While state regulation of insurance has strong arguments in its favor, the breadth of the federal government's latest involvement in the financial sector could pull regulation of insurance into its orbit, according to an insurance consultant.
Joy Schwartzman, an insurance consultant with the Seattle-based actuarial and consulting firm Milliman, said that the involvement of the Federal Reserve in any bailout of insurers will elevate the level of discussion about some federal regulation of insurance.
However, she noted, state regulators have a strong argument to preserve the current system because the solvency issue over American International Group involved the company's noninsurance entities, while the insurance arms remained strong. She said state regulators are already pointing out that the failure to regulate was not at the state end but the federal end.
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