Howard Mills

Howard Mills is a Senior Advisor at Deloitte. Recently, he spoke with about issues surrounding capital in the (re)insurance industry, as well as global and U.S. regulatory efforts to develop appropriate capital standards.

Mr. Mills says the impact of “new capital” coming into the insurance market is a key issue in 2015. He wonders if new entrants into the market will bring new capital, and if they will meet increased regulatory scrutiny. He notes that hedge funds that attempted to enter the market met with some resistance. Regulators wondered “if they will be in it for the long haul.” With the Terror Risk Insurance Act (TRIA) renewed, one avenue for new capital is closed, which raised the question, “where will new capital go?”

On the global regulatory front, Mr. Mills see pressure coming from the International Association of insurance Supervisors (IAIS) impacting State regulators in the U.S. and the relationships between State and Federal regulators over the past five years. Recently, the IAIS adopted a Basic Capital Requirement (BCR) for globally systemic insurers, considered by many to be the first step in advancing global capital requirements.  U.S. insurers and regulators are concerned about international standards that are too focused on capital, and that the IAIS is moving too quickly to adopt such a global capital standards.

“Uncertainty is the rule of the day” in insurance regulation, according to Mr. Mills. While the Dodd-Frank Act gave oversight of the insurance industry to the Federal government, Mr. Mills says we have not seen much activity from the Federal Insurance Office (FIO) since they issued their report.

With pressure mounting on State regulators, Mr. Mills sees clear trends emerging in consumer protection, restrictions on capital, and increased challenges and expense related to compliance. He also believes there more “opportunities for insurers to get into trouble”, and with social media, troubles can be amplified very quickly to become a brand issue.

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