Annual Report on the Insurance Industry - U.S. Department of ...

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 2021

Annual Report on the Insurance Industry (September 2021)

TABLE OF CONTENTS

EXECUTIVE SUMMARY ....................................................................................................VIII I. INTRODUCTION............................................................................................................... 1

Federal Insurance Office Authorities and Insurance Regulation ..................................... 1 The Structure of this Report ............................................................................................. 3 II. INSURANCE INDUSTRY FINANCIAL OVERVIEW AND OUTLOOK .................. 4 Domestic Insurance Marketplace Overview and Outlook ............................................... 4

Financial Performance and Condition Overview .......................................................... 5 Life and Health Sector................................................................................................... 9 Box 1: Registered Indexed-Linked Annuities: Addressing Longevity Risk

Through Annuities ................................................................................................ 26 Property and Casualty Sector ...................................................................................... 27 Market Performance .................................................................................................... 42 Domestic Outlook........................................................................................................ 44 Capital Markets Activity ................................................................................................ 46 Mergers & Acquisitions of U.S. Insurers .................................................................... 46 Box 2: Life Sector Restructuring ............................................................................... 47 Changing Investment Strategies .................................................................................. 48 Alternative Risk Transfer Insurance Products............................................................. 49 Private Equity-Backed Insurers................................................................................... 50 InsurTech Investments ................................................................................................ 52 International Insurance Marketplace Overview and Outlook ........................................ 53 III. TOPICAL UPDATES AND FIO ACTIVITIES ............................................................ 56 Pandemic-Related Updates ............................................................................................ 56 Domestic...................................................................................................................... 57 International................................................................................................................. 63 Climate Change, Mitigation, and Resilience.................................................................. 64 1. Climate-Related Risks and Catastrophic Events ......................................................... 64 Box 3: Residual Markets............................................................................................ 66 2. Responding to Climate-Related Executive Orders...................................................... 67 3. Mitigation and the Mitigation Framework Leadership Group .................................... 69 4. National Flood Insurance Program.............................................................................. 70 5. State Climate-Related Efforts and Response to Catastrophic Events ......................... 70 6. International Work ...................................................................................................... 73 Cyber Risks, Ransomware, and Cyber Insurance .......................................................... 74 The Cyber Insurance Market and Ransomware's Impact ........................................... 74 The Threat of Ransomware ......................................................................................... 77 U.S. Cybersecurity and Ransomware Responses ........................................................ 78

_____________________________________________________________________________ FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY i

Annual Report on the Insurance Industry (September 2021)

Terrorism Risk Insurance Program ................................................................................ 80 TRIP Data Collection .................................................................................................. 81 Small Insurer Study ..................................................................................................... 82

FIO Advisory Committees ............................................................................................. 83 Advisory Committee on Risk-Sharing Mechanisms ................................................... 83 Federal Advisory Committee on Insurance................................................................. 83 Box 4: Initiatives on Diversity and Inclusion ............................................................ 85

Personal Auto Insurance ................................................................................................ 86 Background ................................................................................................................. 87 FIO's Current Work on Auto Insurance...................................................................... 90 Box 5: The Use of Credit Scores in Insurance Underwriting .................................... 90

InsurTech........................................................................................................................ 91 Long-Term Care Insurance ............................................................................................ 93 Financial Stability Oversight Council ............................................................................ 95 State Initiatives on Systemic Risk and Solvency ........................................................... 96

Macroprudential Initiative and Liquidity Stress Testing Framework ......................... 97 Group Capital Calculation ........................................................................................... 98 Box 6: Risk-Based Capital for Bonds and Real Estate .............................................. 99 International Developments ......................................................................................... 100 IAIS ........................................................................................................................... 100 Covered Agreements ................................................................................................. 106 Additional International Engagements ...................................................................... 111 IV. CONCLUSION ............................................................................................................... 114

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Annual Report on the Insurance Industry (September 2021)

2020 Annual Report 2021 Small Insurer Study A2ii Accreditation Committee ACRSM A&H Aggregation Method

ART CISA Climate-Related RFI

CLO CMBS ComFrame Dodd-Frank Act

EIOPA ExCo FACI FAIR Plan Federal Reserve FEMA FIF FIO FIO Act FSB FSOC FSTF GAO GCC GDP GIMAR

GLOSSARY

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FIO, Annual Report on the Insurance Industry (2020) FIO, Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (2021) Access to Insurance Initiative NAIC Financial Regulation Standards and Accreditation Committee Advisory Committee on Risk-Sharing Mechanisms Accident and Health A group capital methodology under development by the United States and other interested jurisdictions as an alternative to the ICS Alternative Risk Transfer Cybersecurity and Infrastructure Security Agency Federal Insurance Office Request for Information on the Insurance Sector and Climate-Related Financial Risks, 86 Fed. Reg. 48814 (August 31, 2021) Collateralized Loan Obligation Commercial Mortgage-Backed Securities IAIS Common Framework for the Supervision of IAIGs Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 European Insurance and Occupational Pensions Authority IAIS Executive Committee Federal Advisory Committee on Insurance Fair Access to Insurance Requirements Plan Board of Governors of the Federal Reserve System Federal Emergency Management Agency IAIS Financial Inclusion Forum

.......... Federal Insurance Office

.......... Federal Insurance Office Act of 2010

.......... Financial Stability Board

.......... Financial Stability Oversight Council

.......... NAIC Financial Stability Task Force

.......... U.S. Government Accountability Office

.......... Group Capital Calculation

.......... Gross Domestic Product

.......... IAIS Global Insurance Market Report

_____________________________________________________________________________ FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY iii

Annual Report on the Insurance Industry (September 2021)

GME Health sector

Holistic Framework

IAIG IAIS IBHS ICP ICS ILS IMARA InsurTech

IPO IPPC ITF L&H LST Framework LTCI M&A MitFLG NAIC NBCR NCOIL NFIP NGFS

NYDFS OECD ORSA P&C PCR PE RBC Report RILA

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IAIS Global Monitoring Exercise for the Holistic Framework Health sector includes companies licensed solely as health insurers or as health maintenance organizations IAIS Holistic Framework for the Assessment and Mitigation of Systemic Risk in the Insurance Sector Internationally Active Insurance Group International Association of Insurance Supervisors Insurance Institute for Business & Home Safety IAIS Insurance Core Principle IAIS Insurance Capital Standard Insurance-Linked Securities Insurance Marketplace Aggregate Retention Amount The innovative use of technology in connection with insurance Initial Public Offering OECD Insurance and Private Pensions Committee IAIS Infrastructure Task Force Life and Health NAIC Liquidity Stress Testing Framework Long-Term Care Insurance Mergers and Acquisitions Mitigation Framework Leadership Group National Association of Insurance Commissioners Nuclear, Biological, Chemical, and Radiological National Council of Insurance Legislators National Flood Insurance Program Central Banks and Supervisors Network for Greening the Financial System New York Department of Financial Services Organisation for Economic Co-operation and Development Own Risk Solvency Assessment Property and Casualty Prescribed Capital Requirement Private Equity Risk-Based Capital FIO, Annual Report on the Insurance Industry (2021) Registered Index-Linked Annuity

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