State lawmakers and insurance regulators say federal regulators should focus on doing a better job rather than on expanding their jurisdiction to include the insurance industry.

The lawmakers and regulators are here for the fall meeting of the National Association of Insurance Commissioners, Kansas City, Mo.

They were responding to comments that U.S. Treasury Secretary Henry Paulson made Sunday on “Meet the Press.”

Pauslon indicated that the problems at American International Group Inc., New York, are at least partly the result of the current fragmentation of the U.S. financial services regulation system.

Paulson argued that the AIG problems show why the United States needs to have an optional federal charter system that would give insurers a chance to be federally regulated.

North Dakota state Rep. George Keiser, R-Bismarck, N.D., secretary of the National Conference of Insurance Legislators, Troy, N.Y., said here at the NAIC meeting that AIG’s problems were at its investment subsidiaries, not its insurance subsidiaries.

“The U.S. is the best insurance market worldwide and offers the best protection for consumers worldwide,” Keiser said.

The “problems surfacing have been at the federal level of regulation,” Keiser said.

Within 24 hours of the start of the AIG crisis, locally based state regulators were explaining what the crisis meant to consumers and assuring consumers that the insurance subsidiaries are sound, Keiser said.

“We didn’t have to wait for a federal beauracracy,” Keiser said.

NAIC President Sandy Praeger, the Kansas insurance commissioner, talked last week about the strength of state regulation and is expected to repeat that point here Tuesday, during a public briefing.

Mila Kofman, the Maine insurance director, said in an interview that AIG’s problems were at the holding company level.

“The whole mess was created under federal watch,” Kofman said. “Because of effective state-based insurance regulation, the insurance subsidiaries of AIG are financially solvent and not in trouble…. The approach from Secretary Paulson to deregulate insurance through an optional federal charter and an Office of Insurance Information is exactly what we do not want.”

The OFC and OII approaches do not include effective enforcement standards and would not protect consumers, Kofman said.