27 October 2014 Insurance

Legislative environment still a minefield for US insurers

The rapidly changing legislative and regulatory environment, coupled with advancements in technology and innovation, is the biggest challenge currently facing US P&C insurers.

That is the opinion of David Sampson, president and chief executive officer of the Property Casualty Insurers Association of America (PCI).

Speaking at the annual PCI Meeting in Scottsdale, Arizona, starts, Sampson told PCI Today that the conference has been carefully constructed to focus on these challenges, and warned that insurers must look beyond obvious threats and plan for the future.

“Property-casualty executives in the US are facing disruptive transformations from many fronts including regulatory, technology, and demographic, from the change in consumers and the workforce and how companies need to adapt,” he said.

“To lead in an age of disruptive transformation, insurance executives must be prepared to navigate the state, federal, and international regulatory environment that is rapidly changing while also trying to anticipate and support advancements in innovation and technology.

“When technology is evolving at a lightning pace, the regulatory and legislative environments often struggle to keep up. The industry must continue to look over the horizon and anticipate threats to the property-casualty industry.”

Sampson gave the generation of new business models as a result of cultural shifts as an example, specifically referencing the ‘sharing economy’.

“This is one example that represents threats and opposition. It is important that executives aren’t just reactive but look at how to prepare their organisations,” he said. “It is important to recognise the opportunities in a disruptive transformation and give careful consideration to the new business models and how they will affect underwriting and pricing.”

Sampson explained that PCI is working hard with State legislatures to ensure that the personal and financial safety of consumers, passengers, and drivers are protected in their interactions with transportation network companies (TNC)— companies such as Uber and Lyft.

On September 17, 2014, California passed a TNC bill that will protect the public by establishing reasonable insurance requirements for the TNCs and their drivers and creates a firewall that protects personal auto insurance policyholders from subsidising commercial activities.

“PCI worked very hard on this bill and we hope it will become a model law for other States,” he said. Sampson went on to speak of what he described as “the most important priority in 2014”— securing the reauthorisation of the Terrorism Risk Insurance Act (TRIA) before its expiry on December, 31, 2014.

He said that PCI has played an important role in creating overwhelming bipartisan consensus for reauthorising TRIA, and spoke of the progress gained so far.

“In July the Senate voted 93–4 to reauthorise TRIA for seven years, which is miraculous considering the gridlock, and the House Financial Services Committee passed a version, which is another important step. This is a top priority for Congress coming back for the lame duck session,” he said.

“PCI also continues to push back against the global regulatory convergence of insurance regulation that will not benefit consumers and fundamentally undermine the US State-based regulatory system.”

Speaking specifically of the challenges facing reinsurers in the US, Sampson said that the alternative capital continues to increase competition and the low interest rate investment yield volatility continues to cause pressure, with profits having to come from the underwriting side. He also said that political and terrorism risk is growing.

Speaking of trends for US reinsurers, he said: “Overall the reinsurance capacity is growing and loss experience is improving. In 2013 the combined ratio for global reinsurers was 89.6 percent, the best since 2009. There is also gradually increasing demand for cyber insurance, which creates new opportunities in the reinsurance markets as well.”

A valuable event

As the PCI Annual Meeting gets under way, Sampson said that the event is more important than ever, and continues to go from strength to strength.

“Our annual meeting brings together more than 1,000 property-casualty executives, reinsurers, and brokers and more than 40 sponsors. An important element of the PCI Annual Meeting is the opportunity for PCI members to meet with reinsurers and brokers to negotiate contracts and discuss emerging issues in one place,” he said.

“In addition, the meeting provides valuable information on industry trends, challenges, and opportunities. It is a unique opportunity for attendees and sponsors to network and talk with our media partners, conduct business, and gain knowledge on the global issues facing our industry.”

The event has been firmly lodged in the industry’s diary since its establishment, but there are evident changes that have shaped the event into the hugely successful gathering that it is today.

“Every year, I solicit input from some of our CEOs that serve on PCI’s Executive Advisory Committee for planning the programme,” explains Sampson.

“We take the time to plan a very thoughtful and informative meeting with keynote speakers who each bring a unique, informed perspective of leadership in our current environment. We also design panel sessions to address our members’ most pressing concerns and what we believe will provide the greatest benefit as they position their businesses for success in a fluid regulatory and economic environment.

“Our hope is always that all of our meeting participants go home better equipped to look over the horizon and position their companies to address the challenging environment in which they operate.”

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