"No amount of talent, expertise or resources can overcome a lack of will. Indeed, the will to regulate is essential to an efficient, effective and competitive marketplace."

This quote was part of almost every major address I made as superintendent of insurance for the state of New York serving under Gov. Mario Cuomo from 1983 to 1990. The Cuomo administration was never overwhelmed or unduly influenced by Wall Street, despite powerful lobbying efforts opposing certain of our regulatory initiatives.

We understood that the function of financial regulation was to create a fair competitive market in the interest of attracting capital. Over the last decade or two financial regulators have failed to include the word "fair" in their mission statement, and we have seen the results.

Fortunately, the effects of the current recession on the insurance sector have been mitigated to a great degree by actions the New York State Insurance Department took during that period. The administration went beyond demonstrating the will to regulate; it anticipated crises and acted to protect the public.

In 1984, our first major initiative was to take a leadership role in modernizing a National Association of Insurance Commissioners' model act that subsequently has been enacted in every state. This effort was designed to ensure that insurance company subsidiaries of a holding company are protected from the financial difficulties of the controlling holding company. It provides state insurance commissioners with the ability to "wall off" insurance companies from the problems of the insurers' parent or affiliates, in order to preserve the solvency of the regulated institution.

The regulation's efficacy was driven home in 1983 when the Baldwin-United conglomerate collapsed throughout the rest of the country, but New York consumers were protected.

In another initiative, the department was able to compel the multiline property/casualty insurance companies to cease writing financial guarantees, the same activity that ultimately resulted in the recent AIG holding company crisis. If that singular action had not been taken, many property/casualty insurance companies that issued guarantees on commercial paper in the l980s would now be, if not insolvent, under financial stress. These companies are the same that underwrite auto, homeowner and commercial coverages.

I stressed before various legislative committees that a proliferation of these guaranties would undermine discipline within the investment community. In fact, financial guaranty insurers, including the multiline insurers, at that time were attempting to obtain an exemption from the SEC registration requirement for insured corporate bond issues. This would have meant that such issues would have no longer been subject to the SEC disclosure requirements. We testified in opposition to the exemption.

If the department had not acted, the result could have been a drain of the reserves in the general insurance market, the cost of which would have been subsidized by the middle class in the form of higher premiums for automobile, homeowner and essential commercial insurance coverages.

Notably, the imposition of financial guaranty regulation was met with almost overwhelming opposition from the investment community.

Whether spurred by the pursuit of innovation and business success or simple greed, financial companies will always be pushing the envelope of good sense and fair competition. It is the inescapable role of determined regulators, state and federal, to preserve and defend a level playing field for companies, and to protect the taxpaying public.

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