23 May 2014News

Non-essential insurance programs should shift to private sector

ABIR president Brad Kading has called for insurance risk to be moved from non-essential government insurance programs to the private sector, noting this was in the long term best interest of taxpayers and consumers.

In comments delivered at the Global Insurance Symposium, Kading says, “With the interest of pension funds, sovereign wealth funds and hedge funds in investing in insurance markets, it’s time for policymakers to take up the challenge and put this capital to work in downsizing non-essential government insurance programs.”

“Government insurance programs expose taxpayers to assessment, debt and cross subsidies that benefit some at the expense of others. The National Flood Insurance Program with a debt of $24 billion is a poster child of what we should all seek to avoid.”

The ABIR represents 21 global commercial insurers and reinsurers which in 2013 collectively wrote $70 billion in global gross written premiums on a capital base of $95 billion. ABIR members write hurricane, flood, earthquake, terrorism, mortgage, pharmaceutical liability, directors’ and officers’ liability – some of the toughest classes of business. Kading notes that capital is now available to increase the private sector take up of risk, as long as tax or regulatory policies do not interfere.

“Policymakers and regulators should systematically review government insurance programs and identify regulatory impediments to moving risk to private markets. Keep the essential programs, but shift risk gradually as private sector interest materializes,” Kading continued, noting that US and global reinsurance regulation has largely allowed reinsurance markets to attract capital.

He concludes, “Policymakers and insurance regulators should act to remove red tape that keeps insurance risk in residual markets.”