Regulatory Risk and North American Insurance Organizations: A Company Perspective

This research report on regulatory risk in the North American insurance company environment was first contemplated through a discussion among members of the North American Actuarial Council’s (NAAC’s) Collaborative Research Group. NAAC is a voluntary group of actuarial organizations located in the United States, Canada and Mexico. NAAC established a Collaborative Research Group, in part, to brainstorm on possible areas for partnered research on certain topics of interest to participating organizations. NAAC itself does not endorse findings from such research efforts. The subsequent funding and oversight for this particular effort were provided by the Casualty Actuarial Society, Canadian Institute of Actuaries, and Society of Actuaries.

The objectives of this research project are to:

Provide a perspective on the definition of regulatory risk

Reveal current differences in regulatory risk concerns between the United States and Canada

Identify mitigation tactics that can be used to address regulatory risks

Identify the type and frequency of regulatory risk disclosures to stakeholders.

The research involved participants from 20 insurance companies—12 U.S. and eight Canadian. In terms of product portfolios, 16 companies had at least some Life (life insurance, specialty life, annuities, etc.) products and 15 had at least some P&C (auto, home, specialty P&C, etc.) products. In terms of corporate structure, seven companies were publicly traded entities; one was a mutual holding company; six were privately held; and six were mutual insurance companies.

The research had three parts: (1) identify key risks; (2) identify key risk scenarios and mitigation tactics; and (3) identify risk disclosure practices. The research was conducted via two sets of phone interviews with participating company representatives.

There are a handful of notable results that are highlighted below (in both this summary and in the results section). However, the reader will find the main value in the extensive appendices, which provide a detailed presentation of the information collected. This research was, by design, fact-based, and there was no attempt to infer any conclusions from the data. In addition to the detailed appendices of information and the highlighted results, the reader may find additional value from the description of the approach used to produce the information. The approach used is based on the value-based enterprise risk management (ERM) approach, as outlined in my book Corporate Value of Enterprise Risk Management.

The reader should use caution in placing undue reliance on some of the research results, in light of the relatively small number of participating companies. On the plus side, the intimate nature of this study allowed for multiple direct conversations with company participants, providing a higher level of accuracy, consistency and overall quality than is typically feasible in larger studies.