proponents of an charter under which US insurers would be able
choose between current state-only regulation and federal
regulation, the National Association of Insurance Commissioners
(NAIC) has come out strongly in defence of its role in the American
International Group (AIG) debacle.
“Some insurance lobbyists hope to
politicise and mislead policymakers by suggesting AIG’s problems
are a result of state insurance supervision, and could have been
averted by federal oversight,” the NAIC’s president and Kansas
Insurance Commissioner, Sandy Praeger wrote in a letter to the US
House Committee on Oversight and Government Reform.
“On the contrary,” she added, “conservative
state regulation ensured that while the federally regulated [AIG]
holding company was failing, the insurance businesses were
appropriately capitalised and the interests of policyholders were
placed ahead of shareholders.”
Praeger continued that AIG is a financial
holding company that owns 71 US insurance entities and 176 other
financial services companies throughout the world, including banks,
securities firms, and non-US insurers.
“Only the 71 US insurance entities are
regulated by state insurance commissioners,” he stressed.
The problems at AIG that necessitated a
Federal loan of $85 billion from the Federal Reserve Bank of New
York and $38 billion in federal financing are not with its
insurance subsidiaries, emphasised Praeger.
“The problems stem from the operations of
AIG’s holding company, its financial products division, and its
securities lending division, regulated at the Federal level by the
Office of Thrift Supervision, wrote Praeger.
“The state regulated insurance subsidiaries
remain solvent and able to pay claims.”
Concluding, Praeger stressed: “If the proposed
optional Federal charter for insurers had existed, and some or all
of AIG’s insurance companies had chosen that Federal charter, the
problems at the AIG holding company would still have fallen outside
the jurisdiction of that Federal insurance regulator.”