Annual Report on the Insurance Industry
Annual Report on the Insurance Industry
FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY Completed pursuant to Title V of the Dodd-Frank Wall Street Reform and Consumer Protection Act SEPTEMBER 2017
Annual Report on the Insurance Industry (September 2017)
Table of Contents
I. Executive Summary.......................................................................................1
Insurance Industry Financial Overview ...................................................................... 1 Domestic Regulatory and Market Developments ....................................................... 2 U.S. Competitiveness in Global Insurance Markets.................................................... 3
II. Introduction....................................................................................................5
Structure of Report ...................................................................................................... 5 Federal Insurance Office ............................................................................................. 5
III. Insurance Industry Financial Overview....................................................11
Domestic Insurance Marketplace Overview ............................................................. 12 1. Financial Performance and Condition ....................................................................... 13
Box 1: The Effect of Auto Claims on P&C Insurer Performance ........................... 35 2. Market Performance .................................................................................................. 46 3. Infrastructure Investments ......................................................................................... 48 4. 2017 Insurance Market Outlook................................................................................ 49
Capital Markets Activity ........................................................................................... 50 1. Mergers & Acquisitions of U.S. Insurers .................................................................. 51 2. Regulatory Review of Foreign Acquisitions ............................................................. 52
IV. Domestic Regulatory and Market Developments.....................................54
The Cyber Insurance Market and Insurance Sector Cybersecurity........................... 54 1. The Cyber Insurance Market ..................................................................................... 54
Box 2: Ransomware ..................................................................................................... 55 2. Insurance Sector Cybersecurity................................................................................. 58
Innovation and Technology in the Insurance Industry .............................................. 63 1. The Growth of InsurTech .......................................................................................... 63
Box 3: The Emergence of Blockchain Technology .................................................... 64 Box 4: Life Insurance Underwriting and Technology .............................................. 65 2. Big Data, Price Optimization, and Insurance Rates .................................................. 68 3. Insurance Response to the Sharing Economy ........................................................... 70 Box 5: Autonomous Automobiles................................................................................ 71
Natural Hazards and Insurance.................................................................................. 73 1. Natural Hazards in the United States and the Role of Insurance .............................. 73 ______________________________________________________________________________ FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY
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Annual Report on the Insurance Industry (September 2017)
Box 6: Hurricane Harvey ............................................................................................ 75 Box 7: State Insurance Regulatory Response to Natural Disasters......................... 76 2. Insurance and Mitigation........................................................................................... 76 3. Mitigation Framework Leadership Group................................................................. 77 4. Flood Insurance and NFIP Reauthorization .............................................................. 78
Financial Stability Oversight Council ....................................................................... 79 Terrorism Risk Insurance Program ........................................................................... 79 1. Regulations and Guidance......................................................................................... 80 2. 2017 Data Call........................................................................................................... 81 3. Small Insurer Study ................................................................................................... 82 4. Advisory Committee on Risk-Sharing Mechanisms ................................................. 82 The Department of Labor Fiduciary Rule ................................................................. 82 Long-Term Care Insurance ....................................................................................... 83 Box 8: Penn Treaty American Corporation .............................................................. 85 Additional State-Level Regulatory Developments.................................................... 88 1. Domestic Regulatory Capital Initiatives ................................................................... 89 2. Life Insurance Reserving Requirements ................................................................... 90 3. Unclaimed Death Benefits......................................................................................... 91 4. NAIC Activities and State Adoption of Model Laws ............................................... 92
V. U.S. Competitiveness in Global Insurance Markets ................................94
Global Insurance Markets ......................................................................................... 94 Covered Agreement................................................................................................... 96 IAIS Activities........................................................................................................... 98 1. Coordination and Stakeholder Engagement .............................................................. 99 2. Common Framework for the Supervision of Internationally Active Insurance Groups and Insurance Core Principles .................................................................... 100 3. Development of International Capital Standards for Insurance Groups ................. 103 4. Cross-Border Resolution Planning .......................................................................... 105 5. Combating Financial Crime in Insurance................................................................ 106 6. IAIS Systemic Risk Task Forces............................................................................. 107 7. Other IAIS Working Group and Task Force Developments ................................... 107 Financial Stability Board......................................................................................... 108 Box 9: Global Systemically Important Insurers Identified by the FSB in 2016... 109
______________________________________________________________________________ FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY ii
Annual Report on the Insurance Industry (September 2017)
Glossary
ACRSM A&H B3i BICE
.......... .......... .......... ..........
Advisory Committee on Risk-Sharing Mechanisms Accident and Health Blockchain Insurance Initiative DOL Best Interest Contract Exemption
CFIUS
.......... Committee on Foreign Investment in the United States
CIPR ComFrame
CSO Council CPMI
.......... ..........
.......... .......... ..........
NAIC Center for Insurance Policy and Research IAIS Common Framework for the Supervision of IAIGs Commissioners' Standard Ordinary Table Financial Stability Oversight Council Committee on Payments and Marketing Infrastructure
DHS
.......... U.S. Department of Homeland Security
Dodd-Frank Act
DOJ DOL EIOPA
ERISA
..........
.......... .......... ..........
..........
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 U.S. Department of Justice U.S. Department of Labor European Insurance and Occupational Pensions Authority Employee Retirement Income Security Act of 1974
EU
.......... European Union
FACI
.......... Federal Advisory Committee on Insurance
FATF FCTF FDIC Federal Reserve
.......... .......... .......... ..........
Financial Action Task Force IAIS Financial Crime Task Force Federal Deposit Insurance Corporation Board of Governors of the Federal Reserve System
FEMA
.......... Federal Emergency Management Agency
FIO
.......... Federal Insurance Office
FSAP FSB GAAP GDP G-SIB
.......... .......... .......... .......... ..........
Financial Sector Assessment Program Financial Stability Board Generally Accepted Accounting Principles Gross Domestic Product Global Systemically Important Bank
______________________________________________________________________________ FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY iii
Annual Report on the Insurance Industry (September 2017)
G-SII HHS IAIG IAIS IASB IBHS iCBCM
ICP ICS IFRS IFTRIP
IGWG IMF IMO IOSCO
IPPC IRA
Key Attributes
L&H LTCI M&A MitFLG NAIC NCOIL NFIP NIST NYDFS OECD
P2P P&C
.......... .......... .......... .......... .......... .......... ..........
.......... .......... .......... ..........
.......... .......... .......... ...........
........... ..........
..........
.......... .......... .......... .......... .......... .......... .......... .......... .......... ..........
.......... ..........
Global Systemically Important Insurer U.S. Department of Health and Human Services Internationally Active Insurance Group International Association of Insurance Supervisors International Accounting Standards Board Insurance Institute for Business & Home Safety FSB Cross-Border Crisis Management Group for Insurers IAIS Insurance Core Principle IAIS Insurance Capital Standard International Financial Reporting Standards International Forum of Terrorism Risk Insurance Pools Insurance Groups Working Group International Monetary Fund Independent Marketing Organization International Organization of Securities Commissions OECD Insurance and Private Pensions Committee Individual Retirement Account or Individual Retirement Annuity FSB, Key Attributes for Effective Resolution Regimes for Financial Institutions Life and Health Long-Term Care Insurance Merger and Acquisitions Mitigation Framework Leadership Group National Association of Insurance Commissioners National Conference of Insurance Legislators National Flood Insurance Program National Institute of Standards and Technology New York Department of Financial Services Organisation for Economic Co-operation and Development Peer-to-Peer Property and Casualty
______________________________________________________________________________ FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY iv
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