Shifting to federal regulation of insurance would speed up efforts to address industry problems, according to a consulting firm led by a federal bank regulation veteran.
Replacing the current state-based insurance regulatory system with a federal system also would reduce the cost of regulating the insurance industry, analysts at Promontory Financial Group L.L.C., Washington, write in a paper commissioned by the American Council of Life Insurers, Washington; the American Insurance Association Washington; and the Financial Services Roundtable, Washington.
Creating a national insurance regulatory office “would give Congress the leverage it presently lacks to force action to address new problems,” the analysts write.
Eugene Ludwig, the founder and chief executive of Promontory, is a former comptroller of the currency.
As the head of the Office of the Comptroller of the Currency during the Clinton administration, he helped regulate 1,600 national banks.
In the paper released today, Promontory set out to analyze the structure, cost and operations of a federal insurance regulatory office that would be similar to the proposed Office of National Insurance.
Lawmakers included ONI provisions in S.40 and H.R. 4200, bills introduced in the last Congress.
Promontory approached the ONI project “as an analyst, not an advocate,” Ludwig said at a press conference held to unveil the paper. “The objective was to assess the nuts-and-bolts of creating a new federal regulatory agency:”
Ultimately, Ludwig said, “it will be up to Congress and the Obama administration to determine the overall structure of financial services regulation and how insurance fits into that structure.”
A federal insurance office would likely employ 2,390 full-time staff members and have an annual budget of $465 million, Promontory analysts estimate.