Adjustment Of Insurance Activity
In the USA there is a special legislative adjustment of insurance business
. The matter is that each staff has the insurance legislation and the regulation authority. The uniform federal act about insurance and uniform federal organ on supervision of insurance activity isn't present. Each staff makes the demands to a capital minimum level, kinds of offered insurance, conducts audition of the under control insurance companies, performs general adjustment of insurance activity by licensing to brokers, agents and the insurance companies.Bodies of insurance supervision in the USA focus the attention on financial soundness of the insurance companies. In particular, in practice of bodies of the insurance control and auditing services the special system of indicators for the financial analysis of insurance operations is used.
Coefficients and their dynamics concern indicators such. In each indicator are inherent as much as possible and is minimum admissible limits determined by the legislation on the basis of long-term supervision over activity of financially steady companies, and also the companies which ever experienced financial difficulties, but haven't been recognized by bankrupts.
In total coefficients eleven. The basic coefficients concern: an award and net profit ratio, award movement, the relation of net profit of reinsurance to general net profit, biennial general operational coefficient.
If value 3 of 11 coefficients is beyond admissible the company should be under the special control of insurance supervision of staff. Annually 5% of insurers are exposed to the careful control from corresponding departments of staff.
Along with regular checks from supervising bodies, the insurance companies voluntary give every year special reports in which all indicators characterizing activity of insurers, including calculations of eleven test coefficients are contained in their order. Bodies of insurance supervision hold computer testing of the data and individual interview with company management. It is necessary to notice that participation in system of similar supervision completely voluntary that is if the company it is accepted the supreme body of management the decision on nonparticipation in financial screening system insurance supervision needs to publish only special lists of such companies with instructions of the reasons of their refusal of participation in system of the state control.
Employees of department of audit and the financial analysis of National Association of insurance supervision annually analyze values of coefficients of all insurance companies of the USA. For the first time this procedure has been entered in 1977. The comparative analysis of activity of the companies at which values of four and more coefficients were beyond admissible during the current year, and the companies recognized financially unstable in last years has been carried out. Now in connection with the become frequent cycles of macroeconomic character those companies at which values of 2 or more coefficients are beyond the admissible are exposed to careful check also. The financial analyst following the results of computer testing classifies all companies by kinds with instructions of the basic results of the analysis. There are cases when at the insurance company of value of 4 and more coefficients are out of the frameworks specified by the legislation, but the financial analyst doesn't demand intervention of bodies of financial screening. In this case the reasons of similar decisions are specified.
Not all companies with adverse results of testing can be recognized by financially unstable. Some of them are subject to inertial tendencies of last years which can influence values of current coefficients. Others use such accounting methods which also can influence values of coefficients.
Elements of an information system of adjustment of insurance activity IRIS used in the USA (Insupance Regulatoy Information System) represent the interconnected chain of indicators, showing and opening the basic financial results of activity of the insurance organizations.
In spite of the fact that the insurance market of the USA is the world's largest, with the advent of an economic crisis in insurance activity there was also a number of problems.
During crisis many insurance companies have appeared under the threat of bankruptcy. Company AIG didn't become an exception also. The government of the USA has made the decision on allocation to the insurance giant of the credit at a rate of 85 billion dollars instead of what 79,9% of shares of the insurance company will be transferred the state.
Besides problems in the insurance, connected with financial crisis, scandal with payment of extremely generous awards to many employees of the companies has burst. In the conditions of proceeding crisis this fact has caused indignation of the American public.
The insurance companies endure appreciable lowering of a stock value against financial crisis. They aspire to compensate consequences of financial crisis, raising tariffs for insurance.
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