Following is Ms. Pusey’s letter to Chairman Dodd:
"Dear Chairman Dodd:
As the Senate Banking Committee resumes consideration of financial regulatory reform legislation, the American Insurance Association reiterates its support for well-constructed legislation designed to close regulatory gaps to help avoid or reduce the severity and duration of a future financial crisis. To fill those gaps, we support proposals that will provide greater oversight of financial institutions that, based on their interconnectedness, degree of leverage and unregulated activities, could pose systemic risk to our economy.
"Importantly, property-casualty insurers did not pose systemic risk during the recent crisis. Property-casualty insurance companies have remained competitive, stable and well-capitalized. Our business depends on ensuring that capital is readily available for those that suffer insured losses. For this reason, property-casualty insurers are generally not highly leveraged businesses, maintaining conservative investment portfolios that align with the insurance business model. Our companies adhere to rigorous capital standards that ensure sound financial condition and the ability to pay claims when those claims come due. The property-casualty industry is subject to a state-based resolution system in those rare instances when an insurer fails, and funds a guaranty structure to protect policyholders and other claimants in those circumstances.
"AIA could not support “one size fits all” legislative proposals that apply bank-oriented financial regulatory models and assumptions to the property-casualty sector. Nor could we support a resolution authority mechanism that duplicates or usurps our state-based insolvency process and guaranty fund system – a system that has been proven to work to the benefit of insurance consumers. Ironically, altering the insolvency process and guaranty fund system for insurers could generate regulatory gaps that financial regulatory reform legislation should be designed to prevent. Correspondingly, AIA could not support a resolution system that requires property-casualty insurers to pay for the resolution of non-insurers who engaged in behavior that put the broader financial system at risk, particularly where payments are assessed on a pre-event basis and do not differentiate among financial institutions and sectors according to that risk.
"Thank you for the keeping these views in mind as you consider this important legislative initiative. We stand ready to work with you."