WASHINGTON (Jan. 12, 2009) – A new government report on the nation’s financial regulatory system provides more evidence of the need for Congress to target specific areas of financial services regulation apart from the property/casualty insurance industry. The report, “Framework for Crafting and Assessing Proposals to Modernize the Outdated U.S. Financial Regulatory System,” was released by the Government Accountability Office last week.
The report summarizes the development of the U.S. financial regulatory system and attempts to trace current problems to past decisions. While criticizing the current financial regulatory system as “fragmented and complex,” the reform recommendations point directly to the strengths of the state-based insurance regulatory system.
“Once again, we’re seeing evidence of the state-based insurance regulatory system working to protect the assets of the insurance affiliates and safeguarding the financial interests of policyholders,” said Jimi Grande, NAMIC’s vice president for federal and political affairs. “The stringent state financial and accounting insurance standards ensured that even as the nation’s non-insurance segments experience economic disruptions, the property/casualty insurance sector remains solvent and able to meet claims obligations.”
The report is primarily focused on federal regulatory agencies and only briefly discusses the state-based insurance regulatory system. While mentioning that Congress could “consider the advantages and disadvantages of providing a federal charter option for insurance and creating a federal insurance regulatory entity,” the report makes no such recommendation and acknowledges that the authors did not study proposals for an OFC. It also notes that the establishment of a federal insurance charter could “have unintended consequences for state regulatory bodies and for insurance firms as well.”
“This report clearly indicates the need for better regulation and coordination of those sectors responsible for the economic turmoil,” Grande said. “The fact that the authors did not consider proposals to federally regulate the property/casualty insurance industry only emphasizes the fact that the state-based solvency regulation of the p/c industry has proven effective and sets the industry apart in continuing to protect the needs of policyholders.”
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Posted: Monday, January 12, 2009 12:00:00 AM. Modified: Monday, January 12, 2009 12:59:30 PM.
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