States are easing up on regulations to attract insurance companies to set up shop in their borders.
About 30 states are letting insurance companies set up special insurance subsidiaries called captives, which can provide insurance services to their parent companies in ways that save money, the New York Times reports
Aetna recently used a subsidiary in Vermont to refinance a block of health insurance policies, reaping $150 million in savings, according to its chief financial officer, Joseph M. Zubretsky, the newspaper reports.
The insurer did not need to maintain conventional reserves at the same level as would have been required by insurance regulators in Aetna’s home state of Connecticut.
States like California, however, want nothing to do with such practices.
"We are concerned about systems that usher in less robust financial security and oversight," says Dave Jones, the California insurance commissioner, according to the Times.
Critics argue the trend could create a shadow financial sector similar to the one in the banking industry prior to the financial meltdown of the last few years.
Other financial sectors, meanwhile, are working under increased regulation brought about the Dodd-Frank financial reform bill.
|Chris Dodd (left) and Barney Frank
(Getty Images photo)
House Republicans are trying to weaken provisions in the bill although experts agree that a Democratic Senate and White House will likely ensure the bill's survival.
"Dodd-Frank is not in any way, shape or form in danger of being repealed," says Ed Mills, a financial policy analyst with brokerage FBR Capital Markets, according to Reuters.
"But they're building the groundwork over time to strip away elements that the business community feels are the most onerous."
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