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Insurance Reform Touted As Answer To Aig-Sized Problems

One of the architects of a pending federal insurance regulation bill defended the plan during an insurance policy forum as a way to deal with large insurance companies such as American International Group, Inc. (AIG). But other attendees at the sixth annual Insurance Reform Summit doubted that the proposed system would have done much good in the big insurer's case.

"Recent events are a call to action," Rep. Melissa Bean (D-Ill.) told attendees at the summit on March 4 in Washington, D.C., conducted by Indiana State University's Networks Financial Institute.

On Feb. 11, Bean and Ed Royce (R-Calif.) announced the National Insurance Consumer Protection and Regulatory Modernization Act (although Bean offered a shorter name, National Insurance Modernization Act, at the summit). Bean said the bill will be introduced within months.

The legislation would create an optional federal system overseen by the Office of National Insurance, which would act as a systemic risk regulator. The office would also have the authority to gather financial data, recommend regulations and have enforcement authority over some insurance holding companies.

But even attendees who support the idea were skeptical of the national regulator's ability to have prevented the AIG problems, because the insurer problems stemmed from complicated financial products that were not considered insurance and were essentially unregulated. The company's insurance operations were, and still are, fundamentally strong.

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