Although the worst of the financial crisis has passed, the insurance industry still faces numerous challenges in 2010. A weak economy is limiting growth opportunities and making capital preservation an ongoing priority for many companies. Because of these pressures, insurers continue to closely monitor their people, processes, systems, and markets in order to find competitive advantages. In the midst of this, they also face potentially major changes to accounting standards, capital requirements, and regulation that may affect their business for years to come.

As an overhaul of financial services regulation is debated in Washington, the American Academy of Actuaries is throwing its support behind creation of a federal systemic risk regulator for the entire financial services sector.

Several senators are crafting a compromise that could keep the financial services bill “Volcker rule” provision from applying to life insurers.

Final regulations implementing the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act (MHPAEA) of 2008 go into effect April 5, 2010, impacting employers with 50 or more workers whose group health plan chooses to offer mental health or substance use disorder benefits. The new rules, issued in January by the U.S. Departments of Health and Human Services, Labor and the Treasury Department, are effective for plan years beginning on or after July 1, 2010. They prohibit employer-provided group health plans from applying different coverage standards for mental health disorders or substance abuse treatment than those applied for general medical treatment or surgery.

Now that the U.S. healthcare reform plan is law, the federal government is turning to states to institute key components -- some of which have never existed before -- and do so in a tight timeframe.

Because of the effects of the new health bills, Americans probably will get more health care in coming years and pay less for the services they use. Analysts in the Chicago office of Fitch Ratings Ltd. have published that prediction in a commentary on the possible effects of the new Patient Protection and Affordable Care Act and H.R. 4872, the Reconciliation Act of 2010, a PPACA “fixer bill” which appears to be well on its way to becoming law.

It appears that the insurance industry is playing catch up with the rest of the marketplace in response to a sluggish economy. According to a report issued by the U.S. Bureau of Labor Statistics, overall insurance employment dropped by 7,600 in February. The report included new data previously unpublished, citing a January decline in insurance jobs of 5,200, rather than original stats that reported 4,400 jobs lost. These numbers do not coincide with the national unemployment rate, which remained steady at 9.7%, and the number of unemployed stayed the same at 14.9 million.

The U.S. House Financial Services Committee has approved the Federal Insurance Office Act, legislation which, if passed, would create a Federal Insurance Office (FIO). The intention of the bill is to develop an entity at the federal level with deep, thorough insurance knowledge and expertise to advise the government on the insurance industry. The article gives a brief overview of the bill and the proposed role of the FIO.

President Obama is about to unveil a health bill proposal that could give federal regulators the authority to regulate health insurance rates.
The rate regulation provision is part of a proposal that the Obama administration has drafted in an effort to “bridge the gap” between the House and Senate health bills. A copy of the proposal has been obtained by National Underwriter.

Global financial regulation has changed little since the 2008 banking crisis, but that won't be the case much longer.

U.S. and EU authorities are expected to hammer out the final shape of a new regulatory order in 2010 that will fundamentally change how world banks and markets operate.

To take advantage of the financial benefits available through a BOLI program, banks must comply with an increasingly complex risk management and regulatory environment. Familiarity with BOLI and its regulatory requirements will help banks assess risk and to manage the regulatory requirements necessary to implement and maintain an efficient BOLI program that is appealing to the board and shareholders alike.

The Treasury Department believes any Federal Insurance Office legislation will let the FIO preempt state laws that conflict with international trade agreements on the sale of insurance.

Competition among domiciles is heating up as many countries and U.S. states vie to host insurance companies and their related business, according to the Nov. 2 BestWeek U.S./Canada. Regulating insurers is a good business for governments. Insurance business brings jobs without pollution and boosts tax revenue.

The American Council of Life Insurers (ACLI), whose member companies provide financial and retirement security to millions of consumers, elected its 2010 chairman and Board of Directors today at its 2009 Annual Conference, Foundation for the Future.

Patrick M. Liedtke examines the proposals for reform in the post-crisis environment in four specific areas: financial stability and insurance, supervision and regulation, risk management and accounting and value measurement.

The purpose of the third Risk Matters Symposium was to bring together senior opinion makers within the life insurance industry to discuss, in an informal atmosphere, a specific issue that the industry is facing.

In case you haven’t heard, there’s a big change in accounting standards getting ready to take place. Around about 2014, there will be “a single set of high-quality, understandable and International Financial Reporting Standards (IFRS) for general purpose financial statements.”

Last week, the Obama administration outlined its plans for post-meltdown financial regulatory reform in an 85-page framework that’s supposed to address a snarled regulatory structure that evolved in response to the financial panic of the moment. While most of the content addresses issues that are well known throughout the banking and financial markets industry, U.S. insurers didn’t escape the attention of the feds.

From the CDC.

At the end of 2008, LOMA Resource asked insurance industry leaders to share their thoughts on what the year ahead holds for sales, profitability, technology and customer service.

Insurance Commissioner Steve Poizner and the National Association of Insurance Commissioners (NAIC) have released a new tool at www.naic.org to help military servicemembers research and recover compensation resulting from a 2006 multistate regulatory settlement agreement over life insurance sales practices to the military.

http://www.insurancenetworking.com/vwc/federal_charter_state_regulation_...

