The New York state Insurance Department said it wants information from Allstate Corp. on its participation in unregulated insurance markets.
The agency also said Allstate officials must report anything they know about other insurance companies that conducted unregulated writing of credit default swaps _ a form of insurance against loan defaults.
The Insurance Department sought the information in response to Thursday’s New York Times, where Allstate Chief Executive Tom Wilson wrote an op-ed column saying the company “played only a small role in unregulated insurance markets.”
“The insurance companies that wrote credit default swaps were happy not to be regulated,” Wilson said in the column.
Insurance Superintendent Eric Dinallo said it’s illegal in New York and other states for an insurance company to write a credit default swap unless the state insurance regulator approves it.
“If Allstate broke the law or is aware of any other insurance company that broke the law, Allstate should immediately report that conduct to the appropriate state insurance regulator,” Dinallo said in a written statement.
The Allstate Corp., a property and casualty insurer based in Northbrook, Ill., didn’t immediately reply to a phone call and an e-mail seeking comment.
Credit default swaps are commonly used contracts to insure against the default of financial instruments such as bonds and corporate debt. But they are also bought and sold as bets against bond defaults.
They played a prominent role in the credit crisis that brought the downfall last year of investment firm Lehman Brothers Holdings, a government rescue plan for giant insurer American International Group Inc., and Merrill Lynch & Co. selling itself to Bank of America Corp.
“I have said for more than a year that credit default swaps should be regulated and that those who write them should be required to hold adequate reserves,” Dinallo said. “But one thing should be clear. While the credit default swap market is not regulated, insurance company use of credit default swaps is. In New York, no insurance company can use credit default swaps except under very specific and limited ways and only with approval.”
In January, Allstate posted a loss of $1.68 billion, or $3.07 per share, driven largely by capital losses. In 2007, the company earned $4.64 billion, or $7.77 per share. Operating income fell nearly 55 percent to $1.76 billion, or $3.22 per share, from $3.86 billion, or $6.47 per share.
Like most insurers, Allstate emphasizes operating income because it excludes investment gains and losses and is considered more reflective of the company’s performance.
Was this article valuable?
Here are more articles you may enjoy.