A Surgical Approach
to Regulatory Reform
Expert says Congress should proceed with caution when revamping
regulation of insurance industry. By Bill Kenealy
GIVEN THE ENORMITY OF THE
financial crisis, a predisposition
toward bold legislative action
among lawmakers seems natural.
Yet, a measured, surgical response
that takes into account the peculiarities of insurance
while recognizing its central place in the financial
services industry may be the correct one.
ance regulation should build on the industry’s positive risk management characteristics, and the good
elements of the current regulatory structure.”
Patricia Guinn, managing
director, risk & financial services,
at New York-based Towers
Perrin, favors such an approach.
Indeed, Guinn recently testified
to this effect at hearings held by
the House Committee on Financial Services
Subcommittee on Capital Markets, Insurance and
Government Sponsored Enterprises titled “How
Should the Federal Government Oversee
To quell systemic risk, Guinn said she favors a
holistic regulatory framework that includes insurers
along side commercial banks, investment banks and
hedge funds, citing the United Kingdom, Australia
and Canada as models for comprehensive financial services
regulation. However, she
stressed that federal oversight
of the industry needs to recognize its unique characteristics.
“A one-size-fits-all approach
derived from the banking
Citing the industry’s strong risk management
culture and the historical success of state regulators,
Guinn stressed that any new federal regulatory
effort needs to be carefully structured and designed
to supplement and improve the existing regulatory
framework, not replace it.
industry would likely not work well,” she said.
Moreover, any new legislation should seek to
eliminate regulatory arbitrage, while acknowledging the complexity of the insurance landscape,
especially at the holding company level. To accomplish this, she suggests adopting a principle-based
approach that values transparency as much as rules.
Lastly, Guinn said that Federal regulators should
strive for the lightest footprint possible, and only
intervene in the direst of circumstances.
After the hearing, Guinn elucidated this viewpoint in an exclusive interview with Insurance
“State insurance regulation has served the industry, by and large, quite well,” she said. “The best of
it should be preserved.” INN
“There are reasons that Federal attention is warranted, but it should be balanced by the realization
that there is no need to start from scratch,” she said.
“Any new role for the federal government in insur-
Find more about industry
regulation by searching “Consumer
Advocates Slam OFC Efforts” at
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