Witnesses and lawmakers today used a hearing on American International Group Inc. as a chance to debate the merits of federal regulation of insurance.
Rep. Ed Royce, R-Calif., a long-time supporter of letting insurers choose between state and federal regulation, said at a House Financial Services Committee capital markets subcommittee hearing on AIG, New York, that he has been warning of the “systemic risk” problems created by the state-based regulatory system for insurance since 2006.
The risk will continue to exist until a federal role for insurance is created, Royce said.
“Central to this discussion on AIG is what [Federal Reserve Board Chairman Ben] Bernanke told us,” Royce said in his opening statement. “He said the 54 various state insurance regulators didn’t have the capacity to deal with a global insurance company.”
Royce and Rep. Melissa Bean, D-Ill., have been promoting a bill that would give insurers the option of choosing between state and federal regulation.
The OFC bill would close the gap Bernanke was describing, Royce said at the hearing.
“Until we establish a world-class regulatory alternative that is able to deal with a global insurance company like this, that gap will remain,” Royce said.