If U.S. financial services regulators fail to stand up for life insurers, poorly designed international rules could kill the insurers’ ability to offer long-term guarantees, Ben Nelson said Thursday.
Nelson, the chief executive officer of the National Association of Insurance Commissioners (NAIC), used a high-profile speaking slot to try to get other U.S. insurance industry players to pay more attention to regulatory projects under way at the International Association of Insurance Supervisors (IAIS), the G-20′s Financial Stability Board (FSB), and other international organizations.
Nelson — who has been the insurance director in Nebraska, the governor of Nebraska, and a U.S. senator from Nebraska — spoke at lunch at an insurance industry conference organized by Standard & Poor’s Rating Services.
S&P runs a rating system that helps determine whether corporations and governments can borrow money, how much big borrowers pay for loans, and which investors can hold the debt.
Nelson reminded conference attendees that insurers themselves are the biggest buyers of corporate bonds. If ill-advised regulations reduced or eliminated insurers’ ability to sell products such as long-term care insurance (LTCI) and variable annuities with guarantees, that would sharply reduce the insurers’ need for bonds to back up long-term obligations, Nelson said. ”What would that do to the bond market in general?” the executive asked.
Advocates of increased integration of financial services company regulation have noted that problems at American International Group (NYSE:AIG), an insurer, contributed to the severity of the 2008 financial crisis. Nelson repeated arguments that the problems at AIG were caused by investment operations, not by insurance activities that were regulated by U.S. insurance regulators.