Geopolitics & Insurance

Transcription

1 Geopolitics & Insurance September 15, 2016 Sean Kevelighan, EO James Lynch, hief Actuary Insurance Information Institute 110 William Street New York, NY

2 Economic Uncertainty Global Growth... US Growth... *Since 2008 we've had the longest period of stagnation in trade growth since World War II... GDP 1.4 Investment Growth...Monetary vs. Fiscal Policy Monetary: Low interest rates mean insurers are struggling to meet interest rate guarantees for life insurance and annuities must diversify their investment portfolios Fiscal: Supply-side debate heating up, i.e. Tax reform 1 The Peterson Institute for International Economics 2

3 Globalization Geopolitical Polarization Rise of the Far Right Regional Tensions Global Trends Impacting Domestic Market TPP Regulatory Trends "onduct of usiness" apital/solvency Dodd-Frank hina Rising HK$7.1 * HK$16.9 * * Mainland purchases of insurance and related investment policies in the three months ended June 2016 vs. June

4 Geopolitics US 4

5 linton vs. Trump: The Alternative Twitterverse* The Economy Will ongress pass tax plans? Higher Deficits Interest Rates Higher? I ll protect manufacturers. uild big walls! Get tough on trade cheats! Trade A little protectionist or a lot Judges/Tort Reform ourt Relatively Friendly to usiness ould Appoint Four Protectionist during campaign (down on TPP), but generally a realist. * Where issues matter. 5

6 The Return of the ully Pulpit ypassing the Media to Effect Policy Next? 6

7 Profitability & Politics How Is Profitability Affected by the President s Political Party?

8 P/ Insurance Industry ROE by Presidential Administration * arter 16.43% Reagan II 15.10% Nixon 8.93% Obama II linton I G.H.W. ush 8.80% 8.65% 8.35% OVERALL REORD: * G.W. ush II linton II Reagan I 8.33% 7.98% 7.68% Democrats 7.72% Republicans 7.85% Nixon/Ford 6.98% Truman Eisenhower I Eisenhower II G.W. ush I Obama I 5.43% 5.03% 4.83% 4.68% 6.97% Party of President Has Marginal earing on Profitability of P/ Insurance Industry Johnson 4.43% Kennedy/Johnson 3.55% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% *Truman administration ROE of 6.97% based on 3 years only, ;. Source: Insurance Information Institute 8

9 ROE Truman Eisenhower Kennedy/ Johnson Nixon/ Ford arter Reagan/ ush I linton ush II Obama P/ Insurance Industry ROE by Presidential Party Affiliation * 25% 20% 15% 10% 5% 0% -5% LUE = Democratic President. *2015 data is through Q3. Source: Insurance Information Institute RED = Republican President 9

10 ut State Politics Drives Insurance And Every State is Different D A AK OR WA + NV ID AZ A UT D HI D MT + WY O NM ND + + SD A- NE + KS D TX OK MN A IA MO AR D LA WI IL D+ MS MI + IN A TN AL A KY OH GA WV F N A- S PA D FL A VA D NY ME NH VT = A = = = D = F = NG A MA - RI + T NJ DE MD Not Graded: District of olumbia Source: R Street Insurance Regulation Report ard, December

11 Republicans ontrol Most States It is Likely to Remain That Way Makeup Today All Dem Split All Rep NE, NY* ontrol could change 20 hambers ould Switch Mainly in States With Split Legislatures. * Nebraska: Unicameral, nonpartisan, Republican dominated. New York: Democratic-majority Senate controlled by Republicans. Source: National onference of State Legislatures, allotpedia, Insurance Information Institute. 11

12 State Races Governorships D-18; R-31; 1 Independent (AK) 12 States With Elections This Year; Democrats Defend 8 Five Tight Races Dem-held: NH, VT, WV Rep-held: IN, N Insurance ommissioner 11 Elected (D-5; R-6) 5 Elections (DE, MT, N, ND, WA); Incumbent Party Favored Miscellaneous 9 States Have Marijuana Referendums (AR Has Two One Would Let Patients Grow Their Own.) SOURE: allotpedia, Insurance Information Institute. 12

13 State Issues Auto Insurance Increase in Loss osts, 2014:Q1 2016:Q1 odily Injury 9.6% Property Damage 14.7% Personal Injury Protection 18.4% ollision 11.1% omprehensive 11.0% From early 2014 to early 2016, the cost of accidents has risen dramatically. y contrast, consumer prices overall rose 1.7 percent during 2014 and Source: Fast Track Monitoring System. 13

14 State Issues Workers ompensation The Grand argain Still? Opioids Opt Out ig Issue One Year Ago Oklahoma Law Unconstitutional Department of Labor/ Pro Publica: enefit uts Shifted Injury osts from Employer enefit uts? Evidence-ased Guidelines Outside Medical Reviewers Nationwide Epidemic ¼ of Drug osts in W laims 13 States Limiting W Opioid Prescriptions SOURES: Department of Labor, Does the Workers ompensation System Fulfill Its Obligations to Injured Workers? ; enters for Disease ontrol and Prevention. 14

15 State of Insurance Top Issues Autonomous Vehicles P2P insurance ybersecurity Sharing Economy Workers omp Regulation Politics Overcapitalization (Reinsurance) atastrophe osts P/ Payouts / Property Losses $15.5 U.S. Insured at Losses $ $ vs. 2015: Loss Relatively Small ompared to Surplus On Hand $ * onsolidation/m&a Insurance-related Deals Involving U.S. Firms % DEALS 506 (JAPAN) $6.3 $ % VALUE $38 (ERMUDA) pending or completed M&As involving U.S. insurance companies (2016 YTD) 2 1. PS; 2. iii Fact ook. 15

16 Thank you for your time and your attention!