The financial crisis will affect how insurers will be regulated, one legal expert predicts.
Charles Landgraf, an attorney in the Washington office of Dewey & LeBoeuf L.L.P., tried to map out the possible changes here at an executive conference for the life insurance industry.
The conference, the 19th in an annual series, was sponsored by Dewey & LeBoeuf L.L.P., New York; Ernst & Young L.L.P., New York; and Summit Business Media L.L.C., New York, the parent of National Underwriter.
One point that seems to be clear is that insurance companies that want to participate in the Troubled Asset Relief Program must have a bank or thrift unit or be in the process of applying to become a bank, Landgraf said.
There also are indications that a company that wants to use TARP money to make an acquisition must get permission from the Treasury department, Landgraf added.
It will be interesting to see whether the federal government will use guarantees, in addition to actual cash infusions, to shore up companies in need of capital, Landgraf said.
Landgraf also discussed how the crisis could affect insurance regulation.
The problems at American International Group Inc., New York, “clearly brought insurance to the forefront,” Landgraf said.
He predicted any effort to federalize insurance regulation will trigger push back from state regulators and state governors who fear loss of regulatory clout as well as premium tax dollars, even though advocates of federal regulation proposals have promised not to change the premium tax structure.
“States will fight to the death,” arguing that they have a history of protecting consumers, Landgraf said.
The consumer protection argument is an argument that the incoming Obama administration could very well support, Landgraf said.
The National Association of Insurance Commissioners, Kansas City, Mo., will say the insurance industry has been the financial services industry affected least by the current financial crisis, Landgraf added.