In September, the Federal Insurance Office (“FIO”) issued its Annual Report on the Insurance Industry for 2015, including its “outlook” for 2016 based upon results reported through June 30, 2016.
For 2015, the U.S. insurance industry, both life and health and property and casualty “reported another year in a run of solid financial performance, and, in the aggregate, remained in sound financial condition.” FIO notes the continued effects of low interest rates are exacerbated as life insurers are challenged in constructing investment portfolios that properly match liabilities and a decline in the sale of annuity products.
State insurance regulators have improved standards applicable to life insurers ceding to captive reinsurers, “but additional work is needed to develop a consistent oversight regime aimed at improving the transparency and solvency of captive life reinsurers.” In January 2016, state insurance regulators adopted amendments to the Credit for Reinsurance Model Law “that would provide states with the authority to implement regulations relating to a captive framework, as well as regulations applicable to reinsurance captives outside the scope of the captive framework.”
By 2016, a total of 42 state legislatures have enacted a new reserving methodology called “Principles Based Reserving” (PBR), which relies upon an insurer’s individualized risk modeling and analysis techniques. The three-year implementation period of PBR will begin on January 1, 2017.
The report also discusses cybersecurity issues relevant to the insurance sector, including the Cybersecurity Information Sharing Act, as well as the current state of the cyber risk insurance market and common products offered by a number of insurers.
On April 1, 2016, the U.S. Department of Treasury issued a notice of proposed rulemaking to implement changes to the Terrorism Risk Insurance Program (“TRIP”) required by the TRIP Reauthorization Act, and FIO continues to consider comments received in developing a final rule. Per the report, “TRIP remains an important mechanism in ensuring that terrorism risk insurance remains available and generally affordable in the United States.”
Lastly, FIO notes its continued work at the International Association of Insurance Supervisors with other member jurisdictions, spanning nearly 140 countries, in the development of international standards for the supervision of insurance.
For the full text of the report, click here.
Annual Report on the Insurance Industry, Federal Insurance Office, U.S. Department of the Treasury (Sept. 2016)