From catastrophe risk to consumer-directed healthcare to an optional federal charter, the insurance industry faces a number of critical issues in 2008. Executives from the industry associations that represent each insurance sector -- property and casualty, life, health, and reinsurance -- speculate
on the most urgent issues facing their lines of business in 2008 and provide insight into how technology can help meet those challenges.
Editor's note: This contributed commentary is part of a larger compilation on the financial outlook of the insurance industry. For links to the other guest commentaries, scroll to the bottom of the page.
The first challenge facing the reinsurance industry in the coming year is providing capacity to address natural catastrophe risk both in the U.S. and other parts of the world. Although reinsurers have been very responsive to the demand for risk transfer from the primary insurance companies in the past (approximately $35 billion of new capacity entered the market since Hurricane Katrina), it is a continually growing market demand, particularly given the property development and appreciation of property in high-risk coastal and earthquake areas.
The second challenge is striking the proper balance between the public and private sectors in addressing catastrophe risk. In the U.S., we've seen increasing interest on the part of Congress to expand the role of government related to catastrophe risk -- the House approved the addition of windstorm coverage to the National Flood Insurance Program and is considering legislation to provide low-interest federal loans to state residual markets and state pools. And there are proposals in a variety of coastal states to have state government get into the reinsurance business. Rather than take on the risk and preempt the private (re)insurance market, however, government should address mitigation and better land-use planning and make sure insurers are pricing catastrophe coverages properly to reflect the risk.
A third area of great interest to the reinsurance industry is the relationship between the federal and state governments as it relates to the regulation of reinsurance in the U.S. There has been an ongoing debate about whether the federal government should play a role in regulating how reinsurers do business in the U.S. We support an optional federal charter to allow reinsurers to be licensed at the federal level or, at a minimum, federal legislation that would streamline the state system. We also support the idea of mutual recognition in which the regulatory regime in the U.S. would recognize other countries' regulations, allowing foreign reinsurers to be regulated in their home countries but do business in the U.S. and vice versa.
P&C Industry Focuses on Catastrophe Issues
-- By David A. Sampson, President & CEO, Property Casualty Insurers Association of America
Life Insurance Industry Needs Optional Federal Charter
-- By Kim Dorgan, EVP, American Council of Life Insurers
Health Insurance Industry Seeks Broader Coverage
-- By Karen Ignagni, President & CEO, America's Health Insurance Plans