The major investment banks Bear Stearns and Lehman Brothers failed because of weak capital standards. When insurance giant AIG failed, the NAIC and individual state insurance regulators were quick to point out that, because of stronger capital and reserve requirements, AIG’s insurance units were financially sound. Instead, it was brought down by unregulated holding company activity. Yet now, state insurance regulators appear to be on the brink of loosening the very standards that have helped keep insurance companies sound when other financial institutions were failing or teetering on the brink.