The National Conference of Insurance Legislators (NCOIL) today reinforced its strong opposition to insurance optional federal charter (OFC) proposals, and asserted that there is limited support for this approach. In a letter to U.S. Senate Committee on Banking, Housing & Urban Affairs Chairman Christopher Dodd (D-CT), NCOIL Officers wrote that, “If the ongoing financial crisis has taught us anything, it is that state-based insurance regulation continues to safeguard American consumers and the insurance industry.”

The US life insurance industry will be dealing with the multiple lingering after-effects of the global financial crisis and deepening recession.

Financial services and insurance companies face enormous challenges in 2009 as they manage through the economic downturn and respond to market shifts and consumer expectations.

Despite the fact Solvency II in its current form will apply only to the European Union, North American insurers are encouraged to pay attention to the factors underlying its development. If, as anticipated, Solvency II leads to markedly lower capital charges for EU-based companies, then the Europeans will have a significant competitive advantage over North American companies.

The insurance and financial services industry is at a crossroads. In the midst of the biggest financial crisis since the Great Depression, the combination of volatile economic conditions and a rapidly changing competitive landscape has many firms facing a challenging future.

As the situation continues to evolve, Towers Perrin experts offer their insights into the current state of the insurance industry, and how developments on Wall Street and around the world will impact insurers in both the short and long term.

After a consistent series of setbacks in past legislative sessions, the long-running effort to establish a federal charter for insurers may soon be entering its endgame.

Melissa Bean, D-Ill. announced that she and Rep. Ed Royce, R-Calif., will co-sponsor the National Insurance Modernization Act (NIMA) in the next several weeks. Bean made the announcement March 4, in Washington, DC at the 2009 Insurance Reform Summit presented by Networks Financial Institute at Indiana State University. Previously referred to as the National Insurance Act in the 109th and 110th Congress, Bean said that the bill is undergoing fine-tuning as sponsors finalize discussion on key elements such as consumer access, uniformity and whether a federal charter would be optional or mandatory for insurers deemed systemically significant.

Milliman white paper.

Standard & Poor’s Ratings Services has lowered its counterparty credit and financial strength ratings on 10 U.S. life insurance groups because of stressed assets.

S&P has also lowered its counterparty credit ratings on seven U.S. life insurance holding companies. In addition, the ratings of two groups of U.S. life insurers, one of which was also downgraded, have been placed on CreditWatch with negative implications.

Investment performance is being hailed as the most pressing concern of insurers during this economic crisis, according to a recent survey from PricewaterhouseCoopers LLP.

The NAIC Executive Committee has scuttled an emergency request from the life insurance industry to relax capital and surplus requirements.

A bipartisan group of House Financial Services Committee members is urging Treasury Secretary-designate Timothy F. Geithner to establish an office within the Treasury Department to "fill a void on insurance oversight and expertise at the federal level," according to a letter sent Friday to Mr. Geithner.

With the economy expected to remain sluggish and regulatory reform looming, U.S. life insurance companies will face significant challenges in 2009, according to Watson Wyatt, a leading global consulting firm.

"Low revenues and a volatile stock market will make 2009 a challenging year for the life insurance industry," said Craig Buck, U.S. head of insurance consulting at Watson Wyatt. "Many companies will focus heavily on transactions, products and pricing, risk management and regulatory reform."

Buck and Watson Wyatt have identified actions life insurance companies are likely to prioritize in the coming year.

Incoming White House Chief of Staff Rahm Emanuel recently told the Wall Street Journal, "you never want a serious crisis to go to waste."

This statement seemingly echoes the sentiment of a wide swath of parties in the insurance industry—regulators, legislators, lobbyists and carriers—who see the financial crisis as providing a unique opportunity to rewrite the rules under which the industry operates. (Reg. req'd. -- free)

More than three-quarters of the respondents to Towers Perrin's 21st quarterly survey of life insurance company CFOs report concern about their ability to achieve their 2009 growth, profit and risk objectives due to the current economic environment, and only 29% say they are well prepared to face these economic challenges.

To address these economic concerns, CFOs are taking a number of steps.

Congress could give the life insurance industry a federal charter system -- and a great deal more federal regulation. Advocates of optional federal charter (OFC) proposals reportedly want Congress to create a federal insurance regulator and let insurers, and possibly producers, choose between state and federal regulation...But participants in the insurance industry must be involved so that congress does not 'overdo it', Ken Kies, a senior counsel for the Association for Advanced Life Underwriters (AALU), says.

How can life insurers be sure that they are targeting strategic investment where it can earn its best return and how can they convince analysts and investors they are making the right choices? In this PricewaterhouseCoopers Insurance Digest piece, Albertha Charles and Hsiu Min Lim look at how advanced techniques that match insight into customer preferences with dynamic financial analysis could provide a convincing answer.

State insurance commissioners have lashed out at members of Congress who are blaming state regulation for the problems of American International Group (AIG) and using the AIG crisis to bolster their advocacy for federal regulation.