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Industry, Regulators Cheer GAO Finding that State System Worked Well

Industry representatives and regulators are cheering a recent report by the Government Accountability Office (GAO) that concluded that the state insurance regulatory system worked well in helping to mitigate the negative effects of the 2007-2009 financial crisis on the insurance industry...
August 6, 2013

Industry representatives and regulators are cheering a recent report by the Government Accountability Office (GAO) that concluded the state insurance regulatory system worked well in helping to mitigate the negative effects of the 2007-2009 financial crisis on the insurance industry.

The GAO report was prepared for the chairman of the House Financial Services subcommittee on Housing and Insurance, Rep. Randy Neugebauer (R-Texas), as well as subcommittee member Rep. Steve Stivers (R-Ohio). PIA worked closely with Congress to bring the report to fruition. PIA believes that an objective report on the benefits of the state insurance regulatory system is needed to counteract what is expected to be a one-sided study of insurance regulatory modernization by the Federal Insurance Office (FIO) with a clear bias toward federalization as a preordained conclusion.

Some reactions to the GAO report:

NAIC President and Louisiana Insurance Commissioner Jim Donelon said in a statement the report “reconfirms what we have long held: The national system of state insurance regulation effectively protected insurers and policyholders from the worst aspects of the 2008 financial crisis.”

National Association of Mutual Insurance Companies (NAMIC) Vice President of Public Policy Robert Detlefsen said that by seeing that the U.S. system was found to have worked during the financial crisis, international regulators may consider alternatives to implementing global capital standards and other regulatory measures the industry has opposed.

American Insurance Association (AIA) spokesman Willem Rijksen said in a statement to Best’s News Service that the report supports AIA’s belief that the property/casualty business model possesses features that add stability to the financial markets.

Property Casualty Insurers Association of America (PCI) Senior Vice President Robert Gordon said in a statement that the report noted virtually no effects on traditional property/casualty insurance. “The report’s findings confirmed the widely held view that the insurance industry did not present systemic risk in the financial crisis.”

PIA National Senior Vice President Patricia A. Borowski said, “The conclusion is obvious from the assessments made in this report — as compared to the other GAO reports that assess the performance of banking, investment and capital markets during the same time period — that the insurance sector did well.”

What It Means to Agents: Rather than waiting for the FIO to issue a partisan report with a preordained conclusion, PIA National took the initiative 18 months ago, urging some of our allies in Congress to request a balanced report from the GAO on the benefits of our state-based system of insurance regulation.

GAO: State Regulatory System Worked Well During Financial Crisis (PIA 7/31/13)
Impacts of and Regulatory Response to the 2007-2009 Financial Crisis (GAO)

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