ANNUAL REPORT ON THE INSURANCE INDUSTRY

ANNUALREPORT ON THE INSURANCE INDUSTRY

FEDERALINSURANCEOFFICE,U.S.DEPARTMENTOFTHETREASURY

CompletedpursuanttoTitleVoftheDodd-FrankWallStreetReform andConsumerProtectionAct

SEPTEMBER2016

Annual Report on the Insurance Industry (September 2016)

Table of Contents I. Introduction....................................................................................................1

A. Structure of Report ...................................................................................................... 1 B. Federal Insurance Office ............................................................................................. 1

II. Executive Summary.......................................................................................5

A. Insurance Industry Financial Overview ...................................................................... 5 B. Domestic Regulatory Developments........................................................................... 5 C. International Engagement and Standard-Setting ......................................................... 7

III. Insurance Industry Financial Overview....................................................10

A. Domestic Insurance Marketplace Overview ............................................................. 11 1. Financial Performance and Condition ....................................................................... 11 Box 1: Excess and Surplus (E&S) Lines Insurance .................................................. 28 2. Market Performance .................................................................................................. 36 3. 2016 Insurance Market Outlook................................................................................ 38

B. International Insurance Marketplace Overview ........................................................ 39 C. Capital Markets Activity ........................................................................................... 41

1. Mergers and Acquisitions.......................................................................................... 42 2. Alternative Risk Transfer Market.............................................................................. 42

IV. Domestic Regulatory Developments ..........................................................44

A. Financial Stability Oversight Council ....................................................................... 44 1. Annual Review of Designated Nonbank Financial Companies ................................ 44 2. Areas of Heightened Risk Management and Supervisory Attention ........................ 45 Box 2: Infrastructure Investments.............................................................................. 47

B. Supervision of Insurance Companies by the Federal Reserve .................................. 49 1. Capital Standards....................................................................................................... 50 2. Enhanced Prudential Standards for Insurance Companies Designated by the Council ...................................................................................................................... 51 3. Data Reporting .......................................................................................................... 51 4. Orderly Liquidation ................................................................................................... 51

C. Regulatory Developments at the State Level ............................................................ 52 1. Capital ....................................................................................................................... 52 2. Reserving Requirements............................................................................................ 53

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Annual Report on the Insurance Industry (September 2016)

3. Group Supervision..................................................................................................... 55 D. Cybersecurity............................................................................................................. 56

1. Federal Measures....................................................................................................... 56 2. State Measures........................................................................................................... 58 3. International Efforts .................................................................................................. 59 4. Cyber Risk Insurance ................................................................................................ 59 E. Terrorism Risk Insurance Program ........................................................................... 61 F. National Association of Registered Agents and Brokers .......................................... 63 G. The Availability and Affordability of Personal Automobile Insurance in the

United States.............................................................................................................. 64

V. International Engagement and Standard-Setting ....................................66

A. Covered Agreement................................................................................................... 66 B. FIO Coordination with U.S. Authorities in the IAIS ................................................ 67 C. Stakeholder Engagement ........................................................................................... 69

1. IAIS-Sponsored Engagement .................................................................................... 69 2. Domestic Engagement with Stakeholders ................................................................. 70 D. International Standard-Setting................................................................................... 70 1. International Association of Insurance Supervisors .................................................. 70 2. Organisation for Economic Co-operation and Development .................................... 76 E. Other International Cooperation................................................................................ 76 1. Updated Assessment Methodology for Global Systemically Important Insurers

(G-SIIs) and Systemic Risk from Insurance Product Features.................................. 76 2. Financial Stability Board........................................................................................... 78

Box 3: Global Systemically Important Insurers Identified by the FSB in 2015..... 79

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Annual Report on the Insurance Industry (September 2016)

Glossary

A&H AIG BHC Certification Report

CISA CMG CPMI

ComFrame

Council Dodd-Frank Act

EU FACI FCTF FDIC Federal Reserve FIO FSB FSTC G-20 GAAP GDP GE Capital G-SIFI G-SII IAIG IAIS

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Accident and Health Insurance American International Group, Inc. Bank Holding Company U.S. Department of the Treasury, The Process for Certifying an "Act of Terrorism" under the Terrorism Risk Insurance Act of 2002 (October 2015) Cybersecurity Information Sharing Act Crisis Management Group Committee on Payments and Marketing Infrastructure IAIS Common Framework for the Supervision of Internationally Active Insurance Groups Financial Stability Oversight Council Dodd-Frank Wall Street Reform and Consumer Protection Act European Union Federal Advisory Committee on Insurance IAIS Financial Crime Task Force Federal Deposit Insurance Corporation Board of Governors of the Federal Reserve System Federal Insurance Office Financial Stability Board IAIS Financial Stability and Technical Committee Group of Twenty Generally Accepted Accounting Principles Gross Domestic Product General Electric Capital Corporation Global Systemically Important Financial Institution Global Systemically Important Insurer Internationally Active Insurance Group International Association of Insurance Supervisors

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Annual Report on the Insurance Industry (September 2016)

iCBCM

ICPs ICS IOSCO

IPO IPPC LAE L/H LMI M&A MetLife Model Holding Company Act Modernization Report

NAIC NARAB II

NIST NTNI OECD

P/C PBR Prudential RBC Report

ReSG ReWG S&P 500

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FSB Cross-Border Crisis Management Group for Insurers Insurance Core Principles of the IAIS IAIS Insurance Capital Standard International Organization of Securities Commissioners Initial Public Offering OECD Insurance and Private Pensions Committee Loss Adjustment Expenses Life and Health Insurance Low- and Moderate-Income Consumers Mergers and Acquisitions MetLife, Inc. NAIC Model Insurance Holding Company System Regulatory Act Federal Insurance Office, U.S. Department of the Treasury, How to Modernize and Improve the System of Insurance Regulation in the United States (December 2013) National Association of Insurance Commissioners National Association of Registered Agents and Brokers Reform Act of 2015 National Institute of Standards and Technology Non-Traditional and Non-Insurance Organisation for Economic Co-operation and Development Property and Casualty Insurance Principles-Based Reserving Prudential Financial, Inc. Risk-Based Capital Federal Insurance Office, U.S. Department of the Treasury, 2016 Annual Report on the Insurance Industry (September 2016) FSB Resolution Steering Group IAIS Resolution Working Group Standard and Poor's 500 Index

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Annual Report on the Insurance Industry (September 2016)

Secretary SLHC SMRTF

SNL Financial Treasury TRIA TRIP TRIP Reauthorization Act USTR WGCR

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Secretary of the Treasury Savings and Loan Holding Company Supervisory Materials Review Task Force of the IAIS SNL Financial LC U.S. Department of the Treasury Terrorism Risk Insurance Act of 2002 Terrorism Risk Insurance Program Terrorism Risk Insurance Program Reauthorization Act of 2015 Office of the United States Trade Representative Joint Working Group on Cyber Resilience of CPMI and IOSCO

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