The Obama administration's initial comprehensive white paper onfinancial services regulatory reform explicitly acknowledged thattraditional property and casualty insurers did not cause thecurrent fiscal crisis.

This acknowledgement, and the fact that the administration'sproposal focuses on the real problem of systemic risk, is anappropriate, focused response to address the immediate systemicrisk gaps.

With so many competing priorities facing our country, thisrealistic approach could create immediate reforms without beingbogged down in the ongoing debate over state-vs.-federal regulationof the property and casualty industry.

In the midst of the currentmeltdown, the p&c industry has performed well, whichunderscores that overall it is not systemically risky.

An analysis of the recent and historical impairment activityover the last 30 years for major sectors of the financial servicesindustry demonstrates clearly that the p&c industry has aconsistent and low historic impairment rate that is uncorrelatedwith larger economic downturns.

Other financial sectors have shown tremendous variance, withspikes in impairments going hand-in-hand with recessions.

The life and health insurance business registered nearly 4percent in impairments during the 1990-91 recession, while banksapproached 10 percent in 2008.

But the most marked spikes, historically, have been amongthrifts, which hit 4 percent by the end of the 1980-82 recession,shot past 12 percent in 1991, and zoomed off the chart in 2008 to31.2 percent.

Conversely, the percentage of industry impairments since 1980 inthe p&c insurance sector has never risen above 1.5 percent, andhas been consistently close to zero since 2004–even during thecurrent down cycle.

In dollar terms, the phenomenon is similar.

o Total assets of impaired life and health firms spiked atnearly $7.5 billion in 1991.

o The total assets of impaired banks hit the $7.5 billion markin the early days of the 1980-81 recession, then spikeddramatically in 2008 to $56 billion.

o Thrifts once again had the most dramatic spikes, withimpairments representing $17.5 billion in total assets during the2001-03 recession, then shooting off the chart in 2008 to $62billion.

o In stark contrast, the p&c insurance sector has beennearly at zero in the dollar value of industry impairments since2004.

Facts are facts. While some industry sectors do have periodicfailure spikes correlated with–and exacerbating–economic downcycles, p&c insurance is simply not systemically risky.

When it comes to weathering the existing economic crisis,p&c insurers, like every other industry, were hit hard andsuffered a decline in net income.

But they did remain profitable in 2008 and finished the yearwith more than a trillion dollars available to pay claims, which isa remarkable testament to the industry's risk management andbusiness practices.

The difference in performance between our business and otherfinancial services industries demonstrates that the currentdownturn did not originate with the traditional p&c insurancesector. While things have gone wrong elsewhere, clearly somethingis going right on the p&c side.

As such, we would suggest systemically risky activities shouldbear the costs of their own risk, rather than spreading risksoriginating from highly leveraged activities to the p&c sector,which has consistently demonstrated good fiscal health.

If derivatives activities such as credit default swaps cancreate systemic problems requiring government bailouts, then thosecosts should be factored into those products. This solution wouldinduce industries engaged in such activities and their regulatorsto seek the optimal balance between risk leveraging and solvencyprotection.

However, forcing heavily regulated, stable industries tocross-subsidize risky products would only increase marketdistortion and moral hazards.

The data does not support proposals to take an industry that hasproven its stability through the worst financial crisis ingenerations and subject it to a duplicative federal system thatoversaw the current collapse.

While the Property Casualty Insurers Association of Americasupports creating a systemic risk overseer to monitor and flagrisky activities from non-insurance holding company parents, itwould be inappropriate and unhelpful for a regulator to interferein the activities of the insurance affiliates that are healthy andalready subject to robust prudential regulation.

Insurers are subject to stringent capital and surplusrequirements that are in place to ensure that they can meet theirobligations to policyholders.

Any federal systemic risk oversight should also consider thatthe impact of insolvencies in the insurance industry is mitigatedsignificantly by the existing insurance guaranty fund system.Consumers are protected as every state, and the District ofColumbia, has a guaranty fund that pays consumer insurance claimsif their carrier becomes insolvent.

The best solution to the current crisis is simply to targetreforms where they are needed, which is why PCI supports thecreation of a systemic risk overseer to alert regulators to loominghazards.

But the historical numbers clearly show that the p&cindustry does not present a systemic risk. We should always seeksolutions to our problems, but we should never try to solveproblems that do not exist.

David A. Sampson is president and CEO of theProperty Casualty Insurers Association of America in Des Plaines,Ill. Mr. Sampson was formerly deputy secretary of the U.S.Department of Commerce under President George W. Bush.