Systemic Risk - NAIC

  • The very nature of insurance significantly reduces the potential of a run-on-the-bank scenario for property/casualty, health and most life insurance products.
  • For those limited products sold by insurers that could be subject to some level of run risk, mitigating factors exist such as policy loan limitations, surrender/withdrawal penalties, and additional taxes.
  • Additionally, insurers typically maintain a diverse product mix so only a portion of the company’s products would be subject to the already reduced level of run risk.
  • Importantly, insurance products unlike other financial products, do not transform short term liabilities into longer term assets.
  • Insurance has shorter duration liabilities in many of the property/casualty and health product lines, and the assets held are similarly short term.
  • Insurance has longer duration liabilities in life and annuity product lines, and these liabilities are matched against similarly longer term assets.
  • To be clear, though, the business of life insurance, in and of
    itself, does not pose systemic risk to the broader economy or the U.S. financial system.

--  Kevin M. McCarty - NAIC Testimony- Commissioner, Florida Office of Insurance Regulation and President of the National Association of Insurance Commissioners

2012 1129 - GOV - Examining the Impact of the Proposed Rules To Implement Basel III Capital Standards  - PDF - 439p