American Property Casualty Insurance Association
  • Staff Contact: Eileen Gilligan     
    • Related Information Related Information Printer-Friendly Printer-Friendly PDF Export PDF Export




Eileen Gilligan







February 4, 2014

PCI Chair Testifies on FIO Report on Modernizing Insurance Regulation


WASHINGTON – The Property Casualty Insurers Association of America (PCI) Board Chair and Chairman, President and CEO of The State Auto Insurance Companies Bob Restrepo provided an overview of the current U.S. insurance regulatory system before the U.S. House Subcommittee on Housing and Insurance’s hearing on “The Federal Insurance Office’s Report on Modernizing Insurance Regulation.”

“The U.S. has the largest and most diverse insurance market in the world, with a 150 year track record of comprehensive state regulation protecting consumers,” said Restrepo. “The insurance sector has been stable throughout the last several financial crises, and despite a confluence in the last decade of record storms, market contractions and regulatory changes has had no major recent defaults, has achieved record levels of capitalization, and our residual markets for consumers and businesses are at or near historic lows as marketplace suggesting that overall private sector insurance availability is better than ever for consumers. The more local focus of our state-based insurance regulatory system has allowed property and casualty insurance markets to be more responsive to the particular local needs and realities of insurance customers and the companies that serve them.

“State regulation is, however, far from perfect,” Restrepo continued. “The FIO report does a good job of itemizing the numerous current controversies in insurance regulation that the states are working on.

“But we would fundamentally disagree with FIO’s conclusion that ‘The need for uniformity and the realities of globally active, diversified financial firms compel the conclusion that federal involvement of some kind in insurance regulation is necessary’ or that a ‘hybrid’ federal-state approach would be preferable.”

PCI and State Auto agree with several recommendations in the FIO report. However, the FIO report makes several recommendations that do not meet PCI’s test of promoting and protecting the viability of a competitive private insurance market for the benefit of consumers and insurers.

Restrepo suggested the subcommittee look at “the best standards for good regulation and good regulators and where the current system can be improved.” PCI stated the following recommendations provided in the FIO report could improve the market.

·         Improvements towards free-market pricing: PCI and State Auto agree with FIO’s analysis on rate regulation and suggest promoting the model laws, for example, those of the National Conference of Insurance Legislators, to eliminate prior approval rate requirements.

·         Better market conduct examination and coordination: Although the states have made some improvements in market conduct, PCI and State Auto agree with FIO, that more progress is needed.

·         Commercial streamlining: Commercial lines regulation, especially product approval, should be modernized.

The FIO report also makes a number of recommendations pressuring state regulators to adopt best practices, standards and principles that are developed by international bodies. “PCI welcomes more international coordination, mutual recognition and, where appropriate, harmonization. However, we do not support the current push at this time for a one-size-fits-all bank-like global regulatory system. The U.S. system is very focused, successfully, on protecting insurance consumers,” said Restrepo.

In addition, PCI and State Auto present suggestions on the fundamental strategic purpose of FIO, including opportunities for FIO to:


·         Provide additional guidance on the reauthorization of the Terrorism Risk Insurance Act (TRIA).

·         Serve a coordinating role to bring together the NAIC and state regulators, state legislators, the Treasury, the Federal Reserve Board and the Financial Stability Oversight Council’s independent insurance expert to hammer out joint positions.

·         Press for more transparency and public discussion in the Financial Stability Board and International Association of Insurance Supervisors.

·         Insist on more rigorous deliberation, including cost benefit analyses, in international standard setting discussions.


Restrepo’s complete testimony is attached.


“PCI and State Auto look forward to working with state insurance regulators, FIO, the Administration and Congress on ongoing insurance modernization,” concluded Restrepo.

PCI is composed of more than 1,000 member companies, representing the broadest cross-section of insurers of any national trade association. PCI members write over $195 billion in annual premium, 39 percent of the nation’s property casualty insurance. Member companies write 46 percent of the U.S. automobile insurance market, 32 percent of the homeowners market, 37 percent of the commercial property and liability market, and 41 percent of the private workers compensation market.


  • Related Information