In this uncertain economic environment, there is a very real danger that efforts to address the current financial crisis will lead to regulatory overreach. To help address this danger, NAMIC President/CEO Chuck Chamness and the advocacy team in Washington, D.C., met with Treasury Department officials this week to discuss plans for financial services regulatory reform.
During the meeting, the officials confirmed that the administration’s regulatory reform outline will be drafted prior to the G-20 meeting on April 2. They also made clear that there were many possibilities for reform still on the table. With this looming deadline and the sheer complexity of the issues, we anticipate the initial outline will offer only broad recommendations.
NAMIC explained to Treasury that the current financial crisis does not indicate a need for a massive overhaul of insurance regulation. NAMIC also emphasized that the property/casualty insurance industry did not cause the current situation and urged the department not to disrupt the financial markets and regulatory systems that have served consumers well. The facts presented demonstrate that the property/casualty insurance industry has remained comparatively strong and that the state-based system of solvency regulation has proven effective.
Furthermore, NAMIC wanted to make sure Treasury understands that property/casualty insurance companies are a critical part of the American economy. An extremely competitive and diverse industry of 3,000 companies should not be judged or defined by the situation with AIG. Rather, by all analyses, the property/casualty industry is well capitalized and has more than adequate capacity to address the vital needs of American citizens and business.
To solidify the case, Treasury officials received copies of NAMIC’s testimony from last week’s House Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises’ hearing on systemic risk. In the testimony, NAMIC explains that a properly focused systemic-risk regulator might help prevent future financial crises, but notes that a systemic-risk regulator should complement existing regulatory resources instead of supplanting them. Indeed, any proposal should avoid regulatory overreach and only address the problems that brought us to this crisis. Finally, NAMIC offered a commitment to work with the new administration as the voice for main street property/casualty insurance companies as the regulatory reform debate unfolds.