Last week the GAO released a report on financial services regulation
stating that Congress could consider providing a federal charter option
for insurance and creating a federal
insurance regulatory entity. Chuck Chamness, National Association of Mutual Insurance Companies president and chief
executive officer, said in a statement, “While not perfect, the
insurance financial regulatory system has provided a source of
comparative stability during the financial crisis.” NAIMC just published a study Financial Oversight Failure Highlights Effectiveness of Insurance Regulation. NationalUnderwriterProperty&CasualtyInsuranceNews.com writes:
The report noted, “Most experts agree that the current financial crisis is the result of a housing market ‘bubble,’ the effects of which were exacerbated by a proliferation of largely unregulated hedging mechanisms, especially derivatives such as credit default swaps.” It goes on to note that while credit default swaps have been described by some as insurance, they are, in fact, separate risk management products and “lack the core legal elements and business characteristics that are a prerequisite to homeowners and other property-casualty insurance products. The vast majority of CDS clearly lack insurable interest and are initiated by speculators who have no exposure to the underlying debt instrument whose credit default risk the CDS could be used to hedge.”
