Federal insurance regulation is coming, warns a House leader

Delivering a message that his audience probably didn’t want to hear, Paul Kanjorski, D-Penn, chairman of the House Capital Markets Subcommittee, said that federal insurance regulation is inevitable.
“We’re going to have to invade some of the legislation that has been reserved to the states,” he told state securities regulators attending a conference of the Washington-based North American Securities Administrators Association Inc. in the capital.
“We’re going to be moving toward regulation on the federal level of insurance. That’s going to happen. We have to have that. We don’t have a choice right now,” he said. Some insurers are “too large to fail,” he said, citing American International Group Inc. of New York.
“Either eliminate too large to fail or regulate them,” Mr. Kanjorski said.
Although increased regulation is a must, he counseled a deliberate approach in setting up such strictures, calling for slowing down the drive for financial service regulator reform so that a bipartisan consensus can be developed.
“The unintended consequences could be catastrophic through the whole system,” if major reforms are enacted hastily, he said.
Major financial service legislation adopted in the 1930s took five to six years to enact, but helped the U.S. market system run smoothly for 75 years, Mr. Kanjorski said in arguing for a go-slow approach to regulatory reform.
The congressman said that leading House Democrats and Republicans are having private meetings with private financial service leaders and plan to meet seven or eight times over the next three or four months to discuss reform ideas.
Such bipartisanship “sends a whole new message…that we’re going to get something done that will likely have success,” he said.
Mr. Kanjorski also mentioned the possible creation of an international arbitration system to handle securities-related disputes.
“There is no one single uniform methodology to arbitrate disputes,” Mr. Kanjorski told the state securities regulators.
Such a body will be the topic of discussion when U.S. and European Union officials meet over the next few weeks, he said.