HARTFORD — State Sen. Joseph Crisco, Jr. (D-17) offered reassurance to state residents about the dim prospects for a JP Morgan Chase-style derivative collapse within Connecticut’s insurance industry.
Crisco, who is Senate chair of the legislature’s Insurance and Real Estate Committee, wrote a law that was enacted in 2009 that restricts a U.S. insurer doing business in Connecticut from entering into derivative financial transactions unless it is prudent for the company to do so and consistent with its business and diversification considerations, according to a release issued by Crisco’s office.
According to the release, PA 09-48, “An Act Concerning Derivative Financial Transaction Controls,” requires insurance companies making comparable investments to include in audited financial reports a statement from an independent certified public accountant verifying adequate internal controls.
“For the past week the world has watched troubling details unfold in the press of J.P. Morgan’s ill-advised $2 billion gamble, and the aftershocks of that bungled investment have rocked financial and banking institutions,” Crisco said in the release. “I want to commend my legislative colleagues and then-Gov. Rell for having the foresight to enact this law and guard against such upheaval in Connecticut’s insurance industry by strictly regulating the allowable scope of its derivative investments.”
Crisco recounted how derivative investments in the real estate industry are often cited as the primary cause of the financial collapse in 2008, which triggered a lasting, global recession.
“No one challenges the rights of private businesses and corporations to make investments as they see fit and engage in capitalism — it is the basis of our economic system and the engine that generates jobs and careers generation after generation,” Crisco said in the release. “But when the insurance premiums — or bank deposits — of private citizens are exposed in those investments, the government and its regulatory authority have a vitally important role to play.”
Crisco added, “Connecticut residents should know my 2009 law protects their stake in insurance companies and helps ensure the solvency of those companies for when claims must be paid or annuities come due.”