Navigating the Property/Casualty Insurance Industry Under the Biden Administration

Climate Change and Insurance Regulation

Senator Dianne Feinstein's proposed Addressing Climate Financial Risk Act aims to help federal regulators understand and mitigate risks from climate change within the financial system. This act would require a Federal Insurance Office (FIO) report on how to modernize and improve climate risk insurance regulation. According to a recent study by the National Oceanic and Atmospheric Administration (NOAA), climate-related disasters have cost the U.S. economy over $400 billion in the past decade. The insurance industry, more directly affected by climate risk than other areas of the financial system, must adapt to these changes to continue providing essential financial protections.

Pandemic Risk and Legislative Activity

Rep. Carolyn Maloney introduced the Pandemic Risk Insurance Act, modeled after the Terrorism Risk Insurance Act enacted after 9/11. Despite its lack of widespread support, the insurance industry has advanced several pandemic risk mitigation proposals of its own. As the COVID-19 pandemic has shown, the need for such insurance is more pressing than ever. According to the Insurance Information Institute, the pandemic has led to an estimated $1 trillion in economic losses globally.

Corporate Tax Rates and Risk-Based Pricing

An expected increase in the corporate tax rate would mean higher tax liabilities for property/casualty insurers. Additionally, risk-based insurance pricing is an issue that's expected to heat up. Insurers will have to explain to a new set of legislators that the business of insurance hinges on predicting the level of risk a policyholder represents and charging a premium that corresponds with that level of risk. According to a report by the Congressional Budget Office, corporate tax rates are projected to rise by 7% over the next decade, impacting insurers' bottom lines.

For readers, it's crucial to stay informed about these legislative changes and their potential impacts on the insurance industry. Engaging with industry forums and staying updated with the latest reports can help in making informed decisions about insurance policies and risk management strategies.