Seven U.S. lawmakers Friday urged Treasury Secretary nominee Timothy Geithner to boost federal oversight of insurance companies, a long-held goal of much — although not all — of the insurance industry.
Democratic Rep. Melissa Bean of Illinois, Republican Rep. Ed Royce of California and five others wrote to Geithner asking him “to either create an office within the Treasury Department or assign a high level Treasury appointee an insurance portfolio.”
There are more than 6,000 insurers in the United States, but no federal regulator for them. Instead they answer to more than 50 state and territorial authorities. Some insurers like the regulatory system this way, while others don’t.
With a new White House eyeing major regulatory reforms amid a crisis in the financial services sector, conditions look favorable for gains by the powerful faction within the industry that wants regulation centered in Washington, D.C.
The federal government has committed $150 billion in assistance to a bailout of American International Group Inc , once the world’s largest insurer.
AIG nearly collapsed last year after becoming overexposed in the largely unregulated market for credit default swaps, which was undermined by the sharp U.S. housing downturn.
Bean and Royce are long-standing advocates of federal regulation, as are big insurers such as Allstate Corp.
“We all share the belief that we must take steps to ensure that a similar situation does not occur in the future,” the lawmakers’ letter said. They also cited last year’s problems in the bond insurance industry as further evidence of the need for Washington to play a greater role in supervising insurers.
The American Insurance Association, a lobbying group for large property-casualty insurers, issued a statement of support for the lawmakers’ letter.
Geithner on Friday pledged to strengthen regulation of over-the-counter derivatives, such as credit default swaps, and to pursue registration of hedge funds.
In written responses to questions from Sen. Carl Levin, a Michigan Democrat, Geithner said: “We are going to need sweeping changes, in regulatory policy, the oversight structure and in our tools for crisis management.”
He faces a confirmation vote by the full Senate on Monday.
(Reporting by Kevin Drawbaugh, editing by Gerald E. McCormick)
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