Annual Report on the Insurance Industry — 2021

Link: https://home.treasury.gov/system/files/311/FIO-2021-Annual-Report-Insurance-Industry.pdf

Graphic:

Excerpt:

Figure 15 shows that the average risk-based capital ratio for the L&H sector declined slightly in

  1. Specifically, statutory capital and surplus was 4.26 times the level of minimum required
    regulatory capital on average in 2020 compared to 4.31 times the required level in 2019.

L&H sector net income of $22 billion in 2020 was less than one-half of 2019 levels, affecting the
potential for capital generation. The sector reported a nearly 10 percent increase in death and
annuity benefit expenses, which contributed to a ratio of total benefit expenses to premiums
earned of 50 percent in 2020, rising substantially from 44.4 percent in 2019. According to Fitch
Ratings, life insurer operating results in 2020 were largely impacted by higher claims paid,
primarily due to increased mortality from COVID-19.24


Certain leverage ratios indicate that L&H insurers faced balance sheet pressures in 2020. The
greater financial flexibility afforded by steady leverage ratios has enabled insurers to consistently
fulfill policyholder obligations by: (1) returning a profit by investing the premiums received
from underwriting activities; and (2) limiting the risk exposure from the policies underwritten.
Insurers also employ reinsurance in order to move some of the risks off their own balance sheets
and on to those of reinsurers. Figure 16 provides a view of the L&H sector’s general account
leverage for the last 10 years.

Author(s): Fderal Insurance Office

Publication Date: September 2021

Publication Site: U.S. Dept of the Treasury

Insuring Another Disaster

Excerpt:

Leave it to California lawmakers, however, to cast aside thousands of years of complex commercial history in a misguided attempt to fix an admittedly legitimate insurance problem. Thanks to Proposition 103, a 1988 ballot measure, California already has a distorted insurance market that gives the insurance commissioner czar-like powers to approve rate increases and impose rate decreases.

Because of that law, insurers have a tough time adjusting rates to manage their risks. It’s a long, cumbersome, and antagonistic government process to adjust rates. Their other lever for ensuring solvency is to reduce their underwriting risks by, say, not writing fire-insurance policies to homeowners who live in high fire-risk areas or car insurance policies to drivers with multiple DUIs.

….

Instead, California Assemblymember Marc Levine, D-Marin County, has introduced Assembly Bill 1522, which would prohibit insurers from canceling insurance policies solely because a home or business is located in a high-risk wildfire area. It epitomizes California’s economically illiterate edict approach.

Author(s): Steven Greenhut

Publication Date: 29 April 2021

Publication Site: The American Spectator

Solvency II Review: Call for Evidence

Link: https://www.gov.uk/government/publications/solvency-ii-review-call-for-evidence

Excerpt:

Solvency II is the regime that governs the prudential regulation of insurance firms in the UK. This call for evidence is the first stage of the review of Solvency II.

The review is underpinned by three objectives:

to spur a vibrant, innovative, and internationally competitive insurance sector

to protect policyholders and ensure the safety and soundness of firms

to support insurance firms to provide long-term capital to support growth, including investment in infrastructure, venture capital and growth equity, and other long-term productive assets, as well as investment consistent with the government’s climate change objectives.

The government seeks views on how to tailor the prudential regulatory regime to support the unique features of the insurance sector and regulatory approach in the UK.

Author(s): Her Majesty’s Treasury

Date Accessed: 24 February 2021

Publication Site: Gov.UK