WASHINGTON (June 16, 2009) – Property/casualty insurance does not pose a systemic risk and should not be subject to any new federal systemic authority, according to the National Association of Mutual Insurance Companies (NAMIC). NAMIC testified before the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises today at a hearing titled "System Risk and Insurance." This is likely to be the last hearing before Congress crafts legislation to modernize the financial services regulatory structure.
John Hill, NAMIC's chairman-elect and president and COO of the New York-based Magna Carta Companies testified on behalf of NAMIC. “If you exclude a very few companies that are linked to financial markets, our analysis concludes that the property/casualty insurance industry poses no systemic risk,” Hill told the subcommittee.
Hill made it clear that property/casualty insurance is distinct within the financial services sector. “The fundamental characteristics of our industry, including conservative and liquid investment portfolios, low-leverage ratios, strong solvency regulation, and a highly competitive and diverse marketplace make it stand out as unique and work to insulate the property/casualty industry from posing systemic risk,” he testified.
Throughout the current economic crisis, property/casualty insurers, through prudent management and sound state solvency regulation, have remained viable and able to fulfill their commitments to policyholders, Hill explained.
“The record shows that property/casualty insurers played no role in causing the current financial crisis,” Hill said. “Moreover, it is exceedingly unlikely that property and casualty insurers – either individually or collectively – could cause a financial crisis in the future.”
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