While the U.S. enjoys the largest insurance market, U.S. companies no longer own the majority of the insurance market share in the country. Foreign companies do with 74% (Vaughan & Vaughan, 2013). This goes to show the extent to which foreign companies have grown in the insurance industry thanks to the globalization of insurance but also to the spread of wealth throughout the world. Insurance companies and finance go together as the former depends upon the latter for return on investment (ROI). Part of the problem with the globalization of insurance is that everything has been globalized—right down to investable markets. Since 2008, central banks around the world have lowered rates to the point that it is impossible for insurance funds to obtain a targeted ROI without investing in risk assets. Likewise, regulatory bodies have gone global as well with organizations like the Common Framework for the Supervision of Internationally Active Insurance Groups (IAIGs) also known as ComFrame. Many companies view it as an increase in regulation—which is understandable on both ends: tighter regulation makes it harder for insurance companies to make money (when regulation is loose, insurance markets tend to thrive—until the risk catches up with the marketplace and the bubble that is blown pops, as it did in 2008 the world over). Governments want increased regulation to protect themselves, as the 2008 global economic crisis showed what can happen when oversight is insufficient.
However, governments act in fits and starts and inevitably drift back towards deregulation. The 1982 law to allow public companies to purchase their own shares on the open market is one example. Rule 10b-18 was the SEC rule that created a legal process for companies to conduct share repurchases (Reda, 2018). Prior to that rule, share buybacks were illegal. When the SEC changed the law regarding buybacks it changed the nature of the business and its duties. Businesses no longer had to be profitable or successful or even have a long-term plan to succeed—now all they had to do was have access to cheap credit (which they all have now thanks to the Federal Reserve keeping the Fed Funds rate so low) and they could support their share price no matter the valuation. Companies from Apple to American Airlines are spending billions upon billions in share buybacks thanks to the law that now permits them to allocate capital in order to artificially maximize shareholder value (Light, 2019). In 2018, companies spent nearly half a trillion dollars on share repurchases (Egan, 2018). Shareholder value is what companies and their executives care most about. Investing in the future for them means investing in buybacks and keeping the share price high so that they can cash out. They also do it because all the funds of the world—from sovereign wealth funds to mutual funds to pension funds to, yes, insurance funds—need access to a market that will provide an adequate ROI. Insurance companies are part of the institutional investment community and with the kind of ROI that the S&P 500 has provided this year, the insurance companies would go out of business. Thus, even regulation that impacts publicly traded companies impacts insurance companies and their investments because investors are watching the S&P and looking at the financial statements of companies, too—and their actions will determine where the market prices these companies’ shares, which in turn impacts the investments of insurance companies all over the world.

Another issue that is being seen now is the fact that globalization is also not a one way street. As globalization increases so too does the rate at which countries revert back to nationalism. Nationalist self-interests have been on the rise in the U.S., the UK, multiple nations in the EU, Russia, China, India, and so on. The U.S. is currently attempting to renegotiate trade on multiple fronts in an attempt to create deals that are more beneficial to Americans. With every nation and company essentially on its own while insurers still seek to penetrate markets, conflict is bound to arise.

Conflict arises not just among countries and corporations but also among the regulatory agencies tasked with overseeing these markets and the rules that are meant to govern them in their practices of accounting and reporting. The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are two examples of regulatory bodies tasked with overseeing accounting practices, which affect...…subprime crisis was the result of an outcome that went back to the FASB’s desire to serve the needs of economics, accounting and finance all the same time (Flegm, 2008): “The problem developed because of the conflict between economics, accounting and finance—and the education of accountants. All three fields are vital to running a company but each has its place. In what some of us perceive to be an exercise of hubris, FASB has attempted to serve the needs of all three fields at the expense of manager or owner needs for control and performance measurements” (p. 40). With fair value accounting there is no degree of comparability as “each manager would be required to make his or her own value judgments, which, of course, would not be comparable to any other company's evaluations” (Flegm, 2008, p. 40). There is also no chance for consistency in such a method. In terms of consistency, fair value accounting is lacking as the basis for value judgment can easily become highly subjective (Flegm, 2008). Consistency is needed to understand what a company has on its books from one year to the next.

Historical cost accounting is a much more reliable, comparable, consistent and relevant way to practice accounting: the problem with historical cost accounting is that it does not allow one to inflate one’s balance sheet. Fair value accounting allows companies to create impressive balance sheets when the times are good and the market is moving in their favor. It is when the market turns against them that things become dire. And when the markets panic, funds suffer—including insurance funds.

Today, the global markets have banded together to keep everything afloat in spite of warning signs of recession on the horizon. Insurance companies are paying attention, since they were at the heart of the last crisis. The role that AIG played in setting off the U.S. economic crisis in 2008 has not gone unnoticed. Insurance companies are not only insuring financial products—they are also buying them. So it matters to insurance companies a great deal what is going on in the global market. The globalization of insurance is now at the mercy of the globalization of finance and loosely…