Assurant 2013 Annual Report Download - page 24

ASSURANT, INC. – 2013 Form 10-K12
PART I
ITEM 1 Business
Regulation
The Company is subject to extensive federal, state and
international regulation and supervision in the jurisdictions
where it does business. Regulations vary from jurisdiction
to jurisdiction. The following is a summary of signifi cant
regulations that apply to our businesses and is not intended to
be a comprehensive review of every regulation to which the
Company is subject. For information on the risks associated
with regulations applicable to the Company, please see
Item 1A, “Risk Factors.”
U.S. Insurance Regulation
We are subject to the insurance holding company laws in
the states where our insurance companies are domiciled.
These laws generally require insurance companies within
the insurance holding company system to register with the
insurance departments of their respective states of domicile
and to furnish reports to such insurance departments regarding
capital structure, ownership, fi nancial condition, general
business operations and intercompany transactions. These laws
also require that transactions between affi liated companies
be fair and equitable. In addition, certain intercompany
transactions, changes of control, certain dividend payments
and transfers of assets between the companies within the
holding company system are subject to prior notice to, or
approval by, state regulatory authorities.
Like all U.S. insurance companies, our insurance subsidiaries
are subject to regulation and supervision in the jurisdictions in
which they do business. In general, this regulation is designed
to protect the interests of policyholders, and not necessarily
the interests of shareholders and other investors. To that
end, the laws of the various states and other jurisdictions
establish insurance departments with broad powers with
respect to such things as:
• licensing and authorizing companies and intermediaries
(including agents and brokers) to transact business;
•regulating capital, surplus and dividend requirements;
• regulating underwriting limitations including imposing
minimum loss ratio requirements;
• regulating companies’ ability to enter and exit markets or
to provide, terminate or cancel certain coverages;
• imposing statutory accounting and annual statement
disclosure requirements;
• regulating product types and approving policy forms and
mandating certain insurance benefi ts;
• regulating premium rates, including the ability to disapprove
or reduce the premium rates companies may charge;
•imposing fi nes, penalties or other expenses;
• regulating claims practices, including the ability to require
companies to pay claims on terms other than those mandated
by underlying policy contracts;
•regulating certain transactions between affi liates;
• regulating the form and content of disclosures to consumers;
• regulating the type, amounts and valuation of investments;
•mandating annual tests to analyze adequacy of reserves;
• mandating assessments or other surcharges for guaranty
funds and the ability to recover such assessments in the
future through premium increases; and
•regulating market conduct and sales practices of insurers
and agents.
Dividend Payment Limitations
Our holding company’s assets consist primarily of the capital
stock of our subsidiaries. Accordingly, our holding company’s
future cash fl ows depend upon the availability of dividends and
other statutorily permissible payments from our subsidiaries.
The ability to pay such dividends and to make such other
payments is regulated by the states in which our subsidiaries
are domiciled. These dividend regulations vary from state
to state and by type of insurance provided by the applicable
subsidiary, but generally require our insurance subsidiaries to
maintain minimum solvency requirements and limit the amount
of dividends these subsidiaries can pay to the holding company.
For more information, please see Item 7, “Management’s
Discussion and Analysis of Financial Condition and Results
of Operations—Liquidity and Capital Resources—Regulatory
Requirements.”
Risk Based Capital Requirements
In order to enhance the regulation of insurer solvency, the
National Association of Insurance Commissioners (“NAIC”) has
established certain risk-based capital standards applicable to
life, health and property and casualty insurers. Risk-based
capital, which regulators use to assess the suffi ciency of an
insurer’s statutory capital, is calculated by applying factors
to various asset, premium, expense, liability and reserve
items. Factors are higher for items which in the NAIC’s view
have greater underlying risk. The NAIC periodically reviews
the risk-based capital formula and changes to the formula
could occur in the future.
Investment Regulation
Insurance company investments must comply with applicable
laws and regulations that prescribe the kind, quality and
concentration of investments. These regulations require
diversifi cation of insurance company investment portfolios and
limit the amount of investments in certain asset categories.