A new academic study finds that the government bailout of American International Group during the financial crisis is no reason for optional or mandatory federal insurance regulation.

The report warning against the application of systemic risk regulation to insurers was written by Scott Harrington, professor of insurance and risk management at the University of Pennsylvania’s Wharton School, and published by the National Association of Mutual Insurance Companies.

Blame for the financial crisis and the near collapse of American International Group should reflect “the substantial evidence of fundamental failures in U.S. and foreign regulation of commercial banking, thrift lending and investment banking,” according to the report analyzing the role of AIG and the insurance sector in the financial crisis of 2008-09.

The report, titled “The Financial Crisis, Systemic Risk, and the Future of Insurance Regulation,” notes that AIG’s problems were heavily influenced by its credit default swap portfolio, which was assembled by a non-insurance AIG subsidiary that was not subject to insurance regulation.

According to Mr. Harrington’s analysis, AIG’s situation is an “anomaly” in an insurance sector that “was largely on the periphery of the financial crisis.” The financial crisis and the government’s rescue of AIG “do not strengthen arguments for either optional or mandatory federal regulation of insurance,” he wrote.

The report states events at AIG do not justify creation of a systemic risk regulator with authority over insurers and non-bank institutions that are designated as “systemically significant.”

It finds that, compared to banking, systemic risk is relatively low in insurance markets, especially for property and casualty insurance, “because insurers hold greater amounts of capital in relation to their liabilities.”

The report explained that this reduces insurers’ vulnerability to shocks in the economy. But the creation of a systemic risk regulator “would very likely undermine market discipline and protect even more institutions, investors and consumers from the downside of risky behavior.”

Chuck Chamness, NAMIC’s president and chief executive officer, said, “NAMIC is pleased to have had the opportunity to provide Professor Harrington with a forum for his thoroughly researched and thought-provoking inquiry into the role of insurance in the financial crisis.

“His analysis and conclusions should be carefully considered by policymakers as they consider measures that could affect the future of insurance regulation.”

NAMIC is a longtime opponent of federal insurance regulation and proposals for optional federal charters for insurers.

Mr. Chamness called Mr. Harrington “one of the country’s most widely published and respected insurance experts.”

The report questions whether the AIG crisis would have been averted if federal insurance regulation been in place before the onset of the financial crisis.

Noting that federal regulators failed to anticipate or prevent the implosion of Citibank, Bank of America, and other bank and investment bank holding companies, Mr. Harrington concludes that “it’s just as likely or more likely that federal regulation of large insurers would have further increased risk.”

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