In the United States, insurance is one of the financial services regulated by each member state of the Union. There are as many regulations as there are federated states and territories (Puerto Rico, the Virgin Islands, etc.). The market is totally “balkanized” with a plethora of companies operating in an extremely complex system.

The American system is based on a total decentralization of power. Each State of the Union is empowered to legislate and control the activity of insurance companies in its territory, the federal State being reduced to the role of coordinator.

Liberalism, competition, and limitation of federal power are the foundations of the insurance system in the USA.

The insurance market in the United States: organization at the level of the federated states

To practice in a State, an insurer must be registered there and receive a license there. A company wishing to operate in another State must submit a new application for approval to the local authorities.

A nationwide insurer wishing to operate throughout the United States must obtain 57 licenses. In the United States, each state has its insurance laws. The latter is not necessarily the same in all corners of the country.

Insurance regulators in the United States

At the head of each State, there is an insurance control body whose name varies: “Insurance Department”, “Division of insurance”, “Office of Insurance”, etc. As of January 1, 2018, there are 57 autonomous inspection bodies.

Common to all the States, the inspection bodies are assigned more or less the same missions, namely:

• protect consumers
• grant approvals to insurance companies and intermediaries
• set the rules for the functioning of the market
• ensure the solvency of insurers
• check company accounts
• etc

The size of US insurance regulators varies considerably from state to state. The economically powerful ones (New York, California, Florida, Texas, etc.) have a high number of personnel. Others less well off are content with smaller numbers.

For example, the regulatory body in Texas and California employ 1,459 and 1,415 employees respectively, while those in Idaho and Rhode Island only have a workforce of 76 and 38 people.

The commissioner

The head of the insurance supervisory body (the commissioner) is either appointed directly by the governor or elected during the election of governors.

The control body and its commissioner are placed under the authority of the local executive whose names may also vary: Office of the Governor, Department of Commerce, Financial Service Commission, etc.

The legislation

The legislative and regulatory texts promulgated by the supervisory body of each State constitute the source of the latter’s insurance law. This specificity leads to differences in legislation from one state to another and complicates the task of many players in the American insurance market.

Each federated state, therefore, has absolute control of insurance in its area of ​​jurisdiction.

The insurance market in the United States: organization at the federal level

Three organizations play an important role at the federal level:

The Federal Insurance Office (FIO)

The 2010 law creates the Federal Insurance Office (FIO) which depends on the Treasury Department. The President of the FIO is appointed by the Minister of Finance of the Federal State. He is responsible for supervising the activity of insurance companies at the federal level, except for health insurance and crop insurance.

This organization has a second mission, namely to promote access for disadvantaged classes to insurance (apart from health).

The FIO also manages terrorism risk through the “Terrorism Insurance Program”.

The Federal Advisory Committee on Insurance (FACI)

FAST is a federal advisory agency. This organization provides assistance and support to the FIO in its statutory missions.

The National Association of Insurance Commissioners (NAIC)

To oversee the building, the various federated authorities founded the National Association of Insurance Commissioners (NAIC) in 1871. The latter assists the control bodies of each State and territory.

It is responsible for promoting market competitiveness, strengthening the solvency and financial soundness of insurers and guaranteeing good service to consumers, etc.

In addition, the NAIC works constantly to harmonize certain activities of the insurance sector in the United States (technical and financial ratios, etc.), standardize certain practices and work standards, and share information between the states.

Classification of insurance companies in the United States

As of December 31, 2017, the United States counted 6,000 local companies accounting for 50% of the global premium. With a turnover of 1.333 trillion USD, the USA is the leading insurance market in all branches, followed by a long way by China, an emerging power.

In the United States, insurance companies are classified into three main categories:

• Local insurance companies: these are companies domiciled in the State in which they carry out their activities.
• Foreign insurance companies: a US insurance company domiciled in a state other than that in which it operates is considered foreign. According to the official nomenclature, there are tens of thousands of such companies.
• Foreign companies in the United States or “Alien Insurers”: foreign companies carrying out activities in the United States fall into this category. Example Allianz, Axa, etc.

In addition to these three main types of companies, other forms are specific to the American insurance market. These include, among others:

• Purchasing Group: a structure similar to a mutual insurance company that brings together people with a common interest (belonging to a profession, trade union, etc.).
• Risk Retention Group: an entity that is also similar to a mutual insurance company and which takes out liability insurance on behalf of its members.