The Federal Insurance Office (FIO) of the United States Department of the Treasury issued its second annual report on the United States insurance industry in September.
Although the Dodd-Frank Wall Street Reform and Consumer Protection Act mandates a report, FIO has produced a report describing the overall United States insurance market in a comprehensive and understandable manner.
The Report gives an overview of the US insurance industry and of a proposed national producer licensing law
The Report presents and analyzes the financial performance and condition of the key U.S. insurance industry sectors, i.e., the life and health sector and the property and casualty sector. The industry financial overview also includes analysis of insurance industry capital markets activity, the increasing prominence of non-U.S. reinsurers, and the expanding role of alternative risk transfer mechanisms such as insurance-linked securities.
The Report also deals with a proposed law, the “National Association of Registered Agents and Brokers Reform Act of 2013” establishing a national board that would issue producers multi-state licenses with uniform licensing and continuing education requirements.
Along with numerous charts and tables, the Report includes sections focusing on:
- Matters of consumer protection and access to insurance. This section highlights developments concerning affordability of personal auto insurance; portability of auto insurance for service members; force-placed insurance for homeowners; and topics concerning life insurance and annuities.
- Developments – at the state, federal, and international levels – which have occurred or progressed over the past year, and which have implications for the U.S. insurance sector. Discussions of domestic activities include updates addressing: the insurance-related activities of the Financial Stability Oversight Council (Council); federal supervision of designated nonbank financial companies; licensing of insurance producers (brokers and agents); private equity acquisitions of annuity writers; terrorism risk insurance; flood insurance; and captive life reinsurance.
- International issues including the European Union-U.S. Insurance Project, reinsurance collateral reform; supervision of internationally active insurance groups and global systemically important insurers that concludes with an update on progress in developing standards for the resolution of troubled or failing insurers.
Selected highlights from the Report:
- The U.S. remains the world’s largest insurance market by premium volume, even though the nation’s share of worldwide premiums has declined over the last several years.
- 2013 saw record levels for capital and surplus in the property and casualty sector of $665 billion and $335 billion in capital and surplus in the life and health sector of the US insurance industry.
- The life and health and the property and casualty reported approximately $583 billion and $481 billion, respectively, of aggregate net written premiums in 2013.
- The life and health sector recorded net income of $44 billion for 2013, as compared to the previous record high of $37 billion set in 2006.
- The property and casualty sector had lower catastrophe losses and favorable loss development in 2013 that contributed to record net income of $72 billion exceeding the previous high net income of $66 billion, also set in 2006.
- The industry also raised $42 billion in new capital through debt markets, as interest rates remained historically low, albeit significantly higher than 2013.
- Over the past ten years stock price indices for both the life and health and property and casualty sectors have outperformed the S&P 500. Since the end of 2003, P/C sector stocks gained 106 percent and L/H sector stocks increased 94 percent. The S&P 500 gained 67 percent over the same time period.