NEW YORK — Insurance regulation should focus on deterring futurewrong acts, not on punishing the sins of the past, New York's topregulator said here Friday. 

New York Department of Financial Services SuperintendentBenjamin Lawsky, speaking before the Insurance Federation of NewYork (IFNY), told the crowd of insurance professionals, "I do thinkwe've entered an era right now of very severe enforcement."

He explained, "It feels as if the focus more and more is onpunishing firms for acts that happened years ago. We're moving moreand more in that direction even as we move further and further awayfrom the financial crisis."

Lawsky said the punishment being meted out against firms ismassive, but done in a way "that I don't think focuses on deterringthe conduct we want to deter going forward in thefuture." 

He clarified, "Don't get me wrong, there is a place, in my view,for clear rules, and enforcement when those rules are broken. Butit feels like we're moving into an era where we're not doing any ofthat, and it's just punishment for punishment's sake, and we'refocused on the past instead of where we are now and thefuture."

Lawsky expressed concern about what such enforcement could meanfor the financial-services industry in New York, and he called fora "balanced middle approach to enforcement where wrongdoers areheld accountable without throwing the baby out with the bathwaterand killing the golden goose of New York City."

He concluded, "And I think it's time that we have a realdialogue in society at large about how we're going to go forward onthese issues."

ACE Chairman and CEO Evan Greenberg, who received the FreeEnterprise Award at the IFNY luncheon, also took issue withregulations contemplated and enacted in the wake of the financialcrisis. Both he and Lawsky indicated that regulations are taking abank-centric approach that does not make sense for the insuranceindustry.

Greenberg said the current global regulatory environment is"difficult" and "politically charged." He said, "It has never beenmore complex, demanding and in my judgment confused. It is one ofthe greatest challenges our industry faces today. In fact, it wouldbe far more difficult to build ACE today in this environment."

He said while many regulators do a good job, some at thenational and multilateral level "are confused about mission and theissues."

He explained, "At the leadership levels, they are directed bythose with banking experience and very little knowledge andappreciation for our industry and the important differences."

Greenberg called the effort to designate large global insurancecompanies as systemically important "wrongheaded and simply notrelevant" as it relates to the companies' traditional insurancebusiness.

"The failure of an insurance company engaged in traditional lifeor non-life insurance, while potentially a major event, does notpose a systemic threat to the global financial system," hesaid.

He added, "The notion of regular insurers designated assystemically important to hold more capital than other insurers,again for traditional insurance business, makes little sense. Itwould needlessly disadvantage them, and for whatbenefit?" 

Lawsky agreed there is too much focus on banks in insuranceregulation today, noting that the focus on fixing everything thatwent wrong with banks during the financial crisis has spilled overto insurance companies. He said that "it frankly is insane as weconsider how to apply bank standards to insurers," and he calledfor a "nuanced, thoughtful debate" about insurance regulation thathe indicated seems to be missing today.