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1 [1] (April 1, 2025)

handle is hein.crs/infnfcn0001 and id is 1 raw text is: ongressional Research Service IrInforrning the legislative debate since 1914 Introduction to Financial Services: Insurance This In Focus provides a summary of the insurance market and regulatory system in the United States. Market Structure Insurance companies constitute a major segment of the U.S. financial services industry. The insurance industry is often separated into two parts: 1. Life and health insurance, which also includes annuity products; and 2. Property and casualty insurance, which includes most other lines of insurance, such as homeowners insurance, automobile insurance, and various commercial lines of insurance purchased by businesses. According to the insurance rating agency A. M. Best, 2023 net premiums for the more than 300 life/health companies (with over 800 subsidiaries) in the United States totaled $677.6 billion, with admitted assets totaling $8.63 trillion. The 2023 net premiums for the more than 1,000 property/casualty insurance companies (with over 2,800 subsidiaries) totaled $852.9 billion, with admitted assets totaling $2.81 trillion. Despite the large numbers of insurance companies, both life/health and property/casualty insurances are also reasonably concentrated industries, with the top 25 life/health company groups writing 51.3% of overall premiums and the top 25 property/casualty company groups writing 71.0% of overall premiums. Figure 1 displays the market share of the top 25 insurers versus the rest of the market in 2023. Figure I. Insurance Market Concentration 2023; Net Premiums; $ Billions E11Top25 OaRest ofInduary Casualy $ 4 $852.9 V H;;1ealt $. 3__ 5677.6 Source: Figure created by CRS using data from A M. Best for 2023. Different lines of insurance present different characteristics and risks. Life insurance is typically a longer-term proposition with contracts stretching over decades and insurance risks that are relatively well defined in actuarial tables. Annuity products, which are also usually offered by life insurers, present similar long-term insurance risks. Particular life insurance and annuity products, however, may be based on securities, such as stocks or bonds, and thus may present shorter-term risks more similar to investment products for both the consumer and the insurer. Updated April 1, 2025 Property/casualty insurance is typically a shorter-term proposition with six-month or one-year contracts and greater exposure to catastrophic risks. Health insurance has evolved in a different direction than has life and property/casualty insurance. Many health insurance companies are heavily involved with health care delivery-including negotiating contracts with physicians and hospitals-rather than purely insurance operations. The health insurance regulatory system is much more influenced by the federal government through Medicare, Medicaid, the Employee Retirement Income Security Act (P.L. 93-406), and the Patient Protection and Affordable Care Act (P.L. 111-148) than life and property/casualty insurance is. The following discussion focuses on property/casualty and life insurance. Role of Federal and State Governments The role of the federal government in regulating private insurance is relatively limited compared with its role in banking and securities. Insurance companies, unlike banks and securities firms, have been chartered and regulated solely by the states for the past 150 years. There are no federal regulators of insurance akin to those for securities or banks, such as the Securities and Exchange Commission or the Office of the Comptroller of the Currency, respectively. Each state government has a department or other entity charged with licensing and regulating insurance companies and those individuals and companies selling insurance products. States regulate the solvency of the companies and the content of insurance products as well as the market conduct of companies. Although each state sets its own laws and regulations for insurance, the National Association of Insurance Commissioners (NAIC) acts as a coordinating body that sets national standards through model laws and regulations. Before having legal effect, models adopted by the NAIC must be enacted by the states, which can be a lengthy and uncertain process. The states have also developed a system of guaranty funds designed to protect policyholders in the event of insurer insolvency. The limited federal role stems from both Supreme Court decisions and congressional action. In the 1868 case Paul v. Virginia, the Court found that insurance was not considered interstate commerce and thus not subject to federal regulation. This decision was effectively reversed in the Court's 1944 decision U.S. v. South-Eastern Underwriters Association. In 1945, Congress passed the McCarran- Ferguson Act (15 U.S.C. §§1011 et seq.), specifically preserving the states' authority to regulate and tax insurance and granting a federal antitrust exemption to the insurance industry for the business of insurance. ttps://crsreports.congress.gov

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