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Insurance Regulation: Lessons from a Small Economy

Ronen Perry

University of Haifa - Faculty of Law

September 2009

Southern Methodist University Law Review, Vol. 63, 2010

In March 2009, the faltering insurance behemoth AIG sparked national outrage when it announced a payment of $165 million in executive bonuses after receiving more than $170 billion in bailout money from the U.S. Treasury. President Obama expressed his personal indignation in a public statement, emphasizing “the need for overall financial regulatory reform.” Is this merely an anecdote, a unique case that requires a tailored solution, or a symptom of a more fundamental deficiency? The recent economic crisis showcased some of the main deficiencies of existing regulatory systems, and rekindled the debate on the importance and scope of regulation in general, and of financial services regulation in particular. Against this backdrop, insurance - one of the main pillars of the financial services sector - merits special attention, because it remains the only financial industry in the United States not regulated on the federal level.

The Article unveils the inherent weakness of regulation on the state level, and advocates cautious federal intervention. But unlike previous studies, it uses an interest-group theory with a strong comparative bent. An interest-group theory is premised on the idea that regulation provides a mechanism through which well organized interest groups can influence the distribution of economic rents in an industry. Presumably, insurance regulation is no different. In addition, the state system of insurance regulation in the United States makes the use of foreign experience incomparably valuable, because in the absence of federal intervention individual states operate much like small foreign economies. The vast foreign experience, despite its great value to American scholars and policymakers, is usually inaccessible due to language barriers. This Article aims to lift at least one barrier and to enrich scholarly and political discourse with timely and highly pertinent insights.

Number of Pages in PDF File: 46

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Date posted: May 21, 2010  

Suggested Citation

Perry, Ronen, Insurance Regulation: Lessons from a Small Economy (September 2009). Southern Methodist University Law Review, Vol. 63, 2010. Available at SSRN: https://ssrn.com/abstract=1611583

Contact Information

Ronen Perry (Contact Author)
University of Haifa - Faculty of Law ( email )
Mount Carmel
Haifa, 31905
HOME PAGE: http://weblaw.haifa.ac.il/en/faculty/perry/
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