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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 2017

  • Annual Report on the Insurance Industry (September 2017)

    ______________________________________________________________________________ FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

    i

    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

  • Annual Report on the Insurance Industry (September 2017)

    ______________________________________________________________________________ FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

    ii

    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

  • Annual Report on the Insurance Industry (September 2017)

    ______________________________________________________________________________ FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

    iii

    Glossary ACRSM .......... Advisory Committee on Risk-Sharing Mechanisms A&H .......... Accident and Health B3i .......... Blockchain Insurance Initiative BICE .......... DOL Best Interest Contract Exemption CFIUS .......... Committee on Foreign Investment in the United

    States CIPR .......... NAIC Center for Insurance Policy and Research ComFrame .......... IAIS Common Framework for the Supervision of

    IAIGs CSO .......... Commissioners’ Standard Ordinary Table Council .......... Financial Stability Oversight Council CPMI .......... Committee on Payments and Marketing

    Infrastructure DHS .......... U.S. Department of Homeland Security Dodd-Frank Act .......... Dodd-Frank Wall Street Reform and Consumer

    Protection Act of 2010 DOJ .......... U.S. Department of Justice DOL .......... U.S. Department of Labor EIOPA .......... European Insurance and Occupational Pensions

    Authority ERISA .......... Employee Retirement Income Security Act of 1974 EU .......... European Union FACI .......... Federal Advisory Committee on Insurance FATF .......... Financial Action Task Force FCTF .......... IAIS Financial Crime Task Force FDIC .......... Federal Deposit Insurance Corporation Federal Reserve .......... Board of Governors of the Federal Reserve System FEMA .......... Federal Emergency Management Agency FIO .......... Federal Insurance Office FSAP .......... Financial Sector Assessment Program FSB .......... Financial Stability Board GAAP .......... Generally Accepted Accounting Principles GDP .......... Gross Domestic Product G-SIB .......... Global Systemically Important Bank

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