ACLI: OFC Effort Is Making Progress, But Work Remains

However, he noted that the current versions “by no stretch of the imagination” should be expected to remain unchanged, and that the ACLI has been working with its members to craft a series of recommendations for when the bill is reintroduced in the next Congress.

Those recommendations, he said, will be largely guided by 2 key principles: charter neutrality and exclusivity.

Charter neutrality, Mr. Hughes explained, will ensure that opting for federal regulation will not provide any additional benefits, such as a tax advantage, other than the uniformity of having one regulator.

“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,” he said, and should not be based on “external factors,” such as tax issues.

While charter neutrality ensures that the playing field between state and federal regulation remains level, the exclusivity principle is meant to ensure that an insurance company is on only one of those fields at a time. “If you choose to remain state regulated, then what the federal regulator is going to do shouldn’t be a concern for you,” Mr. Hughes said.

While support for enacting a federal option for life products alone may have support in Washington, Mr. Hughes said that enacting such a proposal would not necessarily be better, or easier. Although the “Capitol Hill equation gets a lot simpler” under such a proposal, the debate within the industry would increase, creating more conflict that could confuse the issue. Conversely, he said, health lines have been excluded from the optional federal charter discussion because their inclusion would increase the number of committees necessary for the legislation to move through and the number of advocacy groups that would demand a say in crafting the legislation.

Ms. Dorgan said that some on Capitol Hill have sought out a compromise between a federal life charter and one for property and casualty lines. Cautioning that she “doesn’t believe this has legs,” she said some in Congress have raised the idea of a staggered implementation, with only life products having the federal option initially and property and casualty products gaining the option after the system has been solidly established.

Ultimately, Mr. Hughes said, what lines will be included in the bill and when their charters will be available for insurance companies is, like much in Washington, at the mercy of lawmakers.

“Hill politics will dictate the question of how broad this is,” he said.