FSR Backs National Regulator Plan

Freeman says the FSR does not see the latest proposal as the abandonment by supporters of an "optional federal charter" concept, or drive to win insurers the right to choose between state oversight and oversight by a new federal regulator.

The FSR proposal "still provides an option for insurers to choose between the state system and the federal system," Freeman says.

The FSR directors adopted this architecture for federal regulation of insurance because "they understand that the ongoing crisis in the world financial markets has revealed gaps and weaknesses within the current regulatory system," Freeman says. "The regulatory framework we are proposing is designed to deal with the weaknesses that have clearly materialized in the last year."

The FSR principles are designed to spur discussion about what a new architecture for insurance regulation should look like, Freeman says.

Under the FSR plan, the NIFR would oversee all insurers, brokers and agents that choose to be regulated at the national level, Freeman says.

Freeman says prudential regulation would include safety and soundness, solvency, risk management, and rates and forms.

Federal law should establish a process for addressing policy forms that does not delay the development and marketing of new products, Freeman says.

Federal law should rely upon competitive market forces to establish premium rates, Freeman says.

"We don't want to create a situation where we have bifurcated regulation, where you have one regulator setting capital standards and another regulator at the state level regulating rates and forms," Freeman says.