A few days ago, New York Governor Andrew Cuomo announced his intent to fold the New York Insurance Department into a Department of Financial Services, mainly because he felt the state could regulate insurance and financial matters better, and because the state has a whopping $10 billion budget shortfall, and the fat has to be trimmed somewhere.
Now, as I understand it, this is something that has been in the works for a few years now, dating back to the Spitzer adnimistration. Back then, Spitzer had wanted to fold the banking and insurance departments together because there were very few New York-chartered banks in the state any longer. Most had consolidated into national banks, and running the banking department was fairly expensive, so why not fold it and insurance regulation into a single agency? Alas, Spitzer never got to accomplish this, mainly because he was accomplishing other things as Client 9 that ended his run as Governor.
Perhaps the effort would have remained in political limbo, were it not for the fact that New York, like many other states, currently faces a gargantuan budget deficit that has given new life to previously shelved cost-cutting measures. What Cuomo proposes is fairly vague at this point, but it is a safe bet that the administration will be providing additional details in the future.
Normally, this sort of thing would not be a concern. However, this is the same Andrew Cuomo who seriously jumped the gun when issuing subpoenas over the use of retained asset accounts last year, and who kept at it even after it became apparent that RAAs were and are a fairly standard industry practice that is not the evil Bloomberg magazine portrays them to be.
Given that Cuomo was campaigning to become Governor at the time, his subpeoenas were a Spitzer-like effort to gain popularity at the cost of an easily vilified insurance industry. it is a familiar story, alas, and considering how influential the New York Insurance Department is, you'd think that Cuomo had all the resources he needed to make the right call on RAAs, and yet, he did not. Now comes the likely merger of the NYID into a Department of Financial Services, which suggests that somewhere, some regulatory bandwidth is going to be cut.
