Annual Report on the Insurance Industry - Front page

1 Annual Report on the Insurance IndustryFEDERAL Insurance OFFICE, DEPARTMENT OF THE TREASURY Completed pursuant to Title V of the Dodd-Frank Wall Street Reform and Consumer Protection ActSEPTEMBER 2021 Annual Report on the Insurance Industry (September 2021) _____ FEDERAL Insurance OFFICE, DEPARTMENT OF THE TREASURY i 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.

2 26 Property and Casualty Sector .. 27 Market Performance .. 42 Domestic Outlook .. 44 Capital Markets Activity .. 46 Mergers & Acquisitions of 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.

3 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 Cybersecurity and Ransomware Responses .. 78 Annual Report on the Insurance Industry (September 2021) _____ FEDERAL Insurance OFFICE, DEPARTMENT OF THE TREASURY ii 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.

4 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 Annual Report on the Insurance Industry (September 2021) _____ FEDERAL Insurance OFFICE, DEPARTMENT OF THE TREASURY iii GLOSSARY 2020 Annual Report .. FIO, Annual Report on the Insurance Industry (2020) 2021 Small Insurer Study.

5 FIO, Study of Small Insurer Competitiveness in the Terrorism Risk Insurance Marketplace (2021) A2ii .. Access to Insurance Initiative Accreditation Committee .. NAIC financial Regulation Standards and Accreditation Committee ACRSM .. Advisory Committee on Risk-Sharing Mechanisms A&H .. Accident and Health Aggregation Method .. A group capital methodology under development by the United States and other interested jurisdictions as an alternative to the ICS ART .. Alternative Risk Transfer CISA .. Cybersecurity and Infrastructure Security Agency Climate-Related RFI .. Federal Insurance Office Request for Information on the Insurance Sector and Climate-Related financial Risks, 86 Fed. Reg. 48814 (August 31, 2021) CLO .. Collateralized Loan Obligation CMBS .. Commercial Mortgage-Backed Securities ComFrame.

6 IAIS Common Framework for the Supervision of IAIGs Dodd-Frank Act .. Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 EIOPA .. European Insurance and Occupational Pensions Authority ExCo .. IAIS Executive Committee FACI .. Federal Advisory Committee on Insurance FAIR Plan .. Fair Access to Insurance Requirements Plan Federal Reserve .. Board of Governors of the Federal Reserve System FEMA .. Federal Emergency Management Agency FIF .. IAIS financial Inclusion Forum FIO .. Federal Insurance Office FIO Act .. Federal Insurance Office Act of 2010 FSB .. financial Stability Board FSOC .. financial Stability Oversight Council FSTF .. NAIC financial Stability Task Force GAO .. Government Accountability Office GCC .. Group Capital Calculation GDP .. Gross Domestic Product GIMAR.

7 IAIS Global Insurance Market Report Annual Report on the Insurance Industry (September 2021) _____ FEDERAL Insurance OFFICE, DEPARTMENT OF THE TREASURY iv GME .. IAIS Global Monitoring Exercise for the Holistic Framework Health sector .. Health sector includes companies licensed solely as health insurers or as health maintenance organizations Holistic Framework .. IAIS Holistic Framework for the Assessment and Mitigation of Systemic Risk in the Insurance Sector IAIG .. Internationally Active Insurance Group IAIS .. International Association of Insurance Supervisors IBHS .. Insurance Institute for Business & Home Safety ICP .. IAIS Insurance Core Principle ICS .. IAIS Insurance Capital Standard ILS .. Insurance -Linked Securities IMARA .. Insurance Marketplace Aggregate Retention Amount InsurTech.

8 The innovative use of technology in connection with Insurance IPO .. Initial Public Offering IPPC .. OECD Insurance and Private Pensions Committee ITF .. IAIS Infrastructure Task Force L&H .. Life and Health LST Framework NAIC Liquidity Stress Testing Framework LTCI .. Long-Term Care Insurance M&A .. Mergers and Acquisitions MitFLG .. Mitigation Framework Leadership Group NAIC .. National Association of Insurance Commissioners NBCR .. Nuclear, Biological, Chemical, and Radiological NCOIL .. National Council of Insurance Legislators NFIP .. National Flood Insurance Program NGFS .. Central Banks and Supervisors Network for Greening the financial System NYDFS .. New York Department of financial Services OECD .. Organisation for Economic Co-operation and Development ORSA Own Risk Solvency Assessment P&C.

9 Property and Casualty PCR .. Prescribed Capital Requirement PE .. Private Equity RBC .. Risk-Based Capital Report .. FIO, Annual Report on the Insurance Industry (2021) RILA .. Registered Index-Linked Annuity Annual Report on the Insurance Industry (September 2021) _____ FEDERAL Insurance OFFICE, DEPARTMENT OF THE TREASURY v S&P Global .. S&P Global Market Intelligence SEC .. Securities and Exchange Commission Secretary .. Secretary of the Treasury SIF .. Sustainable Insurance Forum SMI .. Solvency Modernization Initiative Team USA .. FIO, Federal Reserve, NAIC, and state Insurance regulators Treasury .. Department of the Treasury TRIA .. Terrorism Risk Insurance Act of 2002, as amended TRIP .. Terrorism Risk Insurance Program Covered Agreement .. Bilateral Agreement between the United States of America and the European Union on Prudential Measures Regarding Insurance and Reinsurance Covered Agreement.

10 Bilateral Agreement between the United States of America and the United Kingdom on Prudential Measures Regarding Insurance and Reinsurance Annual Report on the Insurance Industry (September 2021) _____ FEDERAL Insurance OFFICE, DEPARTMENT OF THE TREASURY vi TABLE OF FIGURES Figure 1: Total Direct Premiums Written for L&H and P&C Sectors ..5 Figure 2: L&H Insurance Groups by 2020 Life Insurance Lines Direct Premiums Written ..6 Figure 3: L&H Insurance Groups by 2020 A&H Lines Direct Premiums Written ..7 Figure 4: P&C Insurance Groups by 2020 Combined Lines Direct Premiums Written ..8 Figure 5: Health Insurance Groups by 2020 Health Lines Direct Premiums Written ..8 Figure 6: L&H Sector Net Premiums, Considerations, and Deposits ..10 Figure 7: 2020 Composition of Net Premiums and Annuity Considerations for the L&H Sector.