Excess & Surplus Lines Market, Gramm-Leach-Bliley Act

Question 1

Excess & Surplus Lines Market meant to

Answer 1

provide coverage for unusual risks those with high policy limits or those that cannot find coverage in the admitted market in the state

Question 2

misconception of X/S market

Answer 2

that it is unregulated

• Agents and brokers must be specially licensed to place business with x/s and surplus lines insurers
• There are minimum financial requirements for insurers looking to write these policies
• There is a diligent search criteria in which producer must sign an affidavit that a diligent search of the admitted market was performed before policy was placed in X/S

Question 3

Key characteristic for x/s

Answer 3

is freedom from state-imposed rate and form requirements for nonadmitted insurers: Rates and forms not regulated, Flexibility to adjust and quickly meet insured’s needs

Question 4

During 90s, affiliations between

Answer 4

banks and insurers began to occur and questions arose about who would regulate (traditionally fed=banks, state=insurance)

Question 5

GLB actions

Answer 5

• oversight responsibility of insurance activities of financial institutions = States
• oversight responsibility of holding companies of financial institutions = Federal Government
• GLB prohibits state actions that would prevent bank-related firms from selling insurance on same basis as insurance producers
• GLB treats underwriting different from sales and marketing
• Prohibits national banks from forming subsidiaries to underwrite insurance, but can arrange financial holding companies to create insurance affiliates
• Information-sharing among banks and insurance affiliates raises privacy concerns: Requires banks to disclose information-sharing policies and practices
• GLB requires states to facilitate insurance producers’ ability to operate in more than one state

Question 6

GLB creates the following concerns

Answer 6

Privacy of personal financial information

Ability of state regulation to serve an integrated and global financial services market adequately

Consumers’ desire or need for integrated financial services

Question 7

GLB responded to changes in the economy

Answer 7

since entities with both banking and insurance didn’t exist in the earlier part of the 20th century, as one holding company could have an investment, banking, and insurance company. With the current economy filled with mergers and acquisitions, this is a good response

Question 8

NAIC created Producer Licensing Model Act

Answer 8

Requires states to establish either a system of reciprocal producer licensing or uniform licensing standards

Question 9

In favor of federal insurance regulation

Answer 9

• More efficient because less duplication of effort for the regulator and the insurer, (compared to state regulation, where insurers must answer to regulators in multiple states)
• More efficient because uniform regulation makes it easier for insurers to do business in multiple states
• Facilitates dealings with international markets because it creates a single point of contact for foreign regulators/governments

Question 10

In favor of state insurance regulation

Answer 10

• U.S. is geographically large and diverse so consumer protection / solvency regulation / rate regulation best served by state regulators familiar with these state specific features
• Duplication of effort inherent in state system results in more effective solvency regulation because individual regulators make mistakes
• Opportunities for peer review help to avoid regulatory forbearance/regulatory capture