Legislation proposing an overhaul of the federal financial regulatory system is about to surface in both the House and the Senate.

But participants in an Insurance Summit taking place here today predicted that all members of Congress will be able to do this year is to hold hearings and lay the groundwork for debate in the next Congress.

Emil Henry Jr., assistant secretary for financial institutions at the U.S. Treasury Department, declined to say what kind of legislation the administration might support, or if it would support any major changes to the financial regulatory system.

The Senate bill will call for creation of an optional federal insurance charter for both life and property-casualty insurers, said Jamie Burnett, legislative director to Sen. John Sununu, R-N.H. Sununu and Sen. Tim Johnson, D-S.D., are the primary sponsors of the Senate bill.

The bill will call for creation of an independent federal insurance regulator within the Treasury Department that would be similar to the Office of the Comptroller of the Currency.

The House bill, the State Modernization and Regulatory Transparency Act, will call for federal “standards” or “tools” that could bring uniformity to state regulation, speakers said.

The House bill also will include language calling for an end to rate regulation for property-casualty insurers, according to Glenn Westrick, majority counsel on the House Financial Services Committee. The primary sponsors of this bill are Reps. Mike Oxley, R-Ohio, chairman of the committee, and Richard Baker, R-La., chairman of the committee’s capital markets subcommittee.

One advantage of the Senate proposal is that the system it would create would have no effect on the federal budget, according to Gary Hughes, general counsel for the American Council of Life Insurers, Washington.

The insurance industry has agreed through the legislation to be introduced in the Senate to pay the cost of federal regulation through fees, Hughes said.

National banks use a similar system to cover the operating costs of the OCC.

Under the Senate plan, the state guaranty fund system would remain in place and the states might be the liquidators for an insolvent federally chartered insurance institution.

Alessandro Iuppa, Maine superintendent of insurance and president of the NAIC, said that reform is needed, but argued that federal involvement would create more problems than it would solve.

Westrick said members of the House Financial Services Committee have become impatient with the NAIC’s seeming unwillingness to work with the committee to fashion legislation acceptable to both the industry and regulators

“Simply saying ‘no’ to any reform action is simply not an option,” Westrick said. “The regulatory system is in dire need of reform.”

The current system “is inefficient, needs greater transparency and greater coordination,” Westrick said.

Oxley is supporting SMART “because he doesn’t believe an OFC bill has enough political support,” Westrick said.