Below, we review or overview of legal and regulatory changes.

1. Dodd-Frank Act

In response the 2007-2008 financial crisis, Congress acted to implement major legislative reforms for addressing systemic risk in the financial markets through the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. They are

  • Monitoring all aspects of the insurance industry (except health insurance, long-term care insurance), in regulation of insurers that could contribute to financial crisis.
  • Administering the federal Terrorism Insurance Program
  • Making recommendations to the Financial Stability Oversight Council about insurers that may pose a risk, and to help any state regulators with national issues.
  • Coordinating international insurance matters.
  • Monitoring the extent to which traditionally under-served communities and consumers, minorities, and low-and moderate-income persons have access to affordable insurance (except health insurance).
  • Determining whether state insurance measures are preempted by covered agreements; and
  • Consulting with the states and state insurance regulators regarding insurance matters of national importance and insurance matters of international importance.

2. Affordable Care Act (Insurance Policies in US)

Signed into law in 2010, and largely upheld by the U.S. Supreme Court in National Federation of Independent Business v. Sebelius in 2012.

No law enacted during the prior decade changed the shape of the insurance industry like the ACA. The ACA reimagined health care coverage in the United States.

The largest foray into direct federal regulation of insurance in decades, ACA, among other things: eliminated preexisting condition exclusions; required individuals to obtain health insurance coverage.

In addition, the ACA established various risk-shifting mechanisms directly applicable to the carriers, including reinsurance, risk corridor and risk adjustments.

3. Nonadmitted and Reinsurance Reform Act

Nonadmitted and Reinsurance Reform Act, came into effect on July 21, 2011. Stands on its own and revolutionized the surplus lines and Nonadmitted insurance markets.

Each state had the authority to regulate Nonadmitted insurance products based on the risk residing in such state. And in addition, could levy surplus lines premium taxes. The NRRA changed all this and created uniform. National standards stating that only the home state of the insured can regulate and tax a surplus lines insurance policy.

The NRRA also removed the authority of states to curtail their own surplus lines insurer eligibility standards other than establishing minimum capital and surplus requirements. The NRRA has enabled the surplus lines market to grow. And thrive at a critical moment in the U.S. insurance space.

The term “home state” is defined under NRRA as (1) the state in which an insured maintains its principal place of business (in the commercial context) or resident (as to personal lines insurance policies); or (2) if 100% of the insured risk is located outside the principal place of business or resident state then the state in which the greatest percentage of the insured’s taxable premium is allocated.

4. Terrorism Risk Insurance Act

The Terrorism Risk Insurance Act was passed in the wake of 9/11 to provide financial support for the ever-apparent need for terrorism insurance. Particularly in certain business and population concentrated areas of the United States.

Terrorism Risk Insurance Act was enacted to provide a federal backstop in the form of reimbursement for insurance carriers. That insure commercial property and casualty terrorism risks in the event of an act of terrorism that is certified by the U.S. Secretary of the Treasury.

TRIA was originally enacted in the first decade of this century and no event has ever occurred. It was reauthorized in both 2015 and 2019.

Therefore, Without the TRIA’s backstop, the price of terrorism coverage in certain high-risk areas could become prohibitively expensive.

5. Department of Labor Fiduciary Rule

This rule aimed to revise the long-standing Prohibited Transaction Exemption 84-24. And impose a best interest contract exemption requiring written investor disclosure statements. Related to fees and conflicts of interest, adherence to impartial conduct standards. Adoption of new policies and procedures. Prohibition on class action waivers by investors and regulation of investment fees.

6. Data Privacy and Security

Cybersecurity Regulation

The New York Department of Financial Services lead the charge in imposing new cybersecurity regulatory requirements. For NYDFS insurance industry licensees aimed at protecting the security. Of personal information they collect and their information systems.

California Consumer Privacy Act

The CCPA became effective on Jan. 1, 2020, but has a six-month delayed enforcement date. While its application is across almost any type of business. I is a big deal for the insurance industry in California.

In Conclusion