WIN Magazine - Winter 2013 - (Page 14)

FEATURE DOES POLITICS INFLUENCE REGULATORY FORBEARANCE? BY MARTIN GRACE W E H AV E JUST run through the November 2013 election cycle. While voters and politicians hope that elections matter, it isn't always clear how much they matter and what the real effects elections have on voters and the economy. Researchers looking at developing economies look at how elections relate to the number or timing of bank insolvencies. They hypothesized that troubled banks were declared insolvent after elections to increase the likelihood of a successful election for the party in charge. They find modest evidence that elections affect regulatory actions, but the problem is that there are really so few elections and the decision maker (the president or prime minister), while an important decision maker, does not really have direct oversight of the banking industry. My coauthor, Ty Leverty of the University of Iowa, and I thought about this problem a bit and decided to put this question to the US insurance industry. We thought the insurance industry would be a great laboratory for this study for a number of reasons. * First, we have a very mature market in a well-developed economy. 14 | v i e w t h i s i s s u e a t | * Second, we have among the best regulatory practices worldwide. * Third, we have a regulatory philosophy that allows insurance companies to fail-essentially because failure and a subsequent wind-up is cheaper in the long-run than propping up an ailing insurer. * Fourth, we have the insurance industry regulated at the state level-so this gives us 50 different governments to examine. * Fifth, we have a selection of oversight models at the state level. Some regulators are elected, some are appointed by the governor, and some are selected by the legislature.

Table of Contents for the Digital Edition of WIN Magazine - Winter 2013

Disappearing…and Reappearing Risk: What Lies Ahead
An Innovative Solution for Reducing the Debt of College RMI Students
Does Politics Influence Regulatory Forebearance?
Predictive Analytics: The “Black Box” Used by Savvy Insurance Professionals
Just the Facts—On FATCA: Frequently Asked Questions on the Foreign Assets Tax Compliance Act
Your Reputation Matters, Online and Off
New Wholesale Insurance Product Focus: Protection from Hacked Bank Accounts: Protecting Small Business Policyholders
In the WIN-ner’s Circle
Index to Advertisers/

WIN Magazine - Winter 2013