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Regulation and Compliance > Federal Regulation

Lobbyist: Passing OFC Could Take 5 Years

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Bills that would establish an optional federal charter for insurers have strong bipartisan support in the Senate.

Kim Dorgan, executive vice president of federal relations at the American Council of Life Insurers, Washington, gave that assessment here at the ACLI’s annual meeting.

“We’ve made a lot of progress this year,” Dorgan said.

Optional federal charter bills – bills that would give insurers the ability to choose between state and federal regulation – have been introduced in the House as well as the Senate.

Among Senate staffers, the idea that the federal charter option is “an issue whose time has come” is a recurring theme, Dorgan reported.

Over in the House, Rep. Edward Royce, R-Calif., the lawmaker who introduced his chamber’s version of the OFC bill, is a strong supporter of the federal option, Dorgan said.

Rep. Paul Kanjorski, D-Pa., the most visible Democratic supporter of the House OFC bill, is “not quite there on property and casualty,” but he is a strong supporter of the federal option for life insurance, Dorgan said.

If Republicans keep control over the House after the November elections, Republicans who support OFC legislation would likely be in charge of the relevant committees, and, if the Democrats win control, Kanjorski would be in line to assume control of a key House Financial Services subcommittee, Dorgan said.

“Regardless of who has the majority, we’re in a very good position,” she said.

Although OFC legislation is winning more support, getting it through both the Senate and the House could take from 2 to 5 years, Dorgan predicted.

Gary Hughes, the ACLI’s general counsel, noted that the introduction of actual OFC legislation has led companies that support the general OFC concept to take a good look at the OFC bills and see how the bills would affect their own operations.

For the most part, Hughes said, the current federal charter bills “track closely with what the industry has done.”

However, the current versions of the bills are likely to change, and the ACLI staff has been working with members to come up with recommendations for revisions to suggest when OFC bills are reintroduced in the next Congress, Hughes said.

Those recommendations will be guided largely by the principles of charter neutrality and exclusivity, Hughes said.

Charter neutrality is supposed to keep the playing field level, by ensuring that the only benefit of opting for federal regulation will be regulatory uniformity.

“The decision of whether to exercise the option or not should be driven by the number of jurisdictions that you’re operating in, or other factors involving how your business operates,” and should not be based on “external factors,” such as tax issues, Hughes said.

The other principle, the “exclusivity” principle, is supposed to ensure that an insurer picks one playing field–either state regulation or federal regulation–and stays there.

“If you choose to remain state-regulated, then what the federal regulator is going to do shouldn’t be a concern for you,” Hughes said.

Insurance company executives and others have talked about enacting a federal charter option that would apply only to life products.

Although excluding property-casualty products from OFC bills would make the Capitol Hill equation simpler, the change could cause new problems by increasing the amount of debate within the industry, Hughes said.

But Hughes noted that health lines have been excluded from the OFC discussion because including health insurance and related products would put OFC legislation under the jurisdiction of more committees and draw the attention of more advocacy groups.

Some in Washington have talked about applying an OFC system first to life products and then to p-c products. Dorgan said she doubts that approach will have much staying power.


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