AIG Puts Industry Backlash 'Back to Square One ", say l

 

Tuesday, Mar 31,2009, 1:29:45 AM   Click:

WASHINGTON, March 30, 2009 (AM Best via COMTEX) - AIG | Quote | Chart | News | PowerRating - The anger still simmering over 165 million dollars in bonuses paid to certain American International Group Inc. employees seized the Capitol, he left the top of industry lobbyists and trade associations do not care for anything else, the lawyers say.

Already, AIG has prompted the House to pass overwhelmingly a bill seeking to use 90% tax bonus to get to the company and other companies that receive federal assistance. More recently, the company, for example, served as Exhibit A in the plan unveiled last week by the Treasury Secretary to give Tim Geithner Federal Deposit Insurance Corp. the authority to take control of financial services and resolve holdings including brokers, insurers, futures commission merchants and other financial companies with potential for systemic risk to the economy.

It could also open the door to real-against federal regulation of insurance, but given the prevailing concerns about giving businesses the opportunity to choose their regulator, the conventional wisdom on Capitol Hill is now proposing an system is unlikely to look like the "optional federal charter" proposal favored by some sectors of the industry.

"Is there going to be over the federal? Absolutely. Are they going to regulate insurance? It remains to be seen," said Ben McKay, Senior Vice President of Federal Government relations with the Property Casualty Insurers Association of America. "It is less likely in May, given that many regulatory arbitrage as one of the causes of the current crisis. However, some form of inter-sector monitoring of systemic risk appears likely.

But AIG's long shadow can be seen, away from questions about his rescue plan and regulatory oversight. The response has been delayed indefinitely the debate, let alone action, even on issues of insurance, which previously enjoyed a broad consensus, as agent licensing reform and changes to the National Flood Insurance Program.

"We had to go back to square one. This has created a blind rage on the part of not only the public, legislators, and the most important thing we notice is that it may not define the whole industry " said Jimi Grande, Vice President of the federal government and political affairs with the National Association of Mutual Insurance Companies. "Perhaps the most frustrating thing about this is that I am not sure that there is another company on the planet that looks like AIG. Certainly it should not be a poster for the benefit of children / l industry accident insurance, and we find ourselves and our incredibly distracting, because the first five questions relate to AIG. "

The game has also emboldened some of the fiercest critics of the industry, as Rep. Gene Taylor, D-Miss. Working with Rep. Peter DeFazio, D-Ore., Taylor reintroduced his proposal - the first time in the wake of Hurricane Katrina, while Taylor has been involved in a lawsuit against State Farm - the repeal of the industry 'limited antitrust exemption created 60 years ago by the McCarran-Ferguson Act.

"Why is anyone surprised?" Taylor said of the premiums paid to the AIG Financial Products unit. "The insurance companies feel they are above the law. When it comes to federal laws, they are.

Repealing McCarran, an idea which has the support of the 110th Congress Speaker of the House Nancy Pelosi, D-Calif., Chairman of the Senate majority Harry Reid, D-Nev. Then-Sen. Barack Obama, could have further implications Congress should adopt a proposal by Senator Chuck Schumer, DN.Y. to create a Commission on the safety of financial products on the model of the CPSC. A version of the House of the Schumer bill just introduced by Reps. Bill Delahunt, D-Mass., And Brad Miller, DN.C., focuses mainly on banking services such as mortgages and credit cards but it could be expanded to include reviews of the agency insurance products as annuities and long-term care.

However, some expressed optimism that more modest and legislation favorable to the industry could emerge. Among these proposals is the Nonadmitted Reform Act and reinsurance, which recently won a key Democratic co-sponsor. Sen. Evan Bayh, D-Ind., Confirmed he will join Senator Mel Martinez, R-Fla., At the reintroduction of the measure, which has twice passed the House unanimously, but has not to go to Congress' upper chamber.

"The bill enjoys broad support within the industry and we believe it will solve a number of regulatory problems by setting federal standards for state regulation, but will retain control by the State which avoids many problems in the recent crisis, "Bouhan Richard, executive director of the National Association of Professional Surplus Lines Offices Ltd

(By RJ Lehmann, director of the Washington office: raymond.lehmann @ ambest.com)