President Obama met with German Chancellor Angela Merkel last week. The Chancellor expressed her strong belief that in times of economic crisis transatlantic regulatory cooperation can set more efficient rules for the capital markets and reduce the costs of bureaucratic burden in the "real" economy.

Just recently, the European Council and the U.S. Administration have simultaneously unveiled a whole host of proposals in response to the economic downturn. As these proposals make their way through Congress and the European Parliament, they will ultimately lead to regulatory restructuring at many levels. Will companies find the new rules a helpful framework to restore confidence in the markets? Or will governments create a minefield of incompatible demands by turbocharged regulators on the two sides of the Atlantic?
 
Chancellor Merkel may be still fuming that her views on hedge funds were largely dismissed three ago. However, frustration is not a good guide for legislation. The turmoil in the markets has exposed their complexity, and the diversity of players and interests. Lumping everyone on the market together as one "evil" financial sector driven by animal instincts will just dampen the very markets that we all want to see revived.

There is some hope that the imperative of compatible rules is getting the recognition is deserves. Last week, the House Financial Services Subcommittee on Capital Markets demonstrated a real effort to accomplish regulatory cooperation. The Subcommittee held a hearing on systemic risk and insurance where Peter Skinner, a Member of the European Parliament and lead sponsor of European insurance law reform, testified about the need for regulatory cooperation in the insurance sector. He echoed the sentiment given at the US Chamber insurance regulatory dialogue earlier this year that responses from the EU and the U.S. must not be disjointed.

Skinner noted that "cooperation between the EU and the US... does not imply for the rules and the principles to be the same, but rather to be recognized as similar in terms of their effect and outcome. No joint approach means no cooperation and this means lessening the chances of a quicker economic recovery."
 
With emerging new laws and regulatory proposals affecting all aspects of the financial services industry, including insurance and reinsurance issues, it is critically important for a continued dialogue between legislators in the U.S. Congress and the European Parliament, as well as between federal agencies and regulators.
 
Transatlantic markets are central to economic relations between the US and EU and a strong and coordinated policy approach must be taken on both sides of the Atlantic. If the U.S. and Europe go their separate ways, recovery will be much slower. Politicians need to commit themselves to grappling with the international implications of their actions. Let's hope that Obama and Merkel take cooperation commitments beyond slogans and smiles. As both of them meet again in the G8 format next week, they can lead others to shoulder the responsibility for pulling out of the crisis together.