The US Treasury Leans Toward Optional Federal Charter for Insurance
By Jim Robinson

 The US Treasury Weighs In: 3/31/2008

The US Treasury Leans Toward  Optional Federal Charter for Insurance

“We should and can have a structure that is designed for the world we live in, one that is more flexible, one that can better adapt to change, one that will allow us to more effectively deal with inevitable market disruptions and one that will better protect investors and consumers. The  challenge is to evolve to a more flexible, efficient and effective regulatory framework – and that is the purpose of this Blueprint.”  - Treasury Secretary Henry M. Paulson, Jr.

Insurance presents a clear need for regulatory modernization. States have been the primary regulator for insurance for over 135 years. While a completely state-based regulatory system for insurance may have been appropriate at one time, insurance market changes have put increasing strains on the system.

A state-based regulatory system is quite burdensome. It allows price controls to create market distortions. It can hinder development of national products and can directly impact the competitiveness of US insurers. There have been numerous attempts to modernize the regulatory structure for insurance. At this time, it seems clear that the way forward is to give insurers the ability to elect for federal regulation. Therefore, in the Blueprint we recommend the establishment of a federal insurance regulatory structure to provide for the creation of an Optional Federal Charter for insurance companies, similar to the current dual-chartering system for banking. This system would be built on a proven model and we recommend, as in the banking sector, that this federal agency be housed within the Treasury Department. This is the most effective way to address these issues and we outline the critical elements to this legislation. Source; Excerpts from  Remarks by Secretary Henry M. Paulson, Jr. on Blueprint for Regulatory Reform:  March 31, 2008  hp-897 

Federal Insurance Regulatory Structure
Treasury recommends the establishment of a federal insurance regulatory structure to provide for  the creation of an Optional Federal Charter. This structure is similar to the current dual chartering  system for banking. An Office of National Insurance within Treasury should oversee this federal regulatory structure. Treasury also recommends that, as an intermediate step, Congress establish a federal Office of Insurance Oversight within Treasury to establish a federal presence in insurance for international  and regulatory issues. Source: U.S. Treasury Department Office Of Public Affairs Fact Sheet: Treasury Releases Blueprint For A Stronger Regulatory Structure.

Related Topic Links:

• Treasury Secretary Speech
• Blueprint for a Modernized Financial Regulatory Structure
• The Department Of The Treasury Blueprint For A Modernized Financial Regulatory Structure
• Fact Sheet on Blueprint