Developments in
North America

The Geneva Association monitors
developments in the region
in order to maintain an
overview of issues of
strategic interest to
our members in
North America
and beyond.

in North

The Geneva Association
monitors developments
in the region in order to
maintain an overview
of issues of strategic
interest to our
members in
North America
and beyond.

Developments in North America

The Geneva Association monitors developments in the region in order to maintain an overview of issues of strategic interest to our members in North America and beyond.

Even though 2017 was a record year for natural catastrophes in North America, there was little action on climate change or on flood mitigation. The major regulatory issues in North America in 2017 revolved around group capital provisions, the U.S.-EU covered agreement, cyber security and Fintech issues.


The role of the U.S. Federal government in insurance remains a focus of debate. Several proposals to amend or repeal the Dodd-Frank Act have been introduced in the U.S. Congress. These proposals include elimination of the Federal Insurance Office (FIO), reform of the Financial Stability Oversight Council (FSOC) process for designating systemically risky non-bank financial companies, and minimising the role of the Federal Reserve System in insurance regulation. One proposal, the Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs (CHOICE) Act, has passed the U.S. House of Representatives, eliminating many of the key banking reforms of the Dodd-Frank Act; however, it is still too early to tell how far Congress is willing to go with reforms.

Even without a change in the Dodd-Frank law, the FSOC is moving away from entity-based action on systemic risk. FSOC has rescinded the designation of AIG as systemically risky to end the appeal on the MetLife case. The U.S. Federal Reserve Board was also reported to have challenged any further G-SII designations by the Financial Stability Board towards the end of 2017.

Both FIO and the Federal Reserve Board are continuing to carry out their mandates regarding insurance and are working with the National Association of Insurance Commissioners (NAIC) on group capital calculation and international issues. FIO’s 2017 annual report defines its international role as one of coordination ‘to ensure that the United States speaks at the IAIS with a unified voice and with the benefit of advice from the U.S. insurance community.’1

A covered agreement between the U.S. and EU was signed in September 2017. Final adoption by the EU took place on 20 March with an effective date of 4 April 2018. The agreement will allow cross-border sales of reinsurance without collateral or requirements for local presence under certain conditions, and establish mutually recognised group supervision between the U.S. and EU. While the agreement encourages early compliance with the terms, many of the provisions allow a five-year period for full enforcement. The NAIC is already working to update its model laws to comply with the terms of the agreement, and several EU member states have suspended their local presence rules for U.S. reinsurers.

In the U.S., flood coverage is not included in a homeowner’s package, but is provided separately though the National Flood Insurance Program (NFIP). The NFIP was praised this year for having purchased USD 1 billion of reinsurance in 2017 to reduce the financial impact of flooding caused by hurricanes. The NFIP was set to expire in early 2018, but there have been temporary renewals. Congress indicated that the renewal bill might include reforms to facilitate an increase in private flood insurance and reinsurance, to increase funding for mitigation and mapping, and to address NFIP claims issues, specifically those issues related to Hurricane Sandy.

The U.S. Department of Labor Fiduciary Rule regarding conflicts of interest in retirement investment advice and imposing federal standards on the sale of certain insurance products was scheduled to come into effect in 2018, but the Department of Labor has now delayed the effective date of many of the key provisions to July 2019.

In 2017, the U.S. Financial Accounting Standards Board reached tentative conclusions for the measurement and disclosure of long-duration (life) contracts. The new standard includes some very significant changes to life insurance accounting and disclosures. An effective date has still to be decided.


Much of the focus of NAIC activity in 2017 was on group capital standards and cyber risk issues.

The NAIC devoted considerable effort to the development of a group capital assessment and is moving quickly to the field testing phase. The signing of the U.S.-EU covered agreement and the IAIS Kuala Lumpur agreement on the Insurance Capital Standard (ICS) provided even more incentive to complete the work as soon as possible. The NAIC is using a Risk-Based Capital (RBC) aggregation approach as the basis for the group capital calculation. The RBC would aggregate individual RBC requirements for U.S. insurers, add home jurisdiction measures for non-U.S. insurers, and include industry-specific measures for non-insurance entities such as Basel III for banks.

In 2017, the NAIC adopted the Insurance Data Security Model Law, which creates rules for insurers, agents and other licensed entities covering data security, investigation, and notification of breach. The model includes provisions for maintaining an information security programme based on ongoing risk assessment, overseeing third-party service providers, investigating data breaches, and notifying regulators of a cyber security event.



After ten years of work, in November 2017, the Canadian Office of the Superintendent of Financial Institutions (OSFI) released the final version of its 2018 Life Insurance Capital Adequacy Test Guideline (LICAT) for federally regulated life insurers. According to the OSFI, the LICAT represents a more advanced and risk-sensitive approach to capital, recognising significant changes in the nature and management of risk within the life insurance industry.


With Bermuda companies expected to pay 30 per cent of the insurers’ losses from hurricanes Harvey, Irma and Maria, Bermuda again proved its critical link to North America. Bermuda, as one of the U.S. qualified jurisdictions under the credit for reinsurance model law, has been pushing to extend the benefits of the U.S.-EU covered agreement to all qualified jurisdictions so that Bermuda reinsurance can operate on a level playing field with European companies. Bermuda was also a leader in the unsuccessful effort to block U.S. tax changes affecting foreign reinsurance transactions. Under the new provisions, payments to foreign affiliates are subject to a base erosion minimum tax (BEMT). The BEMT is specifically applicable to affiliated reinsurance transactions at the rate of 5 per cent in 2018, 10 per cent in 2019, and 12.5 per cent in 2025.

1   2017 Annual Report on the Insurance Industry, Federal Office of Insurance, U.S. Department of Treasury, September 2017, p. 4.