INSURANCE OVERVIEW REGULATION ACCOUNTING

GENERAL INFORMATION

The insurance industry protects the assets of its policyholders by transferring the risk of a person or company to an insurance company. Insurance companies act as financial intermediaries investing the premiums collected to provide this service. Size of the insurance company is usually measured by net premiums written, i.e. it premium revenues less amounts paid for reinsurance.

There are three main insurance sectors: property/casualty, life/health and health insurance. Property/casualty consists mainly of auto, home insurance and commercial. Life/health consists mainly of the products of the annuity and life insurance. Health insurance it is offered by private insurance companies and is also available through government programs. A number of large insurance companies is expanding into other financial sectors, including banking and mutual funds.



REGULATION

All types of insurance are regulated by States, with each State has its own set of statutes and regulations. State insurance departments oversee the solvency of the insurance company, market conduct and, to a greater or lesser degree, review and rule on requests for rate increases coverage. The National Association of Insurance Commissioners develops model rules and regulations for the industry, many of which must be approved by State legislatures.

The McCarran-Ferguson Act, passed by Congress in 1945, refers to the regulation of continuous state of the insurance industry and the public interest. According to the financial services of Gramm-Leach-Bliley Act 1999 Act modernization, insurance - activities is already carried out by banks, broker-dealers and insurance companies, are regulated by the States. However, there have been and will continue to be challenges for utilities regulation of some segments of the federal Government, as well as some State financial.

In March 2008, the Treasury Department proposed a radical revision of the regulation of the United States financial services industry designed to strengthen the protection of consumers, promote market stability and improve financial innovation. The proposal includes a provision to support the creation of an optional federal Charter (OFC) for insurance companies. An OFC would allow that insurance companies to opt for a system of federal chartering, licensing, regulation and supervision or to continue to be regulated by individual States.



ACCOUNTING

Insurance companies are required to use the principles of legal accounting (SAP) to submit annual financial reports with the State and the internal revenue service regulators. SAP, which evolved to improve the financial stability of the industry is more conservative than generally accepted accounting principles (GAAP), established by the independent standard plates financial accounting. The Securities and Exchange Commission (SEC) requires public companies report their financial results through GAAP rules. Insurers outside of United States use standards which differs from SAP and generally accepted accounting principles. When global markets developed, the need of the uniform accounting standards remained clear. In 2001 the international accounting standards Board (IACB), an independent international accounting standards, establish the organisation based in London, began work on a set of rules expected to be used throughout the world. In November 2007, the SEC voted to stop requiring U.S. companies using international standards of financial reporting (IFRS) for its financial reporting for U.S. investors using generally accepted accounting principles. The IACB is also working on an independent set of international standards of accounting for the insurance industry. (See Appendix, page ____ for a comparison of generally accepted accounting principles and SAP systems).