Thanks to the global crisis, insurers and other financial companies will likely see new regulations that will greater restrict their activities, several regulators and experts agreed yesterday at an industry conference.
For instance, one focus is to develop a method to calibrate the risks that financial services companies take, and to establish criteria for intervention at companies that are too big or too interconnected to fail, said Thomas Selman, a panelist at a session of NAVA Inc.’s annual marketing conference in New York.
A “failure to manage risk and protect investors are two sides of the same coin,” said Mr. Selman, executive vice president of regulatory policy at the Financial Industry Regulatory Authority Inc. of Washington and New York.
The idea of a single regulator to oversee systemic risk at the federal level might make sense for the marketplace, but only if there is collaboration with state insurance regulators, said Therese Vaughan, chief executive of the National Association of Insurance Commissioners of Kansas City, Mo.
“In our state-based system, we have diverse eyes on each issue, and because of that, we’re less likely to miss things and less likely to come down on the side of dogmatic solutions,” she said. “It has worked for 150 years.”
However, John Sununu, former Republican senator of New Hampshire, said that the financial crisis warrants a new approach and a new regulatory system that mandates a state-federal partnership, perhaps through the proposed optional federal charter for carriers.
An optional federal charter would enable insurance companies and reinsurance companies, as well as agents and brokers, to choose a system of federal chartering, licensing, regulation and supervision or they could continue to be regulated by the states.
“I think the dual regulatory system worked reasonably well in banking, and can — and will — work in the insurance industry,” Mr. Sununu said. “It’s not a question of who can best protect consumers, but it should be about finding the appropriate level for regulation to occur, and developing systems that will allow businesses to compete on a national basis.”
NAVA is based in Reston, Va.
