WASHINGTON BUREAU — The chairman of a key House Financial Services Committee subcommittee today said “only ostriches can now deny the need for establishing a federal insurance resource center and a basic federal insurance regulatory structure.”
Rep. Paul Kanjorski, D-Pa., chairman of the committee’s capital markets subcommittee, made the comments in a statement issued as he opened a hearing that featured academics discussing the future role that the federal government should play in insurance.
In May, Kanjorski said he would be moving to call for direct federal oversight over the insurance industry. “I will act quickly, yet deliberatively, in developing a new game plan to involve the federal government in direct oversight of the insurance industry,” Kanjorski said at that time..
At the very least, the plan should establish a legislative regime for monitoring the systemic risks of failing non-depository institutions, Kanjorski said in May.
Kanjorski today welcomed the Obama administration’s efforts to strengthen oversight of the financial markets, including systemic risk in the insurance market.
“Insurance is a complex and important part of the U.S financial industry, with more than $6.3 trillion in assets under management and $1.23 trillion in annual premiums,” Kanjorski said. “We need to recognize this reality by modernizing the overall regulatory treatment of insurance…. Personally, I now believe that the federal government should actively regulate some specific insurance lines, especially those that pose systemic risk or which have national significance…. I also believe that we should examine how we can promote greater uniformity in the industry, with or without the establishment of a federal charter.”
Lines that should be federally regulated include bond insurance, mortgage insurance and reinsurance, Kanjorski said.
At American International Group Inc., New York, one problem is that, at the federal level, AIG was regulated only in relation to its role as the owner of a small thrift, by the Office of Thrift Supervision, and “lacked a federal regulator with real expertise about its vast insurance operations,” Kanjorski said.
Several other insurance hold companies now have bank regulator oversight, and dozens of others have no federal oversight, Kanjorski said.
“Because a number of these businesses, I believe that the federal government should directly examine all complex financial holding companies, including those whose primary activities involve underwriting insurance and those who play with credit defaults swaps,” Kajorski said.
The nation also needs a single point of contact for international insurance matters, and a federal insurance office that can advise a systemic risk overseer on insurance matters, Kanjorski said.
CORRECTION: Earlier, due to a production error, an older Kanjorski insurance regulation article appeared in this space. National Underwriter Life & Health regrets the error.