As consideration of financial services reform legislation moves to the Senate floor, the insurance industry is endeavoring to stop any inclusion of property/casualty insurers in a bailout fund for systemically risky companies.
In a letter to Senate Majority Leader Harry Reid (D-Nev.) and Senate Minority Leader Mitch McConnell (R-Ky.), the American Insurance Association, the National Association of Mutual Insurance Companies and the Property Casualty Insurers Association of America asked that insurers not be made to pay for resolution of unrelated financial services providers as suggested in provisions of the Restoring American Financial Stability Act of 2010.
“Property/casualty insurance companies did not create or contribute to the economic crisis,” the letter states. “They do not pose systemic risk and their capital and investment patterns, coupled with strong regulation and the insurance business model, make it unlikely they would contribute to any crisis in the future. As such, it would be inappropriate to tap the property/casualty industry for the financial shortcomings of other financial services industries.”
The associations noted that insurers already contribute to state-based resolution funds.
“We ask that you recognize the existing state insurance guaranty system and not subject the property/casualty industry to inequitable, dual resolution authority,” the letter states. “It simply does not make sense for non-risky property/casualty insurers to be subject to two regimes – a state fund to address their own industry’s insolvencies and a federal fund to address the insolvencies of unrelated financial services companies. It is inequitable to hold insurers responsible for the risky behavior of others.”
