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Modernize and Improve the System of Insurance Regulation in the United States Table of Contents

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Modernize and Improve the System of Insurance Regulation in the United States Table of Contents How To Modernize And Improve The System Of Insurance Regulation In The United States Table of Contents I. INTRODUCTION .................................................................................................................1 Structure of the Report ......................................................................................................4 Recommendations for Modernization of Insurance Regulation in the United States ...........................................................................................................5 Areas of Near-Term Reform for the States........................................................................6 Areas for Direct Federal Involvement in Regulation .......................................................7 Potential Federal Solutions to States’ Failure to Modernize and Improve ....................8 II. A BRIEF HISTORY OF THE REGULATION OF THE UNITED STATES INSURANCE INDUSTRY .................................................................11 Early Era of Insurance Regulation and the Limitation on Federal Authority ..............11 Box 1: The National Association of Insurance Commissioners (NAIC) ..................11 Early Calls for Federal Regulation of Insurance ...........................................................13 The Case of South-Eastern Underwriters, Federal Authority to Regulate Insurance, and the McCarran-Ferguson Act ...................................................14 The Crises of Insurer Insolvencies, Congressional Reaction, and State Regulatory Responses ......................................................................................15 Recent Proposals for Federal Regulation of Insurance to Promote Uniformity ..........16 The Financial Crisis ..........................................................................................................18 Box 2: AIG ....................................................................................................................18 Box 3: Assistance to the Insurance Industry during the Financial Crisis .................20 Financial Regulatory Reform ..........................................................................................21 III. PRUDENTIAL OVERSIGHT ...........................................................................................23 The Solvency Framework .................................................................................................23 Box 4: Europe’s Insurance Regulatory Regime – Solvency II ...................................26 Capital Standards .............................................................................................................28 Box 5: Credit Rating Agencies, Financial Guaranty Insurance, and the Financial Crisis ...............................................................................................30 Reserving ..........................................................................................................................35 Credit for Reinsurance ...................................................................................................37 Corporate Governance – Director and Officer Suitability and Fitness .........................38 Group Supervision ...........................................................................................................39 Resolution of Insolvent Insurers ....................................................................................42 Federal Insurance Office, U.S. Department of The Treasury iii How To Modernize And Improve The System Of Insurance Regulation In The United States Receivership .....................................................................................................................43 Guaranty Funds ................................................................................................................44 IV. MARKETPLACE OVERSIGHT, CONSUMER PROTECTION AND ACCESS TO INSURANCE .....................................................................................................................46 Producer Licensing .........................................................................................................46 Box 6: Marriage and Insurance ................................................................................48 Product Approval .............................................................................................................48 Box 7: Personal Auto Policies for Service Members .................................................49 Box 8: Sale of Annuities to Suitable Consumers .....................................................51 Market Conduct Regulation ............................................................................................52 Rate Regulation ................................................................................................................54 Box 9: Forms of Rate Regulation ................................................................................55 Risk Classification .............................................................................................................56 Box 10: Access of Native Americans to Insurance .....................................................57 Nonadmitted and Reinsurance Reform Act of 2010 ....................................................58 Natural Catastrophes .......................................................................................................59 V. TAKING ACCOUNT OF REGULATORY REFORM .......................................................62 VI. CONCLUSION..................................................................................................................65 Federal Insurance Office, U.S. Department of The Treasury iv How To Modernize And Improve The System Of Insurance Regulation In The United States Glossary of Acronyms Actuarial Guideline 38 .......................................................................................................................................AG 38 AIG Financial Products ....................................................................................................................................AIG FP AIG Securities Lending Corporation ...........................................................................................................AIGSLC American Council of Life Insurers .................................................................................................................... ACLI American International Group, Inc .................................................................................................................... AIG Board of Governors of the Federal Reserve System .......................................................................Federal Reserve California Earthquake Authority ................................................................................................................Authority Capital Purchase Program ....................................................................................................................................CPP Commercial Paper Funding Facility ..................................................................................................................CPFF Common Framework for the Supervision of Internationally Active Insurance Groups ...................ComFrame Consumer Financial Protection Bureau ...........................................................................................................CFPB Council of Insurance Agents and Brokers ........................................................................................................CIAB Credit Default Swap ...............................................................................................................................................CDS Credit Rating Agencies ........................................................................................................................................CRAs Defense of Marriage Act ..................................................................................................................................DOMA Department of Housing and Urban Development .........................................................................................HUD Department of the Treasury ..........................................................................................................................Treasury Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ....................................Dodd-Frank Act European Insurance and Occupational Pensions Authority ....................................................................... EIOPA European Union ......................................................................................................................................................EU Federal Deposit Insurance Corporation ........................................................................................................... FDIC Federal Emergency Management Agency ......................................................................................................FEMA Federal Insurance Office .......................................................................................................................................FIO Federal Insurance Office Act of 2010 ............................................................................................................FIO Act Financial Analysis Working Group ..................................................................................................................
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