Allstate told to report use in 'unregulated' markets

Allstate Corp. has been told by regulators to report its participation in "unregulated insurance markets" after the firm's chief executive officer wrote that the company "played only a small role" in them.

"In New York and in other states, it is illegal for an insurance company to write a credit-default swap unless approved by the state insurance regulator under limited conditions," New York Insurance Superintendent Eric Dinallo said in a statement today. Dinallo also asked Allstate to report any information it has on competitors that sold unregulated derivatives.

Allstate CEO Tom Wilson wrote of the Northbrook- based insurer's participation in an opinion piece published yesterday in the New York Times. Wilson said in the column he favors replacing state regulation of large insurers with federal oversight because of the risk that a single company's failure could threaten the U.S. economy.

Wilson said insurers that sold derivatives were part of the reason for the "collapse" of financial markets.

"The insurance companies that wrote credit-default swaps were happy not to be regulated," Wilson wrote. "Insurance regulators didn't expand their oversight to ensure the solvency of these companies."

The insurer slipped 87 cents, or 3.6 percent, to $23.13 at 12:17 p.m. in New York Stock Exchange composite trading after falling as much as 7.9 percent after Dinallo's announcement.

Maria Gemskie, a spokeswoman for Allstate, had no immediate comment.