Insurance companies have gotten away from their core competencies and that is "dangerous," said New York State Insurance Superintendent Eric Dinallo.
"There is a theory that diversification of financial services activities gets you risk management, but it is only true if you stay within your core competencies," Dinallo said, in an interview with CNBC.
(For the full interview and more detail on the talks that led to the AIG rescue, listen to the attached video.)
"If you drive a car, and then also think you’re going to be safer while you put on your makeup, do the Blackberry and drink a cup of coffee, have a conversation – that is not a way to drive a car," he said. "I think it is true that insurance companies have to get better at focusing on their core competencies."
Dinallo's comments come in the wake of negotiations that led to an emergency $85 billion rescue of American International Group. That plan is aimed at staving off a bankruptcy that had the potential to throw world markets into further turmoil.
According to Dinallo, the plan gives AIG enough time to engage in a "rational unwinding" of the business. However, he would not rule out any further need for capital.
According to Dinallo, the reason that Chapter 11 was rejected as an option for AIG, was that there could have been a perceptional crisis of confidence that could have made the situation worse for the insurer.
"The orderly unwinding of the company even more enhances solvency," Dinallo said.
He anticipates that there is "extremely strong" interest in AIG's core assets from top-tier companies.
Throughout this process, Dinallo said that holders of AIG policies and annuities were always safe.
"I believe that the policies were always safe," he said. "There was always core solvency of the insurance companies and they are now even more enhanced because no one has to worry about any types of withdrawals or runs on the insurance company."