Non-Tariff Barriers to Alien Insurance in the United States

Abstract

The relative importance of foreign investment in the American insurance market has been declining rapidly since World War II. The market share of alien insurers is less than seven percent, a low degree of market penetration. In the absence of tariffs on insurance imports, nontariff barriers such as quotas and restrictive state-trading policies, export subsidies and taxes, discriminatory government and private procurement policies, selective indirect taxes, selective domestic subsidies and aids, restrictive administrative and technical regulations as well as restrictive business practices must be considered as factors explaining the small alien role in American insurance. The study finds nontariff barriers to alien insurers to be present but not controlling in explaining limited market entry. The role of the insurance institution in international trade has become the subject of increasing interest in recent years as a result of a massive expansion of trade and investment, with concurrent problems of balances of payments and protectionism, particularly on the part of developing nations. The United Nations Conferences on Trade and Development in 1964, and subsequently, adopted resolutions' designed to shelter insurance as an infant industry in each of the developing nations. The International Insurance Advisory Council of the U.S. Chamber of Commerce promulgated a position paper outlining the various kinds of insurance recriminations practiced by foreign countries that limit freedom of trade in insurance and reinsurance.2 More recently, the Congress of the United States expressed Irving Pfeffer is Professor of Finance and Insurance, Virginia Polytechnic Institute and State University. He has served as consultant to government and insurance organizations. He is author of numerous articles and several books. He is a member of the State Bar of California. I Nagendra Singh, Achievements of UNCTAD-1 (1964) and UNCTAD-l1 (1968) in the Field of Shipping and Invisibles, S. Chand & Co., New Delhi, India, 1969, pp. 232233, reproduces the Recommendation of the 1964 Conference adopted by a roll-call vote of 100 to 1, with 12 abstentions, favoring the encouragement and strengthening of national insurance and reinsurance markets to increase their retention capacity. They also recommended that Technical reserves and guarantee deposits of insurance and reinsurance companies or institutions should be invested in the country where the premium income arises. 2 International Insurance Advisory Council, Chamber of Commerce of the United States, Position Paper on International Insurance and Reinsurance, Washington, 1972.