vaughan

Question 1

adv of single fed regulator

Answer 1

1. national uniformity
2. single voice
3. more efficient
4. avoid cost of duplicative & overlapping regulation

Question 2

Reasons regulations fail (3)

Answer 2

1. human error
2. regulatory forbearance – regulators don’t take action
3. regulatory capture – regulators influenced by political groups (mortgage industry captured regulators)

Question 3

what is regulatory forbearance

Answer 3

regulators dont take action

Question 4

what is regulatory capture

Answer 4

regulators influenced by political groups (mortgage industry captured regulators

Question 5

Results of regulatory forbearance

Answer 5

CEO takes on more risk to save company

CEO has most to gain and nothing to lose if they think they will fail anyway

consumers lose most

Question 6

Why regulatory forbearance exists (why regulators don’t take action)

Answer 6

1. failure during intervention hurts regulators reputation
2. intervention is unpleasant
3. hope co might pull thru on its own
4. co is part of community

Question 7

Checks & balances in state based regulatory system

Answer 7

1. peer pressure – don’t want to be only state not to intervene
2. duplication – each state has chance to find issues
3. diverse perspectives – moderate amt of regulation prevails instead of extreme reg or deregulations
4. market discipline & moral hazard – can not rely on federal bailouts as its hard to get federal funds

Question 8

NAIC Financial Analysis Division

vs

NAIC Financial Analysis Working Group

Answer 8

Financial Analysis Division: reports unusual financial analysis findings on nationally significant insurers to FAWG

vs

Financial Analysis Working Group: regulators ask domiciliary regulator questions about troubled insurers

Question 9

effective international regulatory system requires 4 things

Answer 9

free sharing of information among countries

ability of 1 country to take action if unsatisfied w/ other

each country has _confidence in each othe_r (independent verification)

mechanism to fix instances when assets can not cover claims

Question 10

NAIC made principles to promote uniformity & reciprocity across states (3)

Answer 10

balance federal uniform standards w/ local non-uniform standards

1. states should set/enforce standards
2. state (regulators) should have equal standing as other regulators