Fed still learning on regulating insurance industry oversight

Atlanta Federal Reserve Bank President Dennis Lockhart./ Bloomberg

(Reuters) — The Federal Reserve is still coming to grips with how large insurance companies should be regulated to protect the financial system, Atlanta Fed President Dennis Lockhart said on Friday.

The U.S. central bank is studying whether some insurance companies offer products or engage in activities that pose a broader financial risk — similar to the problems insurer American International Group Inc. caused during the 2007-2009 financial crisis.

But the answers are not obvious, he said in a question-and-answer session following a speech at a University of Georgia Law School symposium.

“As regulators the Fed has been on a learning curve to differentiate between those that represent systemic risk and those that can be regulated by their state,” Lockhart said.

The issue is being closely watched by the insurance industry as the Fed considers which insurance companies to bring under tougher regulation.