BROOKLYN, N.Y. — Therese Vaughan, chief executive of the National Association of Insurance Commissioners, said she expects to see more federal involvement in insurance oversight.
“I think it is very likely we will have some kind of systemic risk regulation that incorporates the life sector,” Vaughan said here Monday at an insurance conference organized by Standard & Poor’s, New York.
But Vaughan, a former Iowa insurance commissioner, questioned suggestions that the systemic regulator would be the Federal Deposit Insurance Corp. Sen. Susan Collins, R-Maine, has introduced a bill that would create a systemic risk council that would include a number of different voices, not just the FDIC, Vaughan reported.
“I personally am a huge fan of that approach,” Vaughan said, arguing that a bigger, broader entity could do a better job of looking for systemic risk.
Vaughan said she would like to see the NAIC, Kansas City, Mo., be part of the systemic risk effort, and to see the effort recognize the diversity of the financial services sector.
“Insurance is different from banking and different from securities,” she said.
It seems unlikely that the failure of any one U.S. life insurer could hurt the financial system, but the collapse of American International Group Inc., New York, shows that a life insurer could be part of an entity big enough to raise questions about systemic risk, Vaughan said.
Patrick Baird, chairman of the American Council of Life Insurers, Washington, said he does not believe any one life insurer is big enough that its failure would cause the sorts of problems that the collapse of Lehman Brothers Holding Inc., New York, caused in September 2008.
But intense media coverage of one large insurance company failure could undermine confidence in the entire life industry, and that could destabilize the entire industry, Baird warned.