NAIC Czar Says Insurance Regs Unlikely To Cover Credit Derivatives

José Montemayor, Texas commissioner of insurance and chair of the National Association of Insurance Commissioners' property and casualty committee, has helped calm the credit derivatives market by stating that the NAIC is unlikely to argue that credit derivatives should fall under the bailiwick of the insurance industry. The debate springs from a recent NAIC white paper which says that weather derivatives should be regulated as insurance contracts because they are primarily protection contracts "that appear to be disguised as non-insurance products." The NAIC white paper has riled OTC players, who regard any encroachment on their turf by the insurance industry as unacceptable (DW, 1/5).

"The mere existence of the [NAIC] draft has raised substantial concern in the derivatives market," according to a recent letter Allen & Overy wrote on behalf of the International Swaps and Derivatives Association to the president of the NAIC.