For those of you interested in the role of regulators in the implosion of AIG [see prior posts Here and Here,] Planet Money (an award-winning joint project of NPR News and This American Life) had a fascinating program this past weekend: “The Watchmen”. Although it has already aired, it is available to listen to

On May 28, Eric Dinallo, New York’s high-profile Superintendent of Insurance, resigned effective July 3.

Dinallo presided over the Department’s response to the AIG catastrophe and advocated far more regulation of the industry than previously seen. Dinallo was also instrumental in the rescue of the municipal bond business in New York, approving segregating it from

On May 20th, the NY Times ran an editorial titled “Regulatory Shopping”. The very valid point of the editorial is that if you give the regulated the option to choose their regulator, no good can come of it:

And yet, legislation recently introduced in the House would allow insurance companies, currently regulated by the states, to opt for federal regulation instead — and, in general, if they don’t like that, to switch back after a spell. If the bill were enacted, the race to the regulatory depths would continue, and the nation would be headed in exactly the wrong regulatory direction.

Agreed, no argument. I take issue, however, with the assumption of the NYT that state insurance regulators have covered themselves in glory. Robust defenders of the rights of policyholders? Not exactly. In the pocket of the insurance industry? Sometimes. Opaque?  Always. And that’s without addressing the quagmire/insanity that is insurance insolvency regulation and the guaranty fund system.Continue Reading State Insurance Regulation: The Lessons of History (AIG Edition)