The insurance industry faces a host of challenges in 2011, according to a new report from New York-based
The report, “The Insurance Industry in 2011,” says much of the challenge will emanate from changes ushered in by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (DFA).
Under the DFA insurers will be under federal supervision and regulation for the first time, as the act empowers the Federal Insurance Office (FIO), which is housed within the U.S. Treasury Department.
Moreover, the report notes many of the changes required by the DFA are only now being implemented and many decisions germane to insurers are still being made. “In light of the size and scope of this legislation, rules are evolving in a very dynamic regulatory environment,” the report states.
“Insurers should be acutely aware of how regulators formulate provisions, and how those provisions will be practically implied and enforced. In addition, the industry should continue to pay close attention to the 112th Congress’ promises to “de-fund,” rewrite, or otherwise lessen the expansion of government authority that Dodd-Frank stipulates.”
In addition to the DFA, insurers mist brace for changes in accounting models as the
“Given the fundamental impact of these proposed standards on the measurement of an insurer’s financial performance and position, many companies are dedicating additional resources to understand and anticipate how their business should react,” the report states. “Although final standards likely will allow for at least a two- or three-year lead time prior to mandatory adoption, insurers have an opportunity to take a measured approach to evaluating the impact of change on the form and content of their financial statements, data and systems, processes and controls, and people.”
Lastly, the report notes that last fall’s legislative upheaval in Washington means that fundamental changes to the U.S. tax code may be percolating.
“The results of the 2010 Congressional midterm elections may mark a turning point in debate over tax legislation, with control of Congress divided between a Republican-led House of Representatives and a Democratic-led Senate,” the report states.
One possible scenario is for corporate tax reform under which various deductions and credits would be reduced or eliminated in exchange for lower statutory tax rates.
