Legislators Back Federal Insurance Charter

“Because of our European allies’ concerns, we will have to think about doing an optional federal charter for life insurance,” he said.

Bean said the name of the bill she proposes will be the National Insurance Modernization Act. Issues. Decisions as to what will be in the bill that still must be made include consumer access, uniformity and whether a federal charter would be optional or mandatory for insurers deemed systemically significant, she said. She made her comments at the annual Insurance Reform Summit presented by Networks Financial Institute at Indiana State University.

The bill will include provisions requiring a physical presence for the Office of Insurance Information that would regulate national insurers in each state, she said. It also would create a systemic-risk regulator with the authority to oversee insurance firms defined as “systemically important.” The scope of the proposed systemic risk regulator’s authority is still under discussion as well as the definition of the term “systemic risk,” Bean said.

At a systemic risk hearing before the Capital Markets Subcommittee Thursday, Rep. Ed Royce, R-Calif., who plans to cosponