WASHINGTON — The chairman of the Senate Banking Committee has asked the Treasury Department to launch a comprehensive examination of the nation's insurance industry, according to a letter released Thursday.
"In recent months, there has been a steady stream of reports of distress in America's insurance industry," Sen. Donald Riegle (D-Mich.) wrote in a Dec. 20 letter to Treasury Secretary Nicholas F. Brady.
Although the federal government does not regulate the insurance industry, Riegle said, the recent collapse of the thrift industry and the trouble facing several commercial banks "makes clear that the federal government cannot afford to ignore serious problems in any industry that lies close to the heart of the American economy."
Riegle asked the Treasury to report its findings by next September.
Among his requests was for the Treasury to determine whether the government should establish a federal insurance insolvency regulator, much like the position created to oversee failed savings institutions.
Riegle wanted to know whether such a regulator could be established "without simultaneously creating an implicit federal guarantee of insurance industry obligations."
Insolvencies are on the rise in the insurance industry.
Last year, 44 insurance companies failed nationwide, up from 31 the year before. Industry observers attribute the failures to large investments in real estate, junk bonds and other troubled assets.
According to the Congressional Research Service, the nation's 2,400 life insurers and 3,850 property-casualty insurers control about $32 billion worth of real estate, $267 billion in real estate mortgages and $65 billion in high-risk junk bonds.
"The assets of America's largest insurance companies are comparable in quantity to those of its largest banks," Riegle wrote, asking Treasury officials to determine the economic consequences of one or more large insurance companies.