WASHINGTON (June 17, 2009) – The Obama administration today offered several positive recommendations that could help address the regulatory problems that created the current financial crisis, according to the National Association of Mutual Insurance Companies (NAMIC). The release of the long-anticipated white paper will be accompanied by testimony from Treasury Secretary Timothy Geithner before the Senate Banking Committee and House Financial Services Committee tomorrow.
"We appreciate the Obama administration's effort to draft a plan that thoughtfully addresses the tremendously complex set of challenges that confront the U.S. financial system,” said Charles M. Chamness, president and CEO of NAMIC. “The white paper is appropriately focused on the current and likely future causes of systemic risk, which it identifies as excessive leverage, under-capitalization, and insufficient liquidity on the part of some financial holding companies. By pointing to these concerns, the paper implicitly recognizes that property/casualty insurance companies – particularly mutual insurers whose sole focus is the policyholder – have performed exceptionally well throughout this crisis and do not pose a risk to the financial system.”
The 85-page document proposes broad reforms to all areas of financial services regulation, based on current and possible future regulatory failures. In its section on insurance, the report explicitly states that the current crisis did not stem from widespread problems in the insurance industry. In the case of AIG, the report explains that the main problems were created outside of its traditional insurance business. “We are pleased that the paper recognizes that AIG was a financial holding company, which contained well-regulated insurance subsidiaries as well as a poorly regulated non-insurance subsidiary that engaged in risky non-insurance activities,” Chamness said.
“We note the administration’s proposal to create an Office of National Insurance whose structure and limited authority parallels the Office of Insurance Information that has been proposed in legislation currently pending in the House of Representatives and which NAMIC has endorsed,” Chamness said. “Since the paper does not propose assigning regulatory authority to the ONI, we believe that ‘any new insurance regulatory regime’ refers to regulatory reforms that potentially could be undertaken within the existing state-based regulatory system, which the paper leaves undisturbed and fully intact.
“NAMIC does have concerns with some of the language in the draft paper, and we look forward to providing further input as we review the legislative language and listen to the perspective of President Obama and Secretary Geithner.”
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