Insurance Regulators Want the Fox to Watch the Chicken Coop
It’s no secret that insurance companies, and the state regulators that watch them, are dissatisfied with the performance of the three credit rating agencies. The three: Standard & Poor’s, Moody’s Investors Service and Fitch Ratings, rated many toxic mortgage bonds Triple A (the top rating) and then, in 2008, downgraded them to junk. Both moves not only showed ineptitude, but also left insurers with much less capital to put against their obligations to policyholders. Arguably, the rush of rating downgrades after the collapse of Lehman Brothers led to the disaster at American International Group’s Financial Products unit, and the $182 billion federal bailout. Regulators, who are represented by the National Association of Insurance Commissioners (also known as the NAIC), do not…
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