SEATTLE (Dow Jones/AP) ? New York Attorney General Eliot Spitzer, engaged in a wide-ranging probe of the insurance industry, is calling for more scrutiny of offshore subsidiaries of insurance companies.

Spitzer?s office is already investigating insurer American International Group for accounting issues, but this week he told a meeting of the Society of American Business Editors and Writers here that they should send reporters to Barbados and dig deeper into what insurance companies are doing offshore.

He called this aspect of the insurance industry a ?black hole? and called for a fundamental rewriting of insurance laws.

?The states have ultimately failed in their regulation of the insurance industry,? Spitzer said. ?The Feds can get the data and they have refused to do it.?

He criticised the Bush administration for its emphasis on tort reform while ignoring deeper problems in the insurance industry.

?Insurance is integral to what we do and who we are,? Spitzer said.

Current problems in the insurance industry and the drug industry are the result of the federal government allowing deregulation and then not following up when corporations failed to self-regulate as required by law, Spitzer said.

In the case of the drug industry, drugs like the anti-depressant Paxil were allowed on the market despite the fact that safety studies, which were not made public, showed it increased suicidal tendencies among adolescents, Spitzer said.

He also defended his office against corporations who claim he and his staff are overreaching in investigations of illegal behavior that harm average Americans in the marketplace.

?We had to do something,? he said. ?Someone had to do it or it would have continued.?