Dire fiscal conditions have forced many states to cut back programs, increase taxes and put a freeze on hiring in 2010 and these actions continue to impact public infrastructure spending and related insurance exposures.
Insurance regulators are also affected.
In the wake of landmark financial services reform signed into law this week that retains the state-based regulatory framework for insurance, SNL Financial reports that many state governments continue to cut back on the resources those regulators have to do their jobs.
InÃ‚ a timely analysis of data reported in the NAICÃ¢â‚¬â„¢s recently released 2009 Insurance Department Resources Report, SNL reports:
Projections offered by insurance regulators from the 50 U.S. states, the District of Columbia and the Commonwealth of Puerto Rico show their departments expect to spend a combined $1.77 billion in 2011, or 0.7% less than the roughly $1.79 billion they are spending in 2010. The report projects budget cuts for 20 state insurance departments in 2011, while budgets were left flat in five others.
SNL observes that the budget cuts come despite increased demands on insurance regulators from both the financial crisis and new healthcare reforms.
According to SNLÃ¢â‚¬â„¢s analysis, regulators in 14 states Ã¢â‚¬“ including such major insurance markets as Michigan, Pennsylvania, Georgia and New Jersey Ã¢â‚¬“ have smaller budgets in 2010 than they did in 2006, before the start of the financial crisis.
Even where state insurance departments have not yet cut budgets, they have already been cutting staff.
SNL says NAIC data shows staffing by state insurance departments fell for the third straight year in 2009.
The state suffering the deepest cuts was hurricane-prone Florida with its staff down 64.1 percent to 1,010.5 positions in 2009 from 2,813 in 2006. Other states seeing big reductions in staffing levels during the past three years include Pennsylvania and Arizona, SNL says.
Check out the I.I.I. online publication Ã¢â‚¬Å“A Firm FoundationÃ¢â‚¬ to see the myriad ways in which insurers support state and national economies.