NEW YORK—The regulatory scrutiny that followed the financial crisis is forcing insurance CEOs to spend an inordinate amount of time on compliance to solve problems that do not exist and satisfy regulators who "don't understand the industry," according to Hanover Insurance Group's chief executive.
During a CEO keynote panel at the Annual Insurance Executive Conference held here, Fred Eppinger, CEO of Hanover Insurance Group, said, "[The crisis] put everything 'on steroids,' but the need to look at insurance companies like banks is a ginned-up one because only one insurance company had problems, and that was in non-insurance areas.
"As CEO, I spend two to three times more today on regulatory issues than before."
One of the biggest differences between insurers and banks is insurers' small scale of debt and leverage, which helped the industry weather the recession without putting companies out of business, he says.
Eppinger did note that some insurers' risk profiles are changing due to the current investment landscape. "Some companies in this low-yield environment have taken on more risk on their asset side to make up for it; that makes the risk profile much different than a typical insurance company," he said. "We'll see what we always do in a cycle, is that some people will go in that direction and there will be problems to bear."
But Eppinger says regulators "who don't understand the industry" are getting more involved in its affairs—for example, new regulatory requirements for companies deemed to be systemically important.
"What problems are we trying to solve?" asked Eppinger, stating that the industry is well-financed and has good levels of capital.
Solvency II is another time-consuming issue, stated the speakers on the CEO panel, as European regulators try to "push" accounting changes onto U.S. companies.
"I'd argue the U.S. has one of the best and most consistent accounting regimes," said Eppinger. "I worry that we'll change a system that works for the sake of consistency."
Navigating the present and future insurance regulatory environment will take the cooperation of the entire industry, said Anthony Kuczinski, president and CEO, Munich Reinsurance America, Inc, especially through the support of industry groups such as the American Insurance Association (AIA) and the Property Casualty Insurers Association of America (PCI).
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