Rep. Kanjorski Renews Call For Federal Oversight Of Insurers

NU Online News Service, June 17, 10:15 a.m. EDT

WASHINGTON–Congress should launch federal regulation of the insurance industry with oversight of bond insurers, mortgage insurers, and reinsurers, the chairman of a House subcommittee said yesterday.

The comments came from Rep. Paul Kanjorski, D-Pa., who heads the Capital Markets Subcommittee of the Financial Services Committee.

He said that Congress can no longer "sweep insurance regulation under the rug and cross our fingers that nothing will go wrong."

To start, Rep. Kanjorski said, the federal government should "actively regulate" some specific insurance lines, especially those that pose systemic risk or which have a national significance."

He also said that he believes the federal government should directly examine all complex financial holding companies, including those whose primary activities involve underwriting insurance and "those who play with credit default swaps."

He noted that besides American International Group, several other insurance holding companies have a federal banking regulator as their primary supervisor, and more than six dozen similar entities avoid any form of federal oversight, with selected states instead monitoring them on a consolidated basis.

And, he said, "I also believe that we should examine how we can promote greater uniformity in the industry, with or without the establishment of a federal charter."

For international areas, insurers "must have" a federal regulatory voice on a par with the banking and securities sectors "so that the industry can communicate with its peer regulators at home," said Mr. Kanjorski.

He made his remarks at a hearing on insurance and systemic risk that he convened.

"I believe that only ostriches can now deny the need for establishing a federal insurance resource center and a basic federal insurance regulatory structure," he said.

In his statement, Mr. Kanjorski noted insurance is a complex and important part of the U.S. financial industry with more than $6.3 trillion in assets under management and $1.23 trillion in annual premiums.

"We need to recognize this reality by modernizing the overall regulatory treatment of insurance," he added.

"We also need to protect against the risks certain sectors of the industry may pose and address the greater sensitivity that some industry segments have to external events," he explained.