Washington

Two House members say they will propose creating a federal office of insurance regulation in a bill that would incorporate support for all National Association of Insurance Commissioners model laws.

The OIR bill, to be introduced after the President’s Day recess, also would call for establishing a federal consumer protection office in all 50 states, according to Reps. Melissa Bean, D-Ill., and Ed Royce, R-Calif.

The federal OIR would work in concert with the proposed “systemic regulator” that Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, has talked about, Bean and Royce said today during a press conference.

The systemic regulator would have the authority to oversee the activities of any financial services firm, regardless of its products, if the activities presented a potential risk to the financial system, according to Frank.

Bean and Royce’s OIR would have the power to oversee all the units of any insurance company that was federally regulated, not just the insurance units, Bean and Royce said.

Treasury Secretary Timothy Geithner said Tuesday during a Senate Banking Committee hearing that proposals for a federal insurance charter “have a lot of merit, and they will be reviewed carefully.”

Sen. Timothy Johnson, D-S.D., who in the past has sponsored bills calling for insurers to have the option of choosing between state and federal regulation, said at the hearing that the “largest corporate bailout so far has been an insurance company.”

“Do you believe we can undertake serious market reform without federal regulation of insurance companies?” Johnson asked Geithner.

“I do believe an important part of reexamining supervision of financial institutions should include insurance companies,” Geithner said.

Bean said during the press conference today the Treasury Department’s decision to exclude insurers from the Troubled Asset Relief Program’s Capital Purchase Program “makes an urgent case for passage of our legislation.”

Insurers probably have been excluded from the CPP because “the federal government is leery about providing money to institutions it doesn’t supervise,” Bean said.