The United States and European Union signed a bilateral agreement on prudential insurance and reinsurance measures on Friday.

Both sides announced in July their intention to sign the agreement, also known as a covered agreement in the U.S.

The parties believe the agreement represents a step forward in U.S.- EU cooperation on insurance and reinsurance. In a joint statement, they said it conveys “benefits to EU and U.S. insurers and reinsurers operating across the Atlantic by offering them regulatory certainty, while maintaining consumer protections.”

The agreement was negotiated by the Obama Administration in talks that began in 2015. It was announced on January 13, 2017 in the final days of the previous administration.

The agreement—which is a “covered agreement” in the meaning of the Dodd-Frank Act and an agreement under Article 218 of the Treaty on the Functioning of the European Union— addresses three areas of insurance oversight: reinsurance; group supervision; and the exchange of insurance information between supervisors.

(The final legal text of the U.S. – EU covered agreement is available here and the text of the U.S. policy statement is available here.)

With regard to reinsurance, it will “eliminate collateral and local presence requirements for EU and U.S. reinsurers operating in each other’s markets.”

Regarding group supervision, U.S. and EU insurers operating in the other’s markets “will only be subject to worldwide insurance group oversight by supervisors in their home jurisdiction.”

The agreement also encourages insurance supervisory authorities in the U.S. and the EU to continue to exchange supervisory information on insurers and reinsurers that operate in the U.S. and EU markets and it includes model information sharing memorandum of understanding provisions.

In their joint statement, the parties said they will now move forward to provisional application. The European Union will take the necessary steps, involving the Council and the European Parliament pursuant to the Treaty on the Functioning of the European Union, to formally conclude the agreement.

In January, the U.S. Treasury Department released a fact sheet on the agreement and said the final legal text of the agreement had been given to Congress as required by the Dodd-Frank Act.

Following the announcement of the signing, Cristina Mihai, head of prudential regulation and international affairs at Insurance Europe, issued a statement:

“Insurance Europe welcomes the signing of the EU-US bilateral agreement on (re)insurance, and appreciates the significant work and effort by the European institutions and member states over the past two years in the negotiation of this agreement and then in the legislative process ahead of it being signed.”

Several major U.S. insurance organizations including the American Insurance Association (AIA), the American Council of Life Insurers (ACLI) and the Reinsurance Association of America (RAA) have in the past welcomed the agreement, as have the International Underwriting Association, which represents wholesale re/insurance companies in the London market.

However, the National Association of Mutual Insurance Companies (NAMIC) has not been as welcoming of a covered agreement. It has called the pact “a proposed solution to an invented problem—the question of European regulators deeming our regulatory system equivalent.”

State insurance regulators have also expressed concern that a covered agreement could potentially undermine the U.S. system of state regulation of insurance. The National Association of Insurance Commissioners (NAIC) has been critical of the agreement, warning that it might be used as a “backdoor to force foreign regulations on U.S. companies.”

Another state regulatory group, the National Conference of Insurance Legislators (NCOIL), said state lawmakers are “profoundly disappointed” and criticized the pact as good for Wall Street but bad for Main Street.

“NCOIL has been saying for eight months that this agreement is a win for Wall Street at the expense of Main Street because companies that do not have the market presence to demand collateral contractually will lose its statutory protections and the companies large enough to demand it will continue to do so,” said NCOIL CEO Tom Considine.

Considine labeled the signing of the agreement “an intrusion by both the federal government and international regulatory authorities into the U.S. state based regulation of insurance regulation.”

However, Evan G. Greenberg, chair and CEO of giant Chubb, expressed support for the agreement that he said “respects the legitimacy of each other’s regulatory structure and allows insurers and reinsurers to operate on a level and more predictable playing field.”

According to Greenberg, the agreement “represents a critically important, mutually beneficial recognition among the United States and the European Union that insurance and risk are often global in nature.”

(A version of this article was published on Insurance Journal’s website on Friday, Sept. 21. Reporter Andrew Simpson is the Chief Content Officer of Wells Media, which publishes Insurance Journal and Carrier Management.)