Assurant 2014 Annual Report Download - page 41

ASSURANT, INC. – 2014 Form 10-K 27
PART I
ITEM 1A Risk Factors
NCOIL model rule or any similar regulatory requirement. In
addition, it is possible that these regulators or regulators
in other states may adopt regulations similar to the NCOIL
model rule or to the requirements imposed by the NYDFS.
In addition, regulators in certain states have hired third
party auditors to audit the unclaimed property records of
insurance companies. Among other companies, the Company
is subject to these audits in a number of states and has been
responding to information requests from these auditors.
Several proposals are currently pending to amend state
insurance holding company laws to increase the scope of
insurance holding company regulation. These include model
laws proposed by the International Association of Insurance
Supervisors and the NAIC that provide for uniform standards
of insurer corporate governance, group-wide supervision of
insurance holding companies, adjustments to risk-based capital
ratios, and additional regulatory disclosure requirements
for insurance holding companies. In addition, the NAIC has
proposed a “Solvency Modernization Initiative” that focuses
on capital requirements, corporate governance and risk
management, statutory accounting and fi nancial reporting,
and reinsurance. Similarly, the Solvency II Directive, which
was adopted in the European Union on November 25, 2009
and is expected to become effective in 2016, reforms the
insurance industry’s solvency framework, including minimum
capital and solvency requirements, governance requirements,
risk management and public reporting standards.
Various state and federal regulatory authorities have taken
actions with respect to our lender-placed insurance business.
As previously disclosed, the Company has been involved in
discussions and has reached agreements with certain state
regulators regarding its lender-placed insurance business. At
the federal level, in early 2013, the CFPB published mortgage
servicing guidelines that incorporate certain requirements
mandated by the Dodd-Frank Act. In addition, the FHFA issued
new mortgage servicer guidelines, which became effective
in June 2014, that eliminated lender-placed insurance-
related commissions and client quota-share arrangements on
properties securing GSE loans. At the directive of the FHFA,
the Federal National Mortgage Association (“Fannie Mae”)
and the Federal Home Loan Mortgage Corporation (“Freddie
Mac”) each issued bulletins in December 2013 implementing
these mortgage servicer guidelines.
Additionally, the fi nancial impact on Assurant Health of the
reinsurance, risk adjustment and risk corridor programs under
the Affordable Care Act is highly uncertain. Consequently, it
is impossible to be certain about the amounts that Assurant
Health will pay or receive under these programs, which could
have a material adverse effect on our results of operations.
Reform of the health insurance industry could
materially reduce the profi tability of certain
of our businesses or render them unprofi table.
The Affordable Care Act and related reforms make and will
continue to make sweeping and fundamental changes to
the U.S. health care system. For more information on the
Affordable Care Act and its impact on our Assurant Health
and Assurant Employee Benefi ts segments, please see Item 1,
“Business—Regulation—Federal Regulation—Patient Protection
and Affordable Care Act.”
Among other requirements, the Affordable Care Act requires
that Assurant Health rebate to consumers the difference
between its actual loss ratios and required minimum medical
loss ratios (by state and legal entity) for certain products.
Please see “Item 7—Management’s Discussion & Analysis—
Critical Accounting Estimates—Health Insurance Premium
Rebate Liability” for more information about the minimum
medical loss ratio and the Company’s rebate estimate
calculations. In addition, the Affordable Care Act imposes
limitations on the deductibility of compensation and certain
other payments.
Although Assurant Health has made, and continues to make,
signifi cant changes to its operations and products to adapt
to the new environment, the landscape continues to evolve,
and it is uncertain how effective any changes made by
Assurant Health will be in addressing potential diffi culties
we may face. Consequently, this segment could be adversely
affected if its plans for operating in the new environment
are unsuccessful or if there is less demand than we expect
for these products in the new environment.
Uncertainty remains with respect to a number of provisions of
the Affordable Care Act. Any inability of our businesses to adapt
to requirements of the Affordable Care Act and any signifi cant
continuing uncertainty with respect to its implementation
could lead to a material reduction in their profi tability.
The insurance and related businesses in
which we operate may be subject to periodic
negative publicity, which may negatively affect
our fi nancial results.
We communicate with and distribute our products and services
ultimately to individual consumers. There may be a perception
that some of these purchasers may be unsophisticated and
in need of consumer protection. Accordingly, from time to
time, consumer advocacy groups or the media may focus
attention on our products and services, thereby subjecting
us to negative publicity.
We may also be negatively affected if another company
in one of our industries or in a related industry engages
in practices resulting in increased public attention to our
businesses. Negative publicity may also result from judicial
inquiries, unfavorable outcomes in lawsuits, or regulatory or
governmental action with respect to our products, services
and industry commercial practices. Negative publicity may
cause increased regulation and legislative scrutiny of industry
practices as well as increased litigation or enforcement
action by civil and criminal authorities. Additionally, negative
publicity may increase our costs of doing business and adversely
affect our profi tability by impeding our ability to market
our products and services, constraining our ability to price
our products appropriately for the risks we are assuming,
requiring us to change the products and services we offer, or
increasing the regulatory burdens under which we operate.