U.S. Insurance Regulation Seems Certain, Insurance Execs Say

By Phil Gusman
National Underwriter News
November 20, 2008

NEW YORK --Insurance executives said today that the current mood in Congress, given the U.S. financial troubles, indicates some form of federal insurance regulation has become a matter of "when," rather than "if."

Their comments came during a panel discussion at the 20th Annual Executive Conference for the Property-Casualty Industry produced by National Underwriter Company with sponsors Ernst & Young and Dewey & LeBoeuf

Panel member Stanley A. Galanski, president and chief executive officer, The Navigators Group, Inc. said the pace towards federal regulation is fast.

The feeling among some legislators, he said, is that insurance is part of financial services, and Congress is determined to fix it. Mr. Galanski compared the current environment in Congress to the mood just before Sarbanes-Oxley was passed.

Future federal regulation may not even be "optional," according to George Fay, executive vice president, Worldwide Property-Casualty for CNA. He said he believes there will be federal regulation of insurance that all companies will have to comply with to some degree, possibly in addition to state regulations.

Mr. Fay suggested larger companies will likely be able to adapt to this environment more easily than smaller companies.

John Q. Doyle, president and CEO, AIG Commercial Insurance, wondered what a federal regulation system in the U.S. would look like. He noted that, around the world, regulators are primarily interested in solvency, whereas in the U.S., there is more concern over consumer issues. He said he would be interested to see if the U.S. regulatory system would change its focus under federal regulation.

At a separate session during the conference, Pierre L. Ozendo, member of the executive board, chairman, and chief executive officer of Swiss Re American Corporation, said the United States should look to an Optional Federal Charter as a way to effectively prepare for regulatory systems around the world that will become more global with respect to coordination and cooperation.

Answering a question regarding whether the current U.S. insurance regulatory system is ready to coordinate on a global scale, Mr. Ozendo said an OFC would allow the U.S. to have a regulator that would be able to hold discussions with regulators in Europe and elsewhere.

Sam Friedman, editor-in-chief of National Underwriter, questioned whether federal regulation would be more effective than the states given the problems that have occurred in the federally-regulated banking sector during the current financial troubles.

Mr. Ozendo responded that there is no way to determine exactly how effective the government would be at regulating insurance, but he maintained that federal officials are the only ones with the "sheer power" to get a system that is stuck moving again.

Mr. Galanski furthered Mr. Ozend's point regarding international cooperation, stating he believes the debate in Washington has moved from state versus federal regulation to federal versus international cooperation.

Mr. Doyle did not say whether he would prefer a state or federal regulation system, but stressed there needs to be more effective regulation with respect to insurance.

Mr. Fay said he is not a fan of more government involvement in insurance. A future problem, he said, could be fixing problems ahead created by the very government that is trying to solve current issues.

Speaking beyond regulation, to solutions to the financial troubles in general, Mr. Fay said he would like to see some time pass by before major changes to the financial services landscape are made. He said it would be beneficial to wait until the true problems are identified, and the country can effectively analyze how it got to this point, before effecting solutions on the insurance industry.

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