The Future of Insurance Regulation

A task force of the Financial Regulatory Reform Initiative

Robert E. Litan l William H. McCartney

The Dodd-Frank Act intended to create a framework for 21st century financial regulation while leaving insurance regulation largely in state hands. Five years later, however, it is clear that Dodd-Frank has transformed the regulation of insurance in profound and unexpected ways. The Federal Reserve, for example, now oversees about one-third of the life insurance industry and one-quarter of the property and casualty industry. New institutions, like the Federal Insurance Office, are playing a more prominent role domestically and on the international stage. Meanwhile, officials in the United States and Europe are increasingly arriving at different conclusions on how to best regulate international insurance firms. The Insurance Task Force will examine the impact of these changes and explore ways to improve and modernize the rules.

Objective and Goals

The objective of this project is to examine the changing structure of insurance regulation, both within the United States and internationally, and recommend policy reforms that promote effective and efficient regulation for the 21st century. The project’s guiding principles are:

1. The regulatory system should ensure that consumers have access to insurance products they want and need, in a competitive environment, with appropriate protections.
2. Policymakers should balance economic growth, financial stability, and consumer protection.
3. Effective insurance regulation should balance uniform standards, local control, and global cooperation.
4. Regulation and policy for insurance should be tailored to fit the business of insurance.

Areas of Exploration

The task force plans to assess how the Dodd-Frank Act and other financial reforms have affected the insurance industry. Among the key topics to be explored include the proper role of:

• The Federal Reserve, the Federal Insurance Office, the Financial Stability Oversight Council and other federal institutions in insurance regulation, and whether to create an optional federal charter for insurance companies;
• The state insurance regulatory system (e.g., solvency regulation, state guaranty funds and uniform standards);
• The global insurance regulatory system as it relates to U.S. decisions on insurance regulation, global cooperation and coordination on insurance regulation; and
• Consumer protection regulation to help ensure that families and businesses have access to safe and affordable insurance products they need and want.

Process and Timeline

BPC will engage with all relevant stakeholders, including state and federal regulators, academics, and industry and consumer advocates. The task force will host public events featuring discussions on current issues in insurance regulation. Two early work products are likely to be a primer on the difference between the business of banking and the business of insurance, and another that maps out which agencies in which jurisdictions oversee which aspects of insurance. A final report is targeted for 2016.

Primer

The Business of Insurance and Banking: Understanding Two Different Industries
September 29, 2015

Report

Global Insurance Regulatory Issues: Implications for U.S. Policy and Regulation
November 13, 2015