Category Archives: Regulation

Senate Committee Hearing on Regulation

The current regulatory structure and oversight of the industry will be the subject of a hearing tomorrow before the Senate Banking Committee. Testifying on the first panel are representatives of the National Association of Insurance Commissioners (NAIC), the American Insurance Association, the American Council of Life Insurers and the Consumer Federation of America. The second panel will feature representatives of the Council of Insurance Agents and Brokers, the Independent Insurance Agents and Brokers of America, the Reinsurance Association of America, and the National Association of Professional Surplus Lines Offices. The hearing begins at 10:00am at 538 Dirksen Senate Office Building. Check out further I.I.I. information on regulation modernization.  

Producer Compensation Hearing

The first of three public hearings takes place in Buffalo, New York, today on the form and disclosure of producer compensation (including contingent commissions). Co-hosted by the New York Superintendent of Insurance and the attorney general, the hearings are expected to elicit views about the proposed addition of a new regulation to the Insurance Department’s regulations regarding permissible forms of insurance producer compensation and disclosure by insurance producers of all forms of compensation. Two other hearings are scheduled for later this month: one in Albany on July 23 and one in Manhattan on July 25. You can follow the meetings live at

House Committee Considers Legislation

Markup of three insurance bills, including H.R. 5840 the Insurance Information Act of 2008, will begin later today at a meeting of the Capital Markets Subcommittee of the House Financial Services Committee. H.R. 5840 would establish a federal Office of Insurance Information within the Treasury department. Creation of this office was part of the financial services regulatory reform package unveiled by the Treasury in April (see our March 31 posting). The two other pieces of insurance legislation up for consideration are: H.R. 5792, Increasing Insurance Coverage Options for Consumers Act of 2008 and H.R. 5611, National Association of Registered Agents and Brokers Reform Act of 2008. H.R. 5792 would amend the Liability Risk Retention Act of 1986 to allow risk retention groups to provide property insurance in addition to current liability coverage to their members. Check out further I.I.I. content on regulation modernization,  the optional federal charter (OFC), risk  retention groups and other  alternative risk financing options.  

Regulatory Hearing

Those following the Treasury’s plan to establish an optional federal charter (OFC) for insurers, will turn their attention to Capitol Hill tomorrow where a hearing is scheduled before the Capital Markets Subcommittee of the House Financial Services Committee on H.R. 5840, the Insurance Information Act of 2008. H.R. 5840 would create a federal Office of Insurance Information within the Treasury department. Creation of this office was recommended as part of the blueprint on federal regulation of financial services, including insurance, unveiled by the Treasury in April (see our March 31 posting). The hearing will take place at 10am, 2128 Rayburn House Office Building. Check out further I.I.I. info on the OFC.  

Regulatory Change

Industry eyes today will be on the news out of the Treasury department, where U.S. Treasury Secretary Henry Paulson is expected to outline the agency’s blueprint for federal regulation of financial services, including insurance. Word on the street is that the Treasury’s plan would endorse optional federal charters (OFC) for both insurers and producers. It would also propose the creation of an interim federal insurance regulator. Check out National Underwriter’s March 31 online article by Arthur Postal and Daniel Hays for more information on the proposal. Check out the I.I.I.’s online update on the OFC.

Complaints Decline Again

The National Association of Insurance Commissioners (NAIC) has just released its top insurance complaints for 2007. Given the media’s tendency to focus on the negative, we shouldn’t overlook the fact that consumer complaints against insurers declined for the fourth consecutive year by 3.6 percent to 222,814 in 2007. Delays (16 percent), denial of claims (14.7 percent) and unsatisfactory settlement offers (9.8 percent) were the top three reasons consumers filed formal complaints against their carriers during the course of the year. Policy cancellations (4.6 percent) and premium/insurance rating issues (4.4 percent) rounded out the top five, the regulators noted. Meanwhile, accident & health (36.4 percent), auto (34.4 percent) and homeowners (12.5 percent) were the top three complaints by type of coverage in 2007. It would be remiss of us not to mention that the NAIC collected the data via its centralized electronic Complaint Database System (CDS), through which states voluntarily report “closed† complaints. A closed complaint is one that has been investigated and resolved to the satisfaction of the state or jurisdiction in which it is filed.  

