and procedures to achieve this outcome.” In addition, the TPP includes specific commitments on portfolio management, electronic payment card services, and transfer of information for data processing.
According to the USTR, the pact also addresses intellectual property issues, making it easier for businesses to register and protect IP rights in new markets, and it addresses issues related to the Internet and the digital economy, and the ability of small businesses to take advantage of trade agreements.
The TPP would affect 40 percent of the world economy if it is ratified by Congress.
Special interests of all stripes including manufacturing and labor would be affected by the pact and have already begun announcing positions in support or opposition. Labor is opposed to it, arguing it will cost U.S. jobs.
The TPP includes the U.S., Malaysia, Australia, Brunei, Chile, New Zealand, Peru, Singapore, Vietnam, Canada, Mexico and Japan. The U.S. does not have existing trade agreements with Malaysia, Brunei, New Zealand, Vietnam and Japan.
China is not a participant in the TPP; in fact, supporters argue that the TPP is one way to counter China’s growing influence in foreign markets.
AIA has been involved with the USTR, the other TPP parties, and the business communities of TPP parties since the U.S. joined the negotiations.
According to AIA, U.S. insurers can expect improvement in the markets of the participating countries where the U.S. has no existing pacts and in those markets where the U.S. does have existing agreements, the TPP can create enhanced trade liberalization.
Simchak said his organization of insurance carriers will review the details of the agreement once the text of the agreement is released.
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