Posted on 22 Apr 2009
Michael T. McRaith, director of the Illinois Division of Insurance, did not appreciate an op-ed article on state regulatory missteps that was published last week in "The New York Times" by Allstate Corp's Chief executive Tom Wilson.
Mr. McRaith was upset over an April 16th op-ed piece, “Regulate Me, Please,” in which Mr. Wilson upbraided regulators and insurers for the problems arising behind credit default swaps. He also criticized the state regulators as "lack[ing] the expertise to properly oversee rapid innovation or systemic risks" and called upon Congress to eliminate state regulatory systems by creating a federal regulator for insurance.
However, such a move would be tantamount to deregulation and would remove the solvency protection — such as state receivership and state guaranty funds — that the current state system provides, Mr. McRaith argued.
“Financial institutions pushed for deregulation to promote 'innovation,' while fundamental consumer protections, like solvency, were dismissed as obstacles to profit,” Mr. McRaith wrote in an April 16 letter to Tom Feyer, the letters editor of "The Times".
“With this in mind, the myth-laden pleas of an otherwise prudent Tom Wilson, CEO of Allstate [of Northbrook, IL], in search of federal regulatory relief should be viewed cynically,” he wrote.
“By remaining local, state insurance regulation evolves without caving into the whimsical profit fantasies that drove [American International Group Inc. of New York] and others to taxpayer support,” Mr. McRaith wrote. The regulator cited AIG and its 71 American carriers that continue to meet consumer obligations despite the “prodigious incompetence of its non-insurance units.” The carrier is a poster child for reform and shows why state regulators are open to collaborating with a federal systemic regulator, Mr. McRaith wrote.
Mr. Wilson’s critique of state regulation of insurance has attracted other regulatory responses, including one from Eric Dinallo, superintendent of the New York State Insurance Department.