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NAIC CEO Vaughan Predicts Systemic Regulation

Dr. Therese Vaughan, CEO of the National Association of Insurance Commissioners (NAIC), said she expects there will be some kind of systemic risk regulation that...
June 9, 2009

Dr. Therese Vaughan, CEO of the National Association of Insurance Commissioners (NAIC), said she expects there will be some kind of systemic risk regulation that incorporates the life insurance sector. Vaughan made the remark June 1 at an insurance conference organized by Standard & Poor's, New York. Congress is beginning this month to consider financial regulation reform, prompted by the financial meltdown.

But Vaughan, a former Iowa insurance commissioner, questioned suggestions that the systemic regulator would be the Federal Deposit Insurance Corp. (FDIC). Sen. Susan Collins (R-Maine) has introduced a bill that would create a systemic risk council that would include a number of different voices, not just the FDIC, Vaughan noted. "I personally am a huge fan of that approach," Vaughan said, arguing that a bigger, broader entity could do a better job of looking for systemic risk. Vaughan said she would like to see the NAIC be part of the systemic risk effort, and to see the effort recognize the diversity of the financial services sector.

"Insurance is different from banking and different from securities," she said.

Travelers CEO Jay Fishman also spoke at the conference. He predicted the insurance "industry will end up being included in whatever systemic risk regulation is inevitable," but said that was the limit to the degree of federal oversight to which insurers might be subjected. "I suspect…individual state regulation won't change [because] there is simply not a voice around" - a proponent in Washington willing take this issue on, he said, noting that there are other pressing issues that lawmakers are rightly dealing with. "We would be in favor of it, but not to the point of beating a drum. We're perfectly comfortable continuing to be regulated the way we are," he said.

Vaughan: Systemic Reg Coming (Insurance Journal 6/3/09)