Controversy Continues Over Allstate CEO's Article

He said he had asked Allstate's New York companies "to report immediately any inappropriate or unregulated use by them of credit default swaps."

Yesterday, the Washington-based Competitive Enterprise Institute suggested it was Mr. Dinallo who was acting illegally.

"You know or ought to know that the interconnectedness of all financial markets means that anybody involved in issuing or purchasing debt instruments–things that almost all insurers do–played a "small role" in unregulated insurance markets. It seems that Mr. Wilson's statement was simply an acknowledgement of lawful business practices that are already common knowledge. Thus it appears that you are opening an inquiry under false pretenses," CEI wrote Mr. Dinallo.

The letter said there was reason to believe Mr. Dinallo's "real agenda may be to stop insurers, particularly large companies like Allstate, from calling for federal regulation of the insurance industry– something that may diminish your authority over such companies."

CEI claimed, "It is widely known that your employees have made telephone calls to other insurers operating in New York State asking them to back off of efforts to promote federal regulation of insurance. Thus, it appears rather certain that your real agenda has little or nothing to do with your publicly expressed motives."

The letter went on to cite laws that the group said made Mr. Dinallo's inquiry improper and to voice a "hope that some of the companies that you have taken to harassing will do the right thing and file a lawsuit against you and your department. We disagree with Allstate's call for mandatory federal chartering and disagree with the company on a wide range of other issues." It asked him to withdraw his threat to investigate.

Mr. Dinallo in his announcement of an inquiry said Mr. Wilson's article calling for federal regulation contained "inaccurate and misleading statements."

Allstate, based in Northbrook, Ill., said they had no comment regarding Mr. Dinallo's remarks.

Illinois Insurance Director Michael McRaith wrote the Times to criticize the Wilson article, saying before the current economic crisis, "Financial institutions pushed for deregulation to promote 'innovation' while fundamental consumer protections, like solvency, were dismissed as obstacles to profit. With this in mind, the myth-laden pleas of an otherwise prudent Tom Wilson, CEO of Allstate, in search of federal regulatory relief should be viewed cynically."

Mr. Dinallo had attacked the article for saying financially troubled American International Group sold credit default swaps as an insurer "suggesting any insurer could do the same, which is not true."

Mr. McRaith wrote, "Despite the prodigious incompetence of its non-insurance units, AIG operated 71 US-based insurers that continue to meet all obligations to consumers. As the poster child for regulatory reform, AIG underscores why state insurance regulators welcome collaborative integration with a federal financial systemic regulator."

Mr. Dinallo's office did not immediately respond to inquiries today as to where his Allstate inquiry stands and what his reaction is to the CEI criticism.