If the regulatory regime allows one insurance company to be responsible for underwriting so much of the economy's risk, then of course if regulators are wrong a

If the regulatory regime allows one insurance company to be responsible for underwriting so much of the economy's risk, then of course if regulators are wrong about the required amount of risk capital the firm should be required to hold, regulators are on the hook to nationalize it or to provide credit. Most of the post-depression financial regulations were intended to put barriers in place to large firm size/share, and it wasn't until this was eroded by the financial modernization act of 1999/2000 that AIG's growth was even possible. It's not that the outcome was a surprise, it was just low probability enough that everyone involved was willing to take the risk in exchange for the financial and career benefits that supporting the loosening of regulations offered. There still exist many other low probability events that could cause a similar disruption, in spite of the regulatory response to the credit crisis.