Notwithstanding the bad press generated by the AIG bailout, property-casualty carriers must convince Congress they are better at risk management than their banking counterparts to avoid federal regulation.

In a recent presentation sponsored by the National Underwriter, Robert P. Hartwig, president of the Insurance Information Institute, outlined the key points insurers need to present their cases:

o Insurers are more disciplined than banks in underwriting, especially in managing their overall exposures

o Insurers have low leverage–especially compared with banks

o Insurers have relatively conservative investment portfolios that are far less volatile and more liquid than banks

o Insurers maintain a strong relationship between underwriting and risk-bearing, unlike banks which package and securitize their risks.

And although Hartwig conceded that some form of federal insurance oversight appeared inevitable, he cited “a lot of unresolved issues” for the industry and Congress to work through before that happened, including:

o Differences, if any, between the regulation of life insurers versus their property-casualty counterparts

o The fate of state guaranty funds, with the Federal Deposit Insurance Corp. exploring the idea of establishing a national insurer insolvency backstop

o Whether regulatory authority might be split on a functional basis, with Washington handling solvency, while the states continue to oversee forms and pricing–a possibility Hartwig characterized as “an extraordinary conflict”

o How to reconcile differences in state workers' compensation laws, including the fate of state funds.

Special Reports /

Industry IQ: III&#039;s Hartwig: Banks, Not Insurers, Need More Laws

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Industry IQ: III's Hartwig: Banks, Not Insurers, Need More Laws