Insurers must push for ‘equal voice’ on regulation

Outgoing PCI chairman Terry Cavanaugh has called for a unified voice from the US re/insurance sector to fight to protect its interests in the face of the intrusion of international regulation.

He said it was essential that international and global regulatory standards with no relevance to the US global P&C business are minimised. He called for an effective voice representing the industry to be heard at international level.

Speaking to PCI Today at the organsation’s annual conference in Hollywood, Florida, Cavanaugh said there was no room for what he called a “51st state regulator”. He added: “The property/casualty industry is not like other financial service sectors; it’s what I call a retail business.

“We insure real things everyday—cars, homes and businesses—so I believe the closer we can have our regulator to that marketplace the better off we will be. That’s why I think that the current regulatory climate in terms of state regulation works. The consumer is well served and I don’t think that having a 51st state regulator works.”

He expressed concern that the voice of his members was not being heard when supra-national regulatory bodies were designing regulations that would have an impact on their businesses.

“If we are going to have a global discussion we need to make sure that we are an equal partner in those discussions and that there is full transparency,” said Cavanaugh.

“I’m worried that we don’t have an equal voice.”

Cavanaugh claims that in the minutes of some meetings involving regulators, the US participants’ points were excluded. He has concerns that bodies like the Federal Insurance Office (FIO) and the National Association of Insurance Commissioners (NAIC) may not be pushing the wishes of his members.

“Even the Federal Reserve now has an insurance officer—there are a lot of cooks and I worry that we don’t have a unified strong voice. The insurance industry must be thought of just as importantly as the other participants in the financial services,” he said.

Ultimately, what is good for the US consumer should be the starting point of any discussion around regulation, Cavanaugh believes.

“Making sure that you listen to the customer and having the lightest touch possible while recognising that regulation is important and necessary,” he said. “We are only effective if what we do is effective for the consumer.”

Speaking about mergers and acquisitions across the industry he said that there were good and bad things about this activity and it was always difficult “living with the 90-day devil of satisfying shareholder expectations”.

“There are good mergers and there are bad mergers. Sometimes they are bad from the start and sometimes bad because of the execution. But they are inevitable—it’s a cleansing process and by and large the number of participants in the marketplace is dictated by how well the business is run,” he said.

“We tend to look at mergers as being a bad thing but look at the numbers of great companies that have filled the space,” Cavanaugh said. “New capital comes in with fresh ideas and that’s very healthy, it’s the ebb and flow of healthy capitalism.”