Insurance Industry:

Questions and Concerns About Solvency Regulation

T-GGD-91-10: Published: Feb 27, 1991. Publicly Released: Feb 27, 1991.

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GAO discussed the condition and regulation of the insurance industry, focusing on the: (1) financial condition parallels existing between the insurance industry and the savings and loan industry; and (2) quality of insurance regulation and oversight. GAO noted that: (1) although the insurance industry had not experienced the difficulties that the savings and loan industry had, failed firms in both industries had inadequate internal controls, high growth, inadequate loan reserves, and a regulator who was either unwilling or unable to resolve problems; (2) untimely data and insufficient financial reporting requirements inhibited quick identification of problems and risk exposure in the insurance industry; (3) states had widely varying regulatory resources and authorities to foster insurance solvency; (4) regulatory coverage of the reinsurance market was incomplete because of its extensive international character; and (5) the fairness of existing insurance guaranty fund arrangements varied among states as well as their capacity to adequately protect policyholders in the event of widespread company failures.

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