An array of factors has triggered the current financial crisis. However, there is no compelling proof to indicate that P&C insurers did anything to contribute to the mess, says a recent report issued by National Association of Mutual Insurance Companies (NAMIC).

Written by former Illinois Director of Insurance Nat Shapo, the 15-page report analyzes the causes of the nation's financial crisis and cautions Congress to avoid disturbing the financial markets and regulatory systems that have served consumers well. Specifically, NAMIC cites a tradition of prudent management and state-based solvency regulation that has been advantageous to P&C insurers and their policyholders alike.

“NAMIC member companies — with their established record of conservative management and prudent decision making — know that the state-based system of insurance company solvency regulation has proven to be effective and reliable even as the ongoing financial crisis has exposed weaknesses in the regulatory regimes that govern other financial institutions,” said Chuck Chamness, NAMIC president/CEO. “As a result, insurance companies today are able to provide their policyholders with needed protection even in a time of terrible strain. While not perfect, the insurance financial regulatory system has provided a source of comparative stability during the financial crisis.”

Titled “Financial Oversight Failure Highlights Effectiveness of Insurance Regulation,” the report also illustrates structural and behavioral differences between the P&C industry and various financial institutions, listing factors that led to the economic turmoil. For instance, NAMIC notes that many misconstrue credit default swaps as “insurance.” Because many experts agree that credit default swaps played a notable role in instigating the meltdown, members of the public may erroneously conclude that insurance companies are inadequately regulated. NAMIC explains that, in fact, credit default swaps are not an insurance product and therefore have nothing to do with the business of insurance.

While stressing that Congress should avoid imposing costly federal regulation on the insurance industry, NAMIC recommended that a federal Office of Insurance Information be created to bolster the federal government's institutional knowledge of insurance markets.

“A well-conceived OII would address federal information gaps about insurance regulation and assist Congress in overseeing the functional regulation of financial services,” the report states.

On Monday, NAMIC distributed copies of the report to all members of Congress and state insurance policymakers. Only time will tell if the recipients of heed the well-intended advice.

Special Reports /

NAMIC Warns Against Overzealous Regulation

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