BOSTON—While the role the U.S. will play in new global-regulatory proposals remains uncertain, the threat of additional layers of restrictive guidelines is a “very real threat,” says David Sampson, CEO of the Property Casualty Insurers Association of America.
In outlining risks facing the industry in his opening remarks here at the PCI Annual Meeting, Sampson highlighted what he called the Financial Stability Board's clear intent to “be the global arbiter of financial regulation, which directed the International Association of Insurance Supervisors to issue plans to develop global insurance capital standards by 2016.
“The role of the U.S. government in these efforts is unclear at best,” he said. He acknowledged it may be some time before capital requirements are implemented but the danger of “new layers of bank-centric, unnecessary regulation” must be monitored to ensure “this agenda does not disrupt a highly competitive U.S. insurance market.”
The industry faces more immediate risks, including what Sampson called, “a rising tide of legislative and regulatory proposals that would undermine insurance contracts by political fiat,” especially after Superstorm Sandy in October 2012.
PCI continues to push the reauthorization of the Terrorism Risk Insurance Act (TRIA). Though the federal backstop for terrorism risk doesn't expire until the end of 2014, PCI members are now considering future insurance pacts policies and the “uncertainty over the timing of TRIA's reauthorization, and what changes Congress will adopt is a particular concern.”
Staying on the federal front, Sampson says implementation and compliance associated with the reauthorization of the Nation Flood Insurance Program “has been costly and difficult for 'Write Your Own' insurers.”
“The Senate and the House are hearing from angry constituents as rate subsidies are eliminated,” Sampson reported. “They've also heard from realtors, as selling a property requires the new owner pay the 'full premium' without the benefit of gradual elimination of the subsidy.” He adds that members are also concerned about reputation risk and abrupt changes that could affect premiums.
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