Federal Regulation Is "Inevitable" In Long Term, Fich Forecasts

Federal regulation of the U.S. insurance industry probably is coming, but it may not bring quick benefits to insurers or to consumers.

Analysts in the Chicago office of Fitch Ratings make that argument in an analysis of federal insurance regulation proposals.

“Fitch believes increased federal regulation of the insurance industry is inevitable in the long term,” the analysts write.

The Treasury Department’s recent declaration of support for giving insurers the option of choosing between state and federal regulation makes passage more likely “than at any point in recent history,” the analysts write.

In the short term, however, strong opposition from some insurance industry groups, election-year politics and divisiveness in Washington will prevent passage of any federal regulation proposals, the analysts predict.

Creating a single regulator could benefit the life and annuities markets the most, by reducing the inefficiencies caused by state regulation, the analysts write.