A solution in search of a problem?

Property and casualty insurers have a long, unparalleled track record of success and stability because we adhere to sound business practices and prudent regulation. For more than 150 years, we’ve weathered storms – both natural and economic. Businesses and homeowners across the country have relied on their local insurers to recover, rebuild, and revive. The national economy has prevailed over disasters in no small part because of the existence of a solid and stable insurance marketplace.
 
We agree the 2008 financial crisis warranted a review of both domestic and international regulatory policies and we are working with authorities across state and national borders to promote a stable financial services marketplace and protect consumers, policyholders, taxpayers, and the economy. At the same time, we urge policymakers to safeguard, and not break, a system that has worked well in the United States and, in many cases, overseas.
 

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The U.S. insurance industry is already effectively regulated at the state level, with strong capital requirements, stringent limits on investment, and state guaranty funds funded by insurers, not taxpayers, to protect policyholders. Nearly all property and casualty companies survived the 2008 crisis. Many were only minimally affected. And the industry’s overall capital strength that supports our nation's insurance needs remained strong despite the challenges.
 
The financial crisis also reminded us all of the interconnectedness between of the United States and European markets. There has been a sense of urgency in some quarters to develop more uniform international regulatory standards. But many policymakers have forgotten the good reason the U.S. has a different regulatory regime than foreign insurance markets in the first place.
 
There are fundamental differences between the nature of the U.S. property and casualty insurance industry and the European Union’s. For example, the U.S. insurance market is composed of many smaller companies that are unaffiliated with large banking conglomerates and, accordingly, regulation focuses on the individual insurance business. The European insurance market is highly centralized and interconnected, which means regulation focuses on the whole corporate group of insurers. This makes sense in Europe. If a major bank collapses, it could imperil a major insurer with it, putting consumers at great risk. It does not make sense for the United States.
 
The one-size-fits-all regulatory approach proposed by international standard-setting bodies ignores these fundamental differences. If pursued, it will create an uneven playing field for U.S. insurers that do business abroad. These companies would have to take on the costs of compliance with overlapping, duplicative, and irrelevant regulations that do not promote the solvency of individual companies or protect consumers. If anything, this would harm American consumers and disrupt the international marketplace.
 
A recent report of the E.U.-U.S. Regulatory Dialogue reinforces this idea. It concluded that the U.S. and European insurance regulatory systems, while distinct, have each been effective in protecting consumers and maintaining the soundness of their respective insurance markets. International regulators and standard-setting bodies should recognize the differences between national systems. They should focus on coordinating and streamlining regulatory policies and avoid applying overlapping and ill-conceived regulations. This would advance the same laudable objective: safe, secure and solvent insurance industries.
 
Property and casualty insurers have always worked with regulators here and abroad to enhance cooperation and communication to ensure the regulatory system works as it should. We are committed to doing so going forward, fixing what needs fixing, and preserving what works.
 
Sampson is the president and chief executive officer of the Property Casualty Insurers Association of America (PCI), which represents more than 1,000 homeowners, auto and business insurance companies that write 38.3 percent of the nation's property and casualty insurance.