The New York insurance commissioner’s decision to seek additional information from Allstate Corp. about possible credit default swap activity is drawing fire from a free-market think tank.

Eli Lehrer

Two analysts at the Competitive Enterprise Institute attacked New York State Insurance Superintendent Eric Dinallo’s decision to investigate Allstate after the company’s CEO’s outspoken support for a federal regulator.

The analysts, CEI senior fellow Eli Lehrer and CEI counsel Hans Bader, say they believe Dinallo’s call to investigate Allstate is “simply a cover for illegal efforts to chill the company’s speech.”

The men allege that Dinallo’s actions are “very likely illegal” and suggest that “companies [Dinallo] has attempted to intimidate sue the New York State Insurance Department.”

“What Superintendent Dinallo did is outrageous,” Lehrer said in a statement. “I disagree with a lot of things that Allstate has said and done but this is a blatant effort at intimidation.”

Allstate’s CEO, Tom Wilson, wrote a New York Times op-ed piece April 15, in which he argued for federal regulation of insurance companies. In that piece, he also indicated that his company may have been involved in credit default swaps, the vehicle that caused American International Group to require nearly $170 billion in federal aid since September 2008.

“You know or ought to know that the interconnectedness of all financial markets means that anybody involved in issuing or purchasing debt instruments-things that almost all insurers do-played a ‘small role’ in unregulated insurance markets,” the letter states. “It seems that Mr. Wilson’s statement was simply an acknowledgment of lawful business practices that are already common knowledge. Thus it appears that you are opening an inquiry under false pretenses.”

The authors allege that Dinallo’s “real agenda may be to stop insurers, particularly large companies like Allstate, from calling for federal regulation of the insurance industry – something that may diminish your authority over such companies.”

Lehrer and Bader’s letter also suggests that Dinallo has been lobbying insurance companies to oppose a federal regulator.

“It is widely known that your employees have made telephone calls to other insurers operating in New York State asking them to back off of efforts to promote federal regulation of insurance. Thus, it appears rather certain that your real agenda has little or nothing to do with your publically [sic] expressed motives,” the letter said.