The Federal insurance Office, or FIO, which was established by the Dodd-Frank Act, has issued its annual report. Among other things, the report notes “While insurers would benefit from an increase in interest rates through improved investment returns, a sudden, significant rate increase could present threats. A sudden increase in general interest rate levels would increase unrealized losses in insurer fixed income portfolios and, at the same time, could prompt policyholders to surrender contracts for higher yield elsewhere. In such a circumstance, insurers could be forced to liquidate fixed income investments at a loss in order to fund contract surrender payments.”
Michael McRaith, Director of the FIO, noted in prepared remarks before the House Financial Services Subcommittee on Housing and Insurance, that FIO expects to produce a number of additional reports this year, including the report on how to modernize and improve the system of insurance regulation in the United States and, separately, on the breadth, scope and role of the global reinsurance market.
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