New York Attorney General Eliot Spitzer's office saidSuperintendent of Insurance Howard Mills' recent criticism of Mr.Spitzer's investigations "will cause us to re-evaluate the workingrelationship" and could create politically partisan rancor.

"We think we are at a critical juncture where we are turning thecorner and bringing reform to the industry," said Spitzer spokesmanDarren Dopp.

On Friday Mr. Mills suggested Mr. Spitzer's probes of commercialinsurance bid-rigging and improperly documented financialtransactions could have been undertaken in a way that did not hurtstockholders and cost thousands of insurance industry jobs.

Mr. Spitzer's investigations have made him a national figure andthe favorite to win the Democratic primary for governor next year,when he could face the man who appointed Mr. Mills, incumbentRepublican Gov. George Pataki.

Mr. Mills is a former assemblyman who staged an unsuccessful runagainst U.S. Sen. Charles Schumer, D-N.Y.

"You have to wonder if this is all about that," Mr. Dopp said."After all, this [partisan politics] was Mr. Mills' background whenhe came into office, and we wondered whether or not he could putthat aside and concentrate on his responsibilities of office."

At an industry gathering Friday, Mr. Mills ripped into theSpitzer investigations, asserting that the same results could havebeen achieved in a less public and more "surgical" manner. (Seerelated NU Online story.)

"It does not need to be done in so public a way as to affect thestock of a public company and have 5,000 people lose their jobs,"Mr. Mills said in announcing a new Corporate Practices Unit in theInsurance Department that will look into abuses in the insuranceindustry.

Mr. Dopp said that Mr. Mills was a new player "who came on boardwith some credentials that were at least in question."

"We would like to give the guy the benefit of the doubt, and wedon't think you really need some in-depth experience to do a goodjob," Mr. Dopp said.

Mr. Mills was named to the post in January of this year afterserving three terms in the Assembly and taking on what many termedthe thankless task of running against Mr. Schumer last year. He wasnamed to the insurance post after losing handily in November.

"Clearly the comments are a source of concern," said Mr. Dopp."He is supposed to be a proponent of the highest business standardsand a protector of consumers and honest companies who obey thelaw."

Mr. Dopp said the record of the attorney general's office speaksfor itself with settlements reached with three brokerage firms."And most importantly, they stopped the fraudulent activity," hesaid.

Mr. Mills' comments indicate that he doesn't understand his jobor what he is supposed to be doing, Mr. Dopp said.

Gregory Serio, who preceded Mr. Mills as superintendent, wasportrayed by Mr. Dopp as someone "who when the problem was revealedwas eager to get to the bottom of it and had an aggressiveresponse."

"Heretofore Mr. Mills has agreed to work with us, but if thissignals some kind of shift where he is taking a different view,there may be problems," Mr. Dopp said.

"The bottom line is it [the scandals] happened on the InsuranceDepartment's watch, and you have to accept responsibility whensomething like that occurs," Mr. Dopp said. "Having said that, wealways understood that they were lied to and duped."

He said there will be a settlement with AIG, "but not until theyacknowledge misleading the Insurance Department."

"But the key point is that Mr. Serio throughout the process saidthat 'we have to be aggressive, not only for the customers but forthe honest corporations out there,'" Mr. Dopp continued.

He minimized the impact on the course of the investigations thatcould result from a split with the Insurance Department. "We alwayscarried a tagline thanking the Insurance Department for theircontributions, minimal though they were," he said.

New York–New York's top insurance regulator Howard Mills told ameeting here that State Attorney General Eliot Spitzer's probe ofthe insurance business caused unnecessary harm to industry workersand stockholders.

The state insurance superintendent's criticism Friday came withan announcement he is starting a new unit to investigate industryabuses that he said will conduct operations in a more precise andless damaging way than Mr. Spitzer.

"These efforts can be done a lot more surgically. They do notneed to be done in so public a way as to damage the stock of apublic company and cause 5,000 people to lose their jobs," he saidin a reference to one of Mr. Spitzer's targets, Marsh and McLennanCompanies.

Mr. Spitzer's office said later that Mr. Mills' comments coulddamage the working relationship of the two agencies and injectpolitical partisanship. See related story in NU Online..

Since October 2004, when Mr. Spitzer began inquiries intotransactions used to create improper financial statements andcommercial insurance price-fixing by brokers and various carriers,MMC has announced the layoff of 5,500 workers and its stock pricehas dropped by 33 percent.

The stock of American International Group, another target of theattorney general's probes, has declined during that period fromover $70 to below $50 a share.

Mr. Mills told the Association of Insurance and ReinsuranceRunoff Companies that his investigatory unit, titled the CorporatePractices Unit, will consist of five attorneys looking intoabuses.

Mr. Mills' criticism of Mr. Spitzer comes as the attorneygeneral is looked on as the certain favorite to win the Democraticnomination for governor next year and possibly oppose the man whoappointed Mr. Mills, Republican incumbent Gov. George Pataki.

Mr. Mills in announcing his new unit said, "I am not trying toout-attorney general the attorney general."

His criticism is in contrast to a legislative hearing inJanuary, where Mr. Mills' predecessor, Gregory V. Serio, and Mr.Spitzer carefully complimented each other for the role they took inthe investigations.

They did, however, engage in a certain amount of one-upmanshipas to who initiated the whole probe and who might have dropped theball. Mr. Mills' criticism of Mr. Spitzer is a lot more pointedthan any directed at the attorney general by Mr. Serio.

In other news, Mr. Mills said the department will adopt theNational Association of Insurance Commissioners model regulationregarding finite reinsurance. It calls for full disclosure and CEOattestation that the contracts actually transfer risk.

While an earlier circular letter to the industry from Mr. Millsconcerning the same topic took a tougher approach, Mr. Mills saidthe NAIC model was adopted in the interest of uniformity.

Also, Mr. Mills said his department would no longer conductregular periodic market conduct exams but rather "shift to arisk-based exam structure."