Annual Report on the Insurance Industry

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

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

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

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Annual Report on the Insurance Industry (September 2021)

GLOSSARY

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

..........

..........

..........

..........

..........

..........

..........

..........

..........

..........

..........

..........

..........

..........

..........

..........

..........

..........

..........

..........

..........

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

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

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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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..........

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..........

..........

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..........

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

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