WASHINGTON (Bloomberg) — A House subcommittee chairman called for greater US oversight of the insurance industry and said the federal government should regulate specific types of lending that pose systemic risk.

Representative Paul Kanjorski, a Pennsylvania Democrat, said that with more than $6.3 trillion in assets under management, insurers are an important part of the US financial industry and need basic federal regulation. "We can no longer sweep insurance regulation under the rug and cross our fingers that nothing will go wrong," Kanjorski said at a hearing of his House Financial Services subcommittee that helps oversee the insurance industry.

Kanjorski has called for shifting the primary responsibility for overseeing the insurance industry from the states to the federal government. He and other committee Democrats say the need for federal regulation was made clear by the economic crisis and the $182.5 billion taxpayer bailout of American International Group Inc., once the world's largest insurer, which almost collapsed in September. Bond insurers, mortgage insurers and reinsurers should be among those subject to federal regulation, he said.

The administration of former President George Bush last year proposed legislation authorising optional federal oversight of insurers to complement the 135-year-old system of state regulation.