Since the time when I penned this article that appeared in the Spring 2011 issue of AIRROC Matters, a lot has changed.
At the end of 2014, the U.S. still topped the world market with a GDP of $17.3 Trillion, up $4.4 Trillion from year end 2009. China was second, with a GDP of $10.4 Trillion.
The Federal Insurance Office published its Annual Report for the U.S. Treasury Department for the Year End 2014. In it, the FIO states that the Life and Health and Property Casualty sectors both reported increases in NWP from the prior year end. L&H NWP was at $648 Billion and P/C was at $503 Billion. This is a combined NWP of $1.15 Trillion, which was approximately the same as it was at the end of 2009. The ratio of business written by each sector against overall NWP is as follows: the L&H sector went from approximately 60% of overall NWP at end of 2009 down to 56% for 2014 and the P/C sector went from 40% in 2009 up to 46% at year-end 2014. In 2000, the combined NWP for both sectors was only at $602 Billion.
As a percentage of the GDP, Insurance accounted for 6.65% of the overall GDP of $17.3 Trillion at the end of 2014. In 2000, Insurance accounted for 6.05% and then, in 2009, it was at 7.79% of GDP.
Since 2010, when the FIO was set up as part of Dodd-Frank, watching its evolution has been very interesting – almost predictable. The FIO has become a more active member of the International Association of Insurance Supervisors (IAIS) and has also published papers such as “How To Modernize And Improve The System Of Insurance Regulation In The United States” as well as the “Annual Report on the Insurance Industry”
The FIO has seemingly moved from watching companies and risks that are systemically important to pro-actively increasing the federal government’s involvement in the insurance and reinsurance industry.
In its annual report, the FIO states that “[a] significant achievement in late 2014 was the adoption by the IAIS of an approach to a Basic Capital Requirement (BCR), the first global group capital standard for the insurance sector. The IAIS has also been working on a higher loss absorbency (HLA) requirement, which is scheduled to be finalized in late 2015. The BCR and HLA form a combined capital requirement that will apply to global systemically important insurers (G-SIIs).”1 In October 2014, the Project’s Steering Committee, comprised of leaders from FIO, state insurance regulators, the European Commission, and the European Insurance and Occupational Pensions Authority (EIOPA) held its second public forum in Amsterdam, entitled “Evolution in Group Supervision.” Topics included the practical applications of recent enhancements to group supervisory systems, as well as future challenges, and the potential for using common elements in Own Risk and Solvency Assessment (ORSA) frameworks for insurance groups operating on a transatlantic basis. As you may know, EIOPA was originally CEIOPS and is the engine behind Solvency II.
For the full article, refer to page 28 in the Spring 2016 issue. https://www.airroc.org/assets/docs/matters/airroc%20matters%20spring%202016%20vol%2012%20no%201.pdf