Annual Report on the Insurance Industry (September 2019)
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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 2019 Annual Report on the Insurance Industry (September 2019) Table of Contents I. INTRODUCTION .......................................................................................... 1 A. The Structure of this Report ................................................................................................. 1 B. Federal Insurance Office ...................................................................................................... 2 1. Insurance Regulation and the Federal Insurance Office .................................................. 2 2. FIO Activities ................................................................................................................... 4 II. SYSTEMIC RISK AND SOLVENCY ......................................................... 9 A. Domestic Developments ...................................................................................................... 9 1. NAIC Group Capital Calculation ..................................................................................... 9 2. Federal Reserve Building Block Approach .................................................................... 11 3. NAIC Macro Prudential Initiative .................................................................................. 13 4. Financial Stability Oversight Council Designations ...................................................... 14 B. International Developments ............................................................................................... 16 1. Development of an International Insurance Capital Standard for Insurance Groups .... 16 2. Activities-Based Approach and the Holistic Framework For Systemic Risk in the Insurance Sector .................................................................................................................... 20 III. EFFICIENT REGULATION AND GOVERNMENT PROCESSES ..... 23 A. Role of State and Federal Regulation ................................................................................ 23 1. FIO Engagement with Federal Agencies and the States ................................................ 23 2. Federal Agency Developments ...................................................................................... 24 3. State Developments ........................................................................................................ 30 4. Federal Advisory Committee on Insurance .................................................................... 33 B. Terrorism Risk Insurance Program .................................................................................... 34 1. Data Collection and the 2019 Data Call ......................................................................... 35 2. Terrorism Risk Insurance Program Small Insurer Report .............................................. 36 3. Advisory Committee on Risk-Sharing Mechanisms ...................................................... 37 4. TRIP Reauthorization ..................................................................................................... 38 C. Cyber Insurance and Insurance Industry Cybersecurity .................................................... 39 1. The Cyber Insurance Market .......................................................................................... 39 2. Insurance Industry Cybersecurity................................................................................... 43 IV. INTERNATIONAL ENGAGEMENT ....................................................... 47 A. IAIS .................................................................................................................................... 47 1. Structural Changes at the IAIS and FIO’s Role ............................................................. 47 2. IAIS 2020-2024 Strategic Plan ...................................................................................... 49 3. Insurance Core Principles and ComFrame ..................................................................... 50 ______________________________________________________________________________ FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY i Annual Report on the Insurance Industry (September 2019) 4. Financial Crime: FCTF and FATF ................................................................................ 52 5. Increasing Transparency at the IAIS .............................................................................. 53 B. Covered Agreements with the European Union and with the United Kingdom................ 54 1. Background and Agreement with the European Union ................................................. 54 2. Agreement with the United Kingdom ............................................................................ 56 3. Progress of the States ..................................................................................................... 58 4. The Path Forward on U.S. Implementation.................................................................... 61 5. Engagement with the European Union........................................................................... 62 6. Certain Jurisdictions that are not Party to a Covered Agreement .................................. 63 C. Insurance Dialogue Projects .............................................................................................. 65 1. EU-U.S. Insurance Project ............................................................................................. 65 2. U.S.-UK Insurance Project ............................................................................................. 66 D. Financial Stability Board ................................................................................................... 66 E. OECD ................................................................................................................................. 67 F. Bilateral Dialogue with India ............................................................................................. 67 V. ECONOMIC GROWTH AND INFORMED CHOICES ......................... 68 A. Standards of Conduct ......................................................................................................... 68 B. Retirement Income ............................................................................................................. 70 C. Long-Term Care Insurance ................................................................................................ 71 D. InsurTech ........................................................................................................................... 75 1. Market Overview............................................................................................................ 76 2. Innovation and its Impact on the Insurance Industry ..................................................... 80 3. Regulatory Frameworks and Reforms............................................................................ 90 VI. INSURANCE INDUSTRY FINANCIAL OVERVIEW ........................... 99 A. Domestic Insurance Marketplace Overview ...................................................................... 99 1. Financial Performance and Condition .......................................................................... 100 2. Life and Health Sector.................................................................................................. 104 3. Property and Casualty Sector ....................................................................................... 119 4. Market Performance ..................................................................................................... 132 B. Capital Markets Activity .................................................................................................. 135 1. Mergers & Acquisitions of U.S. Insurers ..................................................................... 136 2. Alternative Risk Transfer Insurance Products ............................................................. 137 C. International Insurance Marketplace Overview ............................................................... 138 D. Domestic Insurance Market Outlook ............................................................................... 139 ______________________________________________________________________________ FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY ii Annual Report on the Insurance Industry (September 2019) Glossary ABA .......... Activities-Based Approach ACRSM .......... Advisory Committee on Risk-Sharing Mechanisms A&H .......... Accident and Health AI .......... Artificial Intelligence AM .......... Aggregation Method API .......... Application Programming Interface ART .......... Alternative Risk Transfer CCPA .......... California Consumer Privacy Act CDO .......... Collateralized Debt Obligations CLO .......... Collateralized Loan Obligation ComFrame .......... IAIS Common Framework for the Supervision of IAIGs Council .......... Financial Stability Oversight Council DG-FSMA .......... EU’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union Dodd-Frank Act .......... Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 EIOPA .......... European Insurance and Occupational Pensions Authority ERISA .......... Employee Retirement Income Security Act of 1974 EU .......... European