In remarks to the U.S. Chamber of Commerce days before unveiling his blueprint for financial regulation, Treasury Secretary Henry Paulson suggested that private insurers and reinsurers could play a larger role in shoring up the integrity of all types of financial institutions. Paulson said that could happen through development of such products as balance sheet insurance and stock price insurance. A reformed regulatory structure, Paulson said, “is going to continue to allow for the kinds of creativity and innovation we’re going to need in that area.”

From the transcript of the Chamber of Commerce appearance by Paulson (courtesy A.M. Best):

QUESTION: Obviously integrity is a critical intangible asset for financial service companies and for the market. You had mentioned the value of the insurance products for the depository institutions in terms of signaling integrity and a viable balance sheet, and have talked about the temporary access to funds with -- through the window.

To what extent do you see the private sector, perhaps some of the larger reinsurance firms, providing that access through some form of balance sheet or stock price insurance product for these various large institutions?

PAULSON: Well, obviously, the private sector has got a huge role to play in that, and is playing a major role today, and many of the products that have been developed and the institutions that have been developed have developed to just do that.

And when we -- when you see our regulatory blueprint for the financial markets, which we will be coming forward with some time soon -- when you see that, you’ll see a lot of that blueprint is aimed at this market and suggesting that we have a regulatory structure that is going to continue to allow for the kinds of creativity and innovation we’re going to need in that area.

What It Means to Agents:  This interesting little tidbit was found buried in one of the many “reaction” stories published after Paulson revealed his plan. It seems to raise the prospect of the insurance sector – which has remained financially sound throughout the market difficulties sparked by the subprime mortgage crisis – assisting in shoring up the banking and securities sectors. The reference by Paulson is to coming up with new insurance products for these sectors, but in light of his proposals for regulatory restructuring, more could be at work here.

Paulson’s Plan Puts OFC On Front Page (BestWire 4/7/08)

April 8, 2008