Posted on 22 Sep 2009
NAMIC at its 114th Annual Convention released a major public policy paper titled "The Financial Crisis, Systemic Risk, and the Future of Insurance Regulation", written by Scott E. Harrington, Alan B. Miller Professor at the Wharton School of the University of Pennsylvania. According to the report, which analyzes the role of AIG and the insurance sector in the 2008-2009 financial crisis, responsibility for the crisis and the near collapse of insurer AIG should reflect "the substantial evidence of fundamental failures in U.S. and foreign regulation of commercial banking, thrift lending, and investment banking."
The report indicates that AIG's problems were heavily influenced by its credit default swap portfolio, which was assembled by a non-insurance AIG subsidiary that was not subject to insurance regulation.
Harrington calls AIG an "anomaly" in an insurance sector that "was largely on the periphery of the financial crisis." The financial crisis and the government's rescue of AIG "do not strengthen arguments for either optional or mandatory federal regulation of insurance," Harrington writes. He also says these events do not justify creation of a systemic risk regulator with authority over insurers and non-bank institutions that are designated as "systemically significant."