The National Association of Insurance Commissioners says states are still better than federal agencies at protecting consumers against insurer failures.
The NAIC, Washington, makes that argument in a response to media scrutiny of financial problems and bonus arrangements at American International Group Inc., New York.
“Unsubstantiated information and misstatements in the media have led to unnecessary consumer frustration and fear,” NAIC Chief Executive Therese Vaughan says in a statement included in the NAIC response.
“State insurance regulators have been actively involved in the AIG situation to help ensure that consumers remain protected,” Vaughan says. “Regardless of the failings at AIG’s holding-company level, its insurance subsidiaries have continued to fulfill their obligations to policyholders.”
The NAIC summarizes the testimony that Pennsylvania Insurance Commissioner Joel Ario gave earlier this week during a hearing on AIG.
“AIG’s insurance companies remain strong, in part because state regulation continues to wall them off from the high-risk activities engaged in by AIG Financial Products,” Ario testified. “The insurance industry–just like the rest of the global economy–is facing challenges, but this only reinforces the need to be wary of changing a part of our regulatory system that has proven effective.”
Ario said AIG’s financial products unit, and not its 71 U.S. insurance subsidiaries, created the financial distress that led to the company seeking help from the federal government.