State solvency regulation of property-casualty and life insurance companies: a commission report

Original publisher: Washington, D.C. : Advisory Commission on Intergovernmental Relations, [1992]. LC Number: KF1190 .A87 1992 OCLC Number: (OCoLC)28511475 Subject: Casualty insurance -- Law and legislation -- United States -- States. Excerpt: ... RECOMMENDATIONS Most reinsurance agreements contain arbitration clauses. These clauses typically require the use of arbitra-Recommendation 7 tion in the event there is any difference of opinion be-in limit Federal Intervention State Regulation tween the reinsurer and the primary company with re-of the Insurance Industry spect to the interpretation of their agreement. Sometimes, reinsurers dispute the amount due upon the U.S. There are problems in the insurance industry. insolvency of the ceding insurer and invoke their right to Both the number of insolvenciesa nd the resulting level of guaranty fund assessments are high compared to their settle their dispute in arbitration rather than before the pre-1981 levels. Several factors may have contributed to state insurance liquidator. this situation. For example, the combination of product Both of these federal statutes reduce the effective-underpricing and significant unforeseen emergencies has ness of state regulation of insurance. contributed to difficulties for property-casualty compan-ies. Alternatively, the lack of asset portfolio diversifica-of some in-Since the inception state insurance regulation, 7. tion, especially with respect to large holdings of junk wance companies urged federal regulation. Con-have The bonds and real estate, has been among the major factors not done however; congressiond investigations has gress so; creating a crisis-like situation for life insurance companies. have into state regulation of insurance ofen stimulated Although problems in the insurance industry have and states to coordinate their regulatoty strengthen systems. increased significantly since 1981, these problems are not similar in scale to the problems in other industries, such...