Senator Brown to Address Increased Risk-Taking and Offshore Reinsurance in Life Insurance Industry in Senate Banking Committee Hearing

Today, the US Senate Committee on Banking, Housing, and Urban Affairs announced a hearing on the insurance industry will be held on September 8th.

Committee Chairman Senator Sherrod Brown is expected to address the issues related to private equity and retirement security in the hearing, among other issues. On August 5th, Brown wrote in a follow-up letter to the Federal Insurance Office (FIO):

“…FIO should work to examine the growth of offshore reinsurance markets and increased risk-taking behavior across the life insurance industry, which could contribute to increased systemic risk across the financial system,” wrote Brown. “I look forward to discussing these issues, and broader insurance industry matters at an upcoming hearing before the Committee on Banking, Housing, and Urban Affairs.” Read more.

In March, Senator Brown sent letters to the NAIC and FIO asking them to study what risks the more aggressive investment strategies pursued by private equity-controlled insurers present to policyholders.

In response to Senator Brown, the FIO identified potential concerns, including:

“Regulatory incentives may help drive private equity-owned insurers to incorporate substantial reliance on offshore risk-bearing entities for certain blocks of business, potentially masking from U.S. regulators the full scope and magnitude of risk to U.S. policyholders.

“The increased use of complex investment strategies has led to the greater prominence of illiquid and volatile assets on insurers’ books. This could contribute to potential market liquidity concerns, valuation challenges, uncertain levels of credit risk, and potential concentration risk, which could intensify under situations of economic uncertainty or dislocation.”

Read the full response from FIO here and the full response from NAIC here.

UNITE HERE applauds Senator Brown’s focus on workers and retirees.