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In this post, I briefly describe the insurance regulations within the United States, highlighting how regulation can act as a first-order force in shaping the incentives and decisions of insurance companies. I also highlight the features that are unique to P&C vs. life insurers. I’ve benefited from discussions with Manav Chaudhary.
Introduction
There are two primary dimensions along which insurance regulations can be analyzed:
- U.S. vs. Europe: In the U.S., insurance is primarily regulated at the state level, with each state having its own set of laws and oversight bodies, leading to a decentralized system. In contrast, the European Union has implemented a harmonized regulatory framework, Solvency II, which sets capital requirements and risk management standards for insurers across the EU.
- P&C vs. Life: P&C insurers typically face more product-specific regulations due to the diverse nature of risks they cover, while life insurers are subject to regulations focused on asset-liability management and long-term solvency considerations, given the nature of their products and obligations.
In this post, I focus on the U.S. insurance regulation for both P&C and life insurers.
Key Features of US Insurance Regulation
State-Level Regulation
Identifying Financially Troubled Insurers
Comparison to Insurance Regulation in the European Union
Property & Casualty vs. Life Insurers