The burgeoning kaleidoscope of insurance regulation and supervision is a growing issue for the industry, and its impact on the Bermuda market is also a subject of discussion.Randi Cigelnik, general counsel at Property and Casualty Insurers Association of America (PCI), was the keynote speaker who tackled the topic at the Insurance Day Summit Bermuda conference.Ms Cigelnik explained to the audience of insurance and reinsurance industry representatives that PCI represents more than 40 percent of the US property and casualty (P&C) insurance market.Explaining she had been a Bermuda resident at an earlier stage in her career, she said: “When I left the US for Bermuda in 1993, insurance regulatory practice seemed rather dull.“The state regulation most applicable to Bermuda companies was industrial insured and self procurement exemptions. These allow big companies to purchase high levels of excess insurance from Bermuda insurers on a non-admitted basis. Those regulations haven’t changed substantially.”She said: “The US has been and should be the most stable legal and political jurisdiction in the world, providing exceptional product certainty. But recent trends raise legitimate questions about whether we can maintain this stability and product certainty or if the US has edged toward a slippery slope that leads to more uncertainty and instability.“Has anyone read Hank Greenberg’s book entitled The AIG Story?” she asked the audience. “Mr Greenberg tells his story of building an American business — based on private property, freedom of contract, open trade and rule of law.“He also tells his story about the destruction of the business — highlighting the guise of ‘shareholder democracy’ and activism, as well as regulators imposing a one-size-fits-all governance model and prosecutors using expanding powers over corporations.“The book’s preface states: “The saga of AIG’s near destruction is a reminder that the rule of law is not inevitable in America.”“With these sobering words in mind, today I will highlight a few shifts in regulatory policies that PCI is watching closely and with a measure of wariness,” she said.She warned: “Many US P&C companies are concerned that developments in recent years both domestically and internationally could threaten a regulatory model that has been successful in the United States for generations.“Many companies are also uneasy about cases of regulatory overreach and arbitrary changes in the rules of the game by public officials that have increased product uncertainty in the P&C marketplace.”Ms Cigelnik said that developments in US regulation have profound implications for Bermuda companies that do business in the US or underwrite US risks, especially over the long term.“Bermuda reinsurers who provide capacity for US insurers will be less affected by shifts in US regulatory policies, although reinsurance collateral requirements could affect your client companies,” she told the audience.“The state-based regulatory model has had a remarkably successful track record in terms of fostering a competitive marketplace.“It may be the right mix of market based principals and regulatory policies. In the US, thousands of companies compete locally, regionally or nationally to provide high-quality, affordable insurance.“State regulators also add risk to the US marketplace. Following Hurricanes Katrina, Rita, Wilma and then Irene, and more recently Superstorm Sandy, the action of political leaders, both elected and appointed, sometimes aimed at nullifying the terms of insurance policies in the name of consumer protection.”She pointed out that super storm Sandy caused some $20 billion worth of insured losses.“And in the months since Sandy, there were a host of bills in the northeast that would eliminate hurricane deductibles, prohibit or restrict anti-concurrent causation clauses, require additional disclosure and increase bad faith penalties and remedies,” she said.“Legislation like this is often driven by politics and not good “There was an interesting contrast between New York and New Jersey. The New York Department of Emergency Services took a heavy-handed approach to consumer protection, using emergency powers for several months after the storm.“The New Jersey Department of Insurance was far less aggressive, setting forth clear expectations for the industry in an Emergency Executive Order, but stepping back and trusting insurers to process claims without burdensome new mandates or directives.“I am not saying state-based regulation cannot change, weather events alter assumptions and market dynamics change.“For example, Sandy also made clear how critical it is to have strong global reinsurance capacity.“Bermudian companies are the largest suppliers of reinsurance to the US.”During her address, Ms Cigelnik proposed: “Bermuda has always been a place of product innovation and light touch regulation. Perhaps there is an opportunity for new product development in Bermuda to provide protection against regulatory uncertainty?”She spotlighted the Federal Insurance Office in the US Treasury, which was created by the Dodd-Frank Act.“Recently the FIO released its first report — this wasn’t the long awaited report on insurance regulation modernisation, but it contains interesting information. The report highlighted the low interest rate environment, the impact of natural catastrophes and changing demographics in the US — all factors that may be of interest to Bermudian Underwriters.”Ms Cigelnik said: ”Bermudian reinsurers have always been interested in Federal tax proposals in the US Rep Richard Neal and Sen Robert Menendez have again introduced legislation that would bar insurance companies based in the United States from claiming a deduction as an ordinary business expense on their corporate tax return for the amount of reinsurance premiums paid to a foreign affiliate.“The domestic industry is split on the issue and the FIO is neutral. Proponents of the bill have said their aim is to close a tax haven loophole for foreign controlled insurers that costs US tax payers and provides foreign-owned insurers an advantage over their US competitors.“Some believe that it will make it more difficult for non-US reinsurers to meet the US market’s demand for reinsurance.”Ms Cigelnik told the audience that “(PCI) have a significant footprint in the policymaking and advocacy arena. We work closely with state regulators and legislators, officials from the US Department of the Treasury, and Members of Congress, and are an observer member of the international association of insurance supervisors (IAIS) and regularly participate in global insurance and trade discussions.“PCI’s mission is to promote and protect the viability of a competitive private insurance market for the benefit of our companies and consumers.”