New York Insurance Superintendent Eric Dinallo agreed that some sort of national insurance regulation is likely on the horizon, but he urged that American International Group not be made into a poster child to support such a shift, and said he opposes an optional federal charter system.

Speaking at the 20th Annual Executive Conference for the Property-Casualty Industry, produced by The National Underwriter Company, he said he thinks there is a “very strong likelihood that we're heading to some kind of federal role in the insurance industry.”

Mr. Dinallo–who recently backed off on his plan to start regulating parts of the credit default swap market, and agreed to allow Washington to take the lead (see story on page 6)–indicated he is not necessarily opposed to federal oversight, calling aspects of state regulation “clunky,” especially on form development and agent licensing. “I've not been one of these extremely resistant state regulators because I can see, first of all, that we need certain standardization through the industry,” he said.

However, he said AIG should not be “Exhibit A” for an optional federal charter, adding that states should be proud of the job they've done regulating AIG's operating companies and keeping them strong.

He also said he opposes any kind of “optional” oversight, contending that regulation is at its best when there is no choice. He said an OFC could result in regulatory arbitrage, and “lead to an inevitable distancing where, I, as a regulator, am not going to get too much in your hair, because you can go over and date someone else, and we're not married yet.”

“I just urge all of you to actually step back about this [OFC],” Mr. Dinallo said, adding it is better to have “committed, holistic oversight than this inevitable distancing that goes on in an optional relationship.”

Regarding where federal lawmakers might want to get involved, Mr. Dinallo said reinsurance may be one of the first areas, while monoline firms could also be targeted.

He said that although people at the federal level respect the actions taken by the New York Insurance Department on monoline bond insurers, “they have a justifiable position to want to look at it and see why it's not regulated federally, because [monolines] are engaging in the guarantee of our financial instruments across the globe.”

Special Reports /

Dinallo: Don't Make AIG Poster Child In Campaign For Federal Regulation

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