California Insurance

John Garamendi, California’s first elected Insurance Commissioner, stood before 500 angry policyholders of the failed Executive Life Insurance Company, answering their questions, trying to soothe their fears and getting a warm response when he promised, “I am working for you.”

But in almost the next breath, Mr. Garamendi felt compelled to add that “I’m no miracle worker” when it comes to salvaging the wreckage of Executive Life.

Policyholders, M. Garamendi told the subdued public meeting on Friday, still face the real risk of financial losses in the wake of his seizure of the Los Angeles-based insurer last month. And he repeatedly reminded his audience that the problems of Executive Life, which had invested in high-risk “junk bonds” had their roots in the months and years before he took office in January.

Just over four months into his term as California’s insurance regulator, Mr. Garamendi, a former Democratic state legislator, is the point on trying to solve what may be the nation’s worst crisis insurance. His handling of the situation will go a long way toward determining whether policyholders will escape potentially devastating losses, and could be the key in determining if the life insurance industry can salvage its reputation for rock-solid financial stability.

His performance will also be watched closely in Washington, where Congress is debating whether the system of state-by-state regulation is adequate to monitor insurance business that is increasingly complex. And it will be closely monitored in other states, many of which are following California’s lead in the re Insurance Commissioner’s post into one primarily concerned with consumer protection rather than its traditional role of helping to grow the industry.

Mr. Garamendi faces a daunting task. Not only is he dealing with the collapse of Executive Life, a subsidiary of the First Executive Corporation, but also with last week’s seizure of another insurer burdened with a huge junk-bond portfolio: The First Capital Life Insurance Company, a unit of the First Capital Holdings Corporation.

The actions against Executive Life and First Capital are the largest yet failures in the insurance industry. Petit customers of the Executive Life’s unit in New York and First Capital’s subsidiary in Virginia, both of which are now under control of regulators in those states, roughly a million policyholders and holders of annuities nationwide face the risk of losses that in the worst case could mount into billions of dollars. Chance to Build reputation

Mr. Garamendi, a 46-year-old former college football player and Peace Corps volunteer who has displayed a burning political ambition, the crisis has provided an opportunity to build a reputation in California and across the country as a tough-minded, sophisticated regulator of year industry that touches nearly every consumer. Mr. Garamendi has said his goal is to make the California Insurance Department “the best consumer protection agency” in the nation.

But the job of state holds undeniable Insurance Commissioner for political peril M. Garamendi. While he is eager to be seen as an aggressive consumer advocate, he has had to avoid making promises he may not be able to keep people like to those at Friday’s gathering of customers Executive Life, which may well turn on him if he must one day tell them that their savings and pensions have been lost.

In an interview, Mr. Garamendi deflected questions about the political risk, saying his four-year term “is like a game with four quarters and only a third corner of the way through the first quarter.

But he made clear that he relishes being in the middle of the action. “I do not like to sit on the bench,” he said. Auto Insurance Debate