New York Attorney General Eliot Spitzer's office said Superintendent of Insurance Howard Mills' recent criticism of Mr. Spitzer's investigations "will cause us to re-evaluate the working relationship" and could create politically partisan rancor.
"We think we are at a critical juncture where we are turning the corner and bringing reform to the industry," said Spitzer spokesman Darren Dopp.
On Friday Mr. Mills suggested Mr. Spitzer's probes of commercial insurance bid-rigging and improperly documented financial transactions could have been undertaken in a way that did not hurt stockholders and cost thousands of insurance industry jobs.
Mr. Spitzer's investigations have made him a national figure and the favorite to win the Democratic primary for governor next year, when he could face the man who appointed Mr. Mills, incumbent Republican Gov. George Pataki.
Mr. Mills is a former assemblyman who staged an unsuccessful run against 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 when he came into office, and we wondered whether or not he could put that aside and concentrate on his responsibilities of office."
At an industry gathering Friday, Mr. Mills ripped into the Spitzer investigations, asserting that the same results could have been achieved in a less public and more "surgical" manner. (See related NU Online story.)
"It does not need to be done in so public a way as to affect the stock of a public company and have 5,000 people lose their jobs," Mr. Mills said in announcing a new Corporate Practices Unit in the Insurance Department that will look into abuses in the insurance industry.
Mr. Dopp said that Mr. Mills was a new player "who came on board with some credentials that were at least in question."
"We would like to give the guy the benefit of the doubt, and we don't think you really need some in-depth experience to do a good job," Mr. Dopp said.
Mr. Mills was named to the post in January of this year after serving three terms in the Assembly and taking on what many termed the thankless task of running against Mr. Schumer last year. He was named 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 standards and a protector of consumers and honest companies who obey the law."
Mr. Dopp said the record of the attorney general's office speaks for itself with settlements reached with three brokerage firms. "And most importantly, they stopped the fraudulent activity," he said.
Mr. Mills' comments indicate that he doesn't understand his job or what he is supposed to be doing, Mr. Dopp said.
Gregory Serio, who preceded Mr. Mills as superintendent, was portrayed by Mr. Dopp as someone "who when the problem was revealed was eager to get to the bottom of it and had an aggressive response."
"Heretofore Mr. Mills has agreed to work with us, but if this signals 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 Insurance Department's watch, and you have to accept responsibility when something like that occurs," Mr. Dopp said. "Having said that, we always understood that they were lied to and duped."
He said there will be a settlement with AIG, "but not until they acknowledge misleading the Insurance Department."
"But the key point is that Mr. Serio throughout the process said that 'we have to be aggressive, not only for the customers but for the honest corporations out there,'" Mr. Dopp continued.
He minimized the impact on the course of the investigations that could result from a split with the Insurance Department. "We always carried a tagline thanking the Insurance Department for their contributions, minimal though they were," he said.
New York–New York's top insurance regulator Howard Mills told a meeting here that State Attorney General Eliot Spitzer's probe of the insurance business caused unnecessary harm to industry workers and stockholders.
The state insurance superintendent's criticism Friday came with an announcement he is starting a new unit to investigate industry abuses that he said will conduct operations in a more precise and less damaging way than Mr. Spitzer.
"These efforts can be done a lot more surgically. They do not need to be done in so public a way as to damage the stock of a public company and cause 5,000 people to lose their jobs," he said in a reference to one of Mr. Spitzer's targets, Marsh and McLennan Companies.
Mr. Spitzer's office said later that Mr. Mills' comments could damage the working relationship of the two agencies and inject political partisanship. See related story in NU Online..
Since October 2004, when Mr. Spitzer began inquiries into transactions used to create improper financial statements and commercial insurance price-fixing by brokers and various carriers, MMC has announced the layoff of 5,500 workers and its stock price has dropped by 33 percent.
The stock of American International Group, another target of the attorney general's probes, has declined during that period from over $70 to below $50 a share.
Mr. Mills told the Association of Insurance and Reinsurance Runoff Companies that his investigatory unit, titled the Corporate Practices Unit, will consist of five attorneys looking into abuses.
Mr. Mills' criticism of Mr. Spitzer comes as the attorney general is looked on as the certain favorite to win the Democratic nomination for governor next year and possibly oppose the man who appointed Mr. Mills, Republican incumbent Gov. George Pataki.
Mr. Mills in announcing his new unit said, "I am not trying to out-attorney general the attorney general."
His criticism is in contrast to a legislative hearing in January, where Mr. Mills' predecessor, Gregory V. Serio, and Mr. Spitzer carefully complimented each other for the role they took in the investigations.
They did, however, engage in a certain amount of one-upmanship as to who initiated the whole probe and who might have dropped the ball. Mr. Mills' criticism of Mr. Spitzer is a lot more pointed than any directed at the attorney general by Mr. Serio.
In other news, Mr. Mills said the department will adopt the National Association of Insurance Commissioners model regulation regarding finite reinsurance. It calls for full disclosure and CEO attestation that the contracts actually transfer risk.
While an earlier circular letter to the industry from Mr. Mills concerning the same topic took a tougher approach, Mr. Mills said the NAIC model was adopted in the interest of uniformity.
Also, Mr. Mills said his department would no longer conduct regular periodic market conduct exams but rather "shift to a risk-based exam structure."
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