By Lilla Zuill
NEW YORK, Jan 13 (Reuters) - Connecticut insurance regulator Thomas Sullivan sees the federal government stepping in to play some role in monitoring systemic risk in the insurance industry, he told an industry gathering on Tuesday.
Insurance regulation in the United States is handled on a state-by-state basis in contrast to most other nations where oversight is federal. But there is increasing debate over whether the system needs to be revamped after giant insurer AIG's near-collapse last year.
'You'll probably have a layer over (the current regulatory environment) of systemic risk regulation,' said Sullivan, within the next year or two. But he said the U.S. government's involvement was likely to stop short of offering a federal regulator to take the place of state regulators.
'How could Congress with a sweep of a pen replace 50 regulators?' Sullivan said, referring to a possible federal regulatory approach.
Sullivan said consumers will push for the state system to remain, seeing this as a safeguard of policyholders' rights.
The debate has heated up after American International Group Inc, once the world's largest insurer by market value, suffered massive losses on bad mortgage bets. AIG was rescued by the federal government in a bailout that has swelled to about $150 billion.
Pierre Ozendo, chief executive of Swiss Re America Corp, speaking at the same event as Sullivan, hosted by trade group the Insurance Information Institute, said amid the global economic crisis, the United States is thinking about global ramifications when it makes decisions.
He said this could bear on what happens on the U.S. regulatory front. 'You have to think about the impact,' said Ozendo.
But it could be a while before lawmakers, bogged down with trying to help the broader economy recover from recession, have time to consider changes to U.S. insurance regulation.
'Some of the other issues have crowded out the urgency,' said Daniel Glaser, chief executive of Marsh & McLennan's insurance brokerage, Marsh Inc, which helps insurance buyers find coverage.
AIG, LIFE INSURERS
Sullivan said that while most property-casualty insurers had been 'good capital managers,' problems elsewhere in the industry, including among life insurers, would hasten the federal government's scrutiny of systemic risk.
The government has said it rescued AIG because its failure could have created havoc in global financial markets.
The life sector has been badly battered in recent months, after investors grew concerned over heavy losses which eroded capital in the third quarter. In addition, there have been worries that shaky stock markets would drive up costs for variable annuities, a popular retirement product that had been heavily sold by the industry.
Several insurers, including Hartford Financial Services Group Inc, a large property and life insurer, and Lincoln National, have applied for federal aid.
Hartford recorded a $2.6 billion loss in the third quarter after giant investment losses.
Sullivan declined to speak to any individual insurer's circumstances but said as a whole the life industry should be 'looking at all sources of capital' given its situation, and the restraints on accessing capital in the current environment.
Sullivan was formerly an executive of a Hartford unit.
(Reporting by Lilla Zuill; Editing by Tim Dobbyn and Matthew Lewis) Keywords: INSURANCE REGULATION/ (lilla.zuill@thomsonreuters.com; + 1 646 223 6281) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
NEW YORK, Jan 13 (Reuters) - Connecticut insurance regulator Thomas Sullivan sees the federal government stepping in to play some role in monitoring systemic risk in the insurance industry, he told an industry gathering on Tuesday.
Insurance regulation in the United States is handled on a state-by-state basis in contrast to most other nations where oversight is federal. But there is increasing debate over whether the system needs to be revamped after giant insurer AIG's near-collapse last year.
'You'll probably have a layer over (the current regulatory environment) of systemic risk regulation,' said Sullivan, within the next year or two. But he said the U.S. government's involvement was likely to stop short of offering a federal regulator to take the place of state regulators.
'How could Congress with a sweep of a pen replace 50 regulators?' Sullivan said, referring to a possible federal regulatory approach.
Sullivan said consumers will push for the state system to remain, seeing this as a safeguard of policyholders' rights.
The debate has heated up after American International Group Inc, once the world's largest insurer by market value, suffered massive losses on bad mortgage bets. AIG was rescued by the federal government in a bailout that has swelled to about $150 billion.
Pierre Ozendo, chief executive of Swiss Re America Corp, speaking at the same event as Sullivan, hosted by trade group the Insurance Information Institute, said amid the global economic crisis, the United States is thinking about global ramifications when it makes decisions.
He said this could bear on what happens on the U.S. regulatory front. 'You have to think about the impact,' said Ozendo.
But it could be a while before lawmakers, bogged down with trying to help the broader economy recover from recession, have time to consider changes to U.S. insurance regulation.
'Some of the other issues have crowded out the urgency,' said Daniel Glaser, chief executive of Marsh & McLennan's insurance brokerage, Marsh Inc, which helps insurance buyers find coverage.
AIG, LIFE INSURERS
Sullivan said that while most property-casualty insurers had been 'good capital managers,' problems elsewhere in the industry, including among life insurers, would hasten the federal government's scrutiny of systemic risk.
The government has said it rescued AIG because its failure could have created havoc in global financial markets.
The life sector has been badly battered in recent months, after investors grew concerned over heavy losses which eroded capital in the third quarter. In addition, there have been worries that shaky stock markets would drive up costs for variable annuities, a popular retirement product that had been heavily sold by the industry.
Several insurers, including Hartford Financial Services Group Inc, a large property and life insurer, and Lincoln National, have applied for federal aid.
Hartford recorded a $2.6 billion loss in the third quarter after giant investment losses.
Sullivan declined to speak to any individual insurer's circumstances but said as a whole the life industry should be 'looking at all sources of capital' given its situation, and the restraints on accessing capital in the current environment.
Sullivan was formerly an executive of a Hartford unit.
(Reporting by Lilla Zuill; Editing by Tim Dobbyn and Matthew Lewis) Keywords: INSURANCE REGULATION/ (lilla.zuill@thomsonreuters.com; + 1 646 223 6281) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.