U.S. insurers need to brace for a potential increase in federal oversight and climate-related action as President Joe Biden prioritizes pandemic response and environmental action in his first year in office. Insurers will also have to prepare for a year of heightened scrutiny on market conduct and consumer protection from states this year.

While a major overhaul of insurance regulation has been ruled out, and Biden’s primary insurance-related focus is expected to be on healthcare, experts say life and property-and-casualty insurers will also need to prepare for an increase in regulatory attention from the new administration as it rushes to temper the impact of the COVID-19 pandemic.

The bulk of the insurance-related action outside healthcare may be focused on climate change, an issue which Biden has classified as one of the top 4 urgent priorities of his administration, alongside COVID-19, the economy, and racial equity.


Biden’s climate initiatives could have a two-pronged impact on property and casualty insurers.

The new administration will need to reduce the U.S. reliance on fossil fuels after rejoining the Paris Accord that former President Donald Trump had withdrawn from in 2017. This could mean more disclosure requirements for insurers and potentially wider adoption by states of regulations such as those in California and Washington that require insurers to divest in fossil fuel projects. Environmentalists have urged insurers to refrain from underwriting projects that do not meet stringent climate standards.

In addition, the federal government may step in to address an insurance affordability and availability crisis being faced by consumers in high-risk areas as natural disasters become more frequent, destructive and widespread. Reinsurer Munich Re estimated the United States suffered $95 billion in damages from natural catastrophes in 2020, nearly double the tally a year earlier.

States such as California and Florida, some of the worst-hit by the increase in hurricanes and wildfires, are struggling to keep insurance coverage available for their residents. The crisis might force the federal government to create a program that will help states create a financial backstop for insurers in times of excess losses.


With the COVID-19 pandemic hitting consumers and small businesses especially hard, state regulators are expected to pay close attention to how insurers treat their clients. Increased scrutiny is expected over their claims-handling processes and payouts as states look more to insurers to relieve consumers of financial distress, thus reducing reliance on government resources.

State regulators are also expected to more closely monitor the financial security of insurers as larger-than-expected claims, especially related to climate risk, potentially threaten their ability to pay consumers. Insurers need to be prepared for additional disclosure requirements and close inspection of their capital strength this year.

State regulators have also said they will re-examine capital requirements if federal policymakers or the legal system pushes insurers to pay out business interruption claims related to the pandemic. A set of lawsuits across the country attempting to force commercial lines insurers to pay claims from pandemic-related business closures will keep the debate alive on virus exclusions in policies.

In addition, regulators are likely to keep a close check on cyber risk management practices as insurance buying, claims-processing and payout activity has widely gone virtual this year. The National Association of Insurance Commissioners, representing state regulators, has established a model cybersecurity standard for all states to adopt, but some states might look to tighten consumer protections when they adopt the legislation.


Biden’s nominee to chair the Securities and Exchange Commission, Gary Gensler, has been a supporter of a tougher fiduciary standard for broker-dealers. Life insurers selling annuities had strongly opposed the previous version of an annuity sales-practice standard developed by the administration of former President Barack Obama and had embraced a more industry-friendly standard adopted by the SEC under Chairman Jay Clayton.

If confirmed, Gensler could tighten protections for investors, adding to compliance requirements and costs for insurers selling annuities. Gensler is also expected to promote more extensive regulation of environmental, social and governance considerations in the financil services industry, which could limit the ability for life insurers to make certain investments.

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