WASHINGTON (March, 17, 2009) – John T. Hill, president/COO of the New York-based Magna Carta Companies and chairman-elect of the National Association of Mutual Insurance Companies’ (NAMIC) board of directors, testified at a crucial Senate hearing today. Titled Perspectives on Modernizing Insurance Regulation, it was the Senate Banking, Housing, & Urban Affairs Committee’s first hearing on insurance regulation since the nation’s financial crisis began.
“The current crisis demands that Congress act, but Congress must act prudently and responsibly, focusing limited resources on the most critical issues,” Hill testified. “We encourage Congress to adopt a measured approach to the problems at hand and avoid the inclination to rush to wholesale reform.”
Hill explained to the committee that NAMIC represents 1,400 property/casualty insurance companies that serve millions of consumers and businesses in towns and cities throughout the nation. He explained that, unlike other financial services, such as life insurance, property/casualty insurers maintain significantly higher ratios of capital to assets and are less affected by investment risk.
“Today, as other financial services companies are failing and seeking government assistance, property/casualty insurers continue to be well capitalized and neither seek nor require federal funding,” Hill said. “The industry is competitive, solvent, and generally well regulated.”
NAMIC supports a reformed system of the state-based regulation of insurance. Weaknesses in federal banking solvency regulation can be seen in the 25 banks that failed last year and the 17 that have already failed this year. “Contrast this with the property/casualty insurance industry that had an excellent solvency record in 2008 in spite of a large drop in investment income and Hurricane Ike, the fourth most-expensive hurricane in U.S. history,” Hill told the committee. “The state-based insurance regulatory system has, in fact, proven to be one of the few bright spots in our nation’s regulatory structure.”
To address the current crisis, NAMIC encourages regulatory coordination and cooperation and information exchange. Specifically, NAMIC recommends Congress:
“As policymakers work to develop long-term solutions to our present financial crisis, NAMIC urges Congress to keep in mind the dramatic differences between main street organizations continuing to meet the needs of their local markets and those institutions that caused this crisis and have either gone out of business or required unprecedented government financial intervention,” Hill said.
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