The Economic Crisis and Lessons from (and for) U.S. Insurance Regulation

Policymakers and scholars are asking what role regulation played in creating the recent financial turmoil, and how the structure of financial services regulation should change to prevent similar financial crises in the future. Policymakers argue the U.S. needs an increased focus on systemic risk and a resolution authority for systemically risky institutions. While the final outcome is still uncertain, it is clear that the structure of U.S. financial services regulation will change. Much of that change will address issues broader than or outside the scope of insurance regulation, but some of it will inevitably interact with insurance regulation. This article summarizes theories that are often used to explain regulatory failure and examines the unique structure of U.S. insurance regulation within the context of those theories. [PUBLICATION ABSTRACT]