Insurance remains "a recession-proof industry" despite the near-collapse of one of its giants, AIG, the president of Lloyd's America said Wednesday.
LoriAnn Lowery told the annual meeting of Lloyd's Kentucky agents that there will be fewer insurers and more government regulation as a result of the current economic crisis, but the insurance industry has the financial strength to weather the storm.
"We will continue to reinvent ourselves and evolve as we have so often in the past," Lowery said.
She warned that it took decades to create the current financial situation and said it will not end overnight — despite bailouts like the $122.8 billion in federal loans that are keeping American International Group, or AIG, afloat until it can heal itself.
Lowery compared the current situation to 1929, when the nation's stock markets crashed, triggering extensive regulation of banks and stock brokerages.
Some of those restrictions were lifted in recent years, but Lowery said "you are going to see similar provisions put (back) in place."
She said one unprecedented step to restore public confidence in the nation's financial system might involve federal oversight of all or parts of the insurance industry, which is now regulated by the states.
In addition, federal regulation of "more speculative" investments like "credit default swaps" and other financial instruments that apparently contributed to the current problem could be part of the solution.
As public confidence increases, fear and other emotions will have less effect on investment decisions and help reduce the large stock market swings of recent days, Lowery said before the stock market closed Wednesday with the Dow down 733 points.
As for Lloyd's America, a branch of the 323-year-old Lloyd's of London insurance company, "we are in the strongest financial position we have ever been in," Lowery said.
"It's very much the-glass-is-half-full scenario for us," she said.
One of Lloyd's U.S. pillars is Kentucky's Thoroughbred industry, which produced more than $75 million in premiums for the insurer in 2007, said Patrick Talley, president of Lloyd's Kentucky.
Because of its horse industry ties, Lloyd's has had a Kentucky office since 1937, Talley said.
Lloyd's held Wednesday's meeting at Keeneland Race Course in Lexington and donated $45,000 to the University of Kentucky Department of Veterinary Science, bringing its total donations to UK equine programs to more than $850,000.