A remaining impediment for EU insurance companies seeking to operate in the US market is the fragmentation of the market into 56 different jurisdictions, with different licensing, solvency and operating requirements. Each state has its own insurance regulatory structure and, by contrast to banking, federal law does not provide for the establishment of federally licensed or regulated insurance companies. However, interest in establishing an optional federal statutory structure for licensing and regulation of insurance is growing.

The decentralised US regulatory/supervisory structure entails heavy compliance costs for EU companies in each of the 56 jurisdictions. The National Association of Insurance Commissioners (NAIC) is making an attempt to harmonise some basic regulatory requirements between the states, but this will be a long process. The NAICs recommendations are not binding, so even if state insurance commissioners agree to some further harmonisation, implementation at state level cannot be guaranteed.

A major issue of concern however has been the requirement for non-US reinsurers to post 100% collateral for their US acceptances (i.e. their US reinsurance business). The collateral requirement is not technically justified and leads to important costs not only for European reinsurers, but also for the US insurance industry and their policyholders. Discussions between the European Commission Services and US insurance commissioners on the collateral issue continue as part of the more general EU-US Financial Markets Regulatory Dialogue and the NAIC-CEIOPS-European Commission Dialogue on Insurance. In December 2006, the Reinsurance Task Force of the NAIC endorsed the principle of a move away from the current discriminatory collateral requirements for non-US reinsurers towards a system where collateral is charged for all reinsurers regardless of origin on the basis of a credit rating established by a ratings organisation. The NAIC Financial Condition Committee recently passed onto the full NAIC membership for adoption in December a proposal from the Reinsurance Task Force for “reinsurance modernization” that would significantly reduce collateral requirements for unlicensed reinsurers, whilst nevertheless remaining discriminatory. The plan would also institute a single licensing system for U.S. reinsurers, and a single “port of entry” for non-U.S. companies; uniform nationwide enactment via federal legislation is contemplated.