Membership of the EU guarantees British insurers the right to do business in 27 other countries on an equal footing. The UK gains from this arrangement, selling more in insurance and long-terms savings products to the rest of the EU than they sell to us. Ahead of the EU Referendum on June 23rd, the ABI is producing a series of blogs exploring the role of the EU in our industry in more detail.
Ellen Bramness Arvidsson, Executive Director, Finance NorwayNorwegian insurers had cause for celebration this week. With 136 to 29 votes the Norwegian Parliament - Stortinget – approved the negotiated solution with EU to secure Norwegian financial services access to the internal market.
Six-year journey
This marks the end of a six-year long debate and intense work by officials from Norway, Iceland, Liechtenstein, the EFTA (European Free Trade Association) secretariat and the EU Commission to find a political, and then a technical solution to the inclusion of the regulations regarding the European Financial Supervisory authorities into the EEA agreement. This is the deal which allows Norway, as a non-EU member, to do business across the European Economic Area.
Personally I’m extremely pleased. I’ve used the better part of three years talking to people in Brussels, in Iceland and Liechtenstein, writing papers trying to convince everyone involved to keep going. Because it’s hard to describe what is at risk, even when so much is.
Life outside
The EEA agreement ensures Norwegian access to and rights in the internal market for everything except fish and farm produce. For insurance and other financial services, it affiliates the small Norwegian market with the internationally known and acknowledged rules of the single market, provided that the rules are implemented into Norwegian law in the same way that EU members implement them. Thus, Norwegian insurers get the clear and certain legal framework needed, albeit without being able to influence it.
Partner of interest?
The latest issue has been incorporating the new European Supervisory Authorities’ (ESA) regulations into the EEA agreement which Norway abides by. There are multiple reasons as to why it has taken so long to get the necessary affiliation to the ESAs into place. Getting the EU to prioritise negotiations with the EEA/EFTA countries is not a straightforward exercise. It is a fact that EEA/EFTA needs EU more than the EU needs EEA/EFTA.
That it is an extremely complicated matter doesn't help. It took 19 months of multilateral negotiations to put in place a technical solution that not only works for the EEA/EFTA countries, but also for the Commission and the EU.
The cumbersome work of entering the remaining 150 regulatory measures into the EEA agreement in order for the EEA to be fully and also legally integrated into the internal market will undoubtedly take more time. In the meanwhile, Norwegian financial services have had to depend on the goodwill of other European nations. This goodwill cannot be taken for granted and we are relieved that it has not been put to the test more often.
Necessary and cumbersome
Norwegian insurers need the EEA agreement. The Nordic non-life insurance market is truly integrated, with the common regulatory framework as a shared platform for operations. For life insurers the agreement ascertains access to the investment universe of the internal market – no small treat in a country where the low supply of government bonds accentuates the general need for diversification and search for yield in a low interest rate environment.
To pretend that the agreement is a smooth and easy affiliation is, however, an illusion. There is always a need to explain, reassure and defend that Norwegian companies and products follow the same regulation and that they do not differ from German or British products or companies in that respect. Explaining, reassuring and defending amounts to costs in financial services. Costs determines where to locate production and how to organise distribution. In a competitive world costs matters.
Inside without a say
The EEA agreement has been active for 22 years. The EEA states follow the development of the EU without being able to influence the development of the union, or indeed the individual legislative acts the agreement binds us to implement. As the story of the ESA-regulations has shown, the challenge lies in developing the agreement itself alongside the development of the EU. The risk going forward is dwindling multilateral interest and effort to do the work of developing the agreement. Without such development, the EEA/EFTA affiliation to the internal market becomes fraught with uncertainty.
Ellen Bramness Arvidsson is an Executive Director at Finance Norway.