Financial Risk Outlook

We head across the pond today, where the U.K. financial regulator has published its annual Financial Risk Outlook. Amid the continuing slowdown in the economy, the FSA’s 2008 report focuses on the risks arising from the events of the second half of 2007 and specifically warns firms and consumers of the risks that could impact them in a less benign economy. Among the risks identified as priority, the FSA notes that tighter economic conditions could increase the incidence or discovery of some types of financial crime or lead to firms’ resources being diverted away from tackling financial crime. An interesting point, given last week’s  revelation concerning a rogue trader who defrauded French bank Socià ©tà © Gà ©nà ©rale of $7.2 billion. Check out  further I.I.I. info on financial  and market  conditions for insurers.

Captive Groups Coordinate IRS Response

Those of you in the alternative risk transfer business may be interested in today’s item. Two prominent captive insurance associations have teamed up to form a coalition to battle a proposed Internal Revenue Service (IRS) rule change that would significantly alter the landscape for captive insurers in the U.S.   Issued September 28, the proposed IRS regulation would eliminate the right of U.S.-sponsored captives to claim reserve deductions against their domestic tax for future claims and losses on consolidated, or related, business. Instead, they would only be allowed to claim deductions when claims are actually paid. The change would essentially result in treating the transaction as non-insurance for tax purposes. We don’t need to remind you that captive insurers are the oldest form of alternative risk transfer vehicle, dating back to the 1950s. Use of captives by corporations has grown exponentially during the last 30 years in the U.S. In 2006, the U.S. was the largest captive domicile– with 1,251 licensed captives – followed by Bermuda with 989. If the IRS proposal goes ahead, it seems likely that it would drive more business offshore. The Coalition for Fairness to Captive Insurers (CFCI) has been formed by the Captive Insurance Companies Association (CICA) and the Vermont Captive Insurance Association (VCIA). Those interested in joining the coalition should contact either association. Check out further I.I.I. information on captive insurers.

NY Reinsurance Collateral Proposal

Reinsurance regulation in the U.S. has long been a broad  issue of debate about which different parts of the industry have varying opinions. Last week’s proposal put forward by New York insurance superintendent Eric Dinallo addresses just one area of the debate: collateral requirements. Currently, any U.S. or non-U.S. reinsurance company that is not authorized or accredited to do business in New York must post collateral equal to 100 percent of its share of policyholder claims. Under Superintendent Dinallo’s proposal, well-capitalized non-authorized reinsurers with the highest credit rating doing business in New York would be treated on an equal footing with authorized companies and would no longer be required to post collateral. Companies that are not as strong would still have to post collateral on a sliding scale from 10 to 100 percent. New York is the first state to suggest the change and it remains to be seen how other states may react. Clearly, reinsurance is an international business that enables risks to be spread more widely. It plays a critical role by increasing capacity in the global insurance marketplace and offering catastrophe protection. But from insurers’ perspective concerns have been raised over ceding insurer solvency and reinsurance recoverables. We welcome your comments on this issue.  Check out the NAIC for further information on its reinsurance modernization proposal. Check out  further I.I.I. facts & stats on reinsurance.

Global Insurance Regulators Meet

“A Global Climate for Change: The Future of Insurance Regulation† is the billing for the 2007 annual conference of the International Association of Insurance Supervisors (IAIS) which kicks off in Fort Lauderdale later this week. For a conference that promises global perspectives on future trends in insurance regulation, we note with interest that Florida Governor Charlie Christ is scheduled as one of the keynote speakers. Other keynote speeches will be delivered by: Zhou Yanli, vice chairman, China Insurance Regulatory Commission (CIRC); Dr. Fariborz Ghadar, director of the center for global business studies, Penn State University; and Dr. Evan Mills, staff scientist, Berkeley National Lab, who will speak on insurance and climate change. Additional panel discussions will focus on a range of topics including: emerging markets and regulation; reform of reinsurance regulation in the U.S.; global accounting standards; Solvency II and its impact; and the use of securitization in insurance markets. Check out I.I.I. updates on reinsurance and accounting and  our International Fact Book for further related info.