WASHINGTON–State insurance legislators and regulators meeting here rejected comments made by U.S. Treasury Secretary Henry Paulson attacking state insurance regulation in the wake of the American International Group credit crisis.
Mr. Paulson made his comments on Meet the Press on Sept. 21 (see story on NU Web site). The remarks were made in the aftermath of a federal investment of 79.9 percent with an $85 billion loan for AIG.
North Dakota State Rep. George Keiser, R-Bismarck, the secretary of the National Conference of Insurance Legislators, said AIG's problems were on its investment side and not with the insurance subsidiaries. His response was made during the fall meeting of the National Association of Insurance Commissioners here.
"The U.S. is the best insurance market worldwide and offers the best protection for consumers worldwide," he continued. The "problems surfacing have been at the federal level of regulation," Mr. Keiser added.
He noted that within 24 hours of the start of the AIG crisis, locally based state regulators were explaining to consumers what the crisis meant to them and that the insurance subsidiaries are sound. "We didn't have to wait for a federal bureaucracy."
Mr. Paulson in the televised interview was highly critical yesterday of AIG's oversight and called for federal regulation of insurance companies.
NAIC President and Kansas Insurance Commissioner Sandy Praeger responded last week to the AIG situation, affirming the strength of state regulation. She is expected to reiterate this position tomorrow during a public briefing here.
New York Insurance Commissioner Eric Dinallo in a letter to the editor of the Financial Times pointed out that the AIG holding company was regulated by the federal Office of Thrift Supervision.
Mila Kofman, Maine Director of Insurance, noted Ms. Praeger's earlier remarks and offered her own thoughts. Ms. Kofman said the problems were focused on the AIG holding company and "the whole mess was created under federal watch. Because of effective state-based insurance regulation, the insurance subsidiaries of AIG are financially solvent and not in trouble."
"The approach from Secretary Paulson to deregulate insurance through an Optional Federal Charter and an Office of Insurance Information is exactly what we do not want and will not protect consumers." Ms. Kofman said these two approaches do not have enforcement standards that could ensure effective regulation.
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