Recently, the Treasury Department decided to include insurance in its upcoming review of the regulatory system for U.S. financial institutions.

What was as interesting as the planned exercise was the response of the American Council of Life Insurers, which used the moment to focus attention on its goal of an optional federal charter. The connection is a stretch. The American Insurance Association also used the opportunity to reinforce its support for an OFC.

During the late June press conference, top Treasury officials said its review of the U.S. regulatory system and its competitiveness, “should be broader as opposed to narrower,” as stated by Treasury’s undersecretary for domestic finance, Robert Steel.

In response, ACLI President and CEO Frank Keating asked the Treasury to consider giving insurers the option of choosing to operate under the jurisdiction of a federal insurance regulator.

“The insurance industry is currently regulated exclusively by the states,” Keating said. “But to meet the challenges of the 21st century, an optional federal charter would provide needed comprehensive reforms.”

It is a given that Congress appears more amenable to a life charter than to comprehensive reform. For example, Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, has repeatedly stated concerns about personal lines rate deregulation or an OFC for personal lines.

In his comments, Frank explains that more than half of the current members of Congress came from the state legislature, and they know from their state days that homeowners/auto is all about urban vs. suburban vs. rural, black vs. white, and rich vs. poor.

But what is the ACLI thinking about? The timing is just not there, even for a life charter.

Treasury officials in their comments conceded that the study will take time, and this administration only has 18 months before, as one columnist noted on July 8, “George Bush… is evicted from the White House.”

Equally important, supporters of an OFC are having difficulty lining up sponsors for its bill in the House. Rep. Ed Royce, R-Calif., has acknowledged he is prepared to sponsor OFC legislation similar to that introduced in the Senate with great fanfare in April.

But snagging a co-sponsor from the majority part in the House appears to be an elusive one for OFC supporters, the primary reason the bill was not introduced before the July 4th break.

This is in the face of the fact that supporters of an OFC have maintained remarkable unity, an all-for-one, one-for-all approach, instead of an OFC for life only approach that pragmatists see as a more realistic goal.

Moreover, the efforts of OFC supporters to plow ahead seem unrealistic, especially since Sen. Trent Lott, R-Miss., a member of the Senate leadership, has yet to see his pound of flesh from an industry he believes has done him wrong.

At the same time, The New York Times piece on July 8 that focused on rogue agents selling unsuitable products to the elderly provides a cautionary note about life products.

On the one hand, life products truly are more national (actuarial tables, etc.) than p/c products…. But, on the other hand, such scrutiny tends to complicate any efforts to preempt state consumer protection laws, a key goal of such legislation.