As the Senate Banking Committee considers reform of the nation’s financial regulatory system, the American Insurance Association is seeking to amplify the distinctions between insurers and other financial services firms.
In letters to Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and Ranking Member Richard Shelby (R.-Ala,), AIA president and CEO Leigh Ann Pusey said the AIA supported greater oversight of financial firms but noted that property/casualty insurers did not pose systemic risk during the recent crisis.
“Property/casualty insurance companies have remained competitive, stable and well-capitalized,” Pusey wrote. “Our business depends on ensuring that capital is readily available for those that suffer insured losses. For this reason, property/casualty insurers are generally not highly leveraged businesses, maintaining conservative investment portfolios that align with the insurance business model.”
Pusey also said that proposals to have insurers contribute for a bailout fund for systemically risky companies was redundant. “Our companies adhere to rigorous capital standards that ensure sound financial condition and the ability to pay claims when those claims come due,” she wrote. “The property/casualty industry is subject to a state-based resolution system in those rare instances when an insurer fails, and funds a guaranty structure to protect policyholders and other claimants in those circumstances. Correspondingly, AIA could not support a resolution system that requires property-casualty insurers to pay for the resolution of non-insurers who engaged in behavior that put the broader financial system at risk, particularly where payments are assessed on a pre-event basis and do not differentiate among financial institutions and sectors according to that risk.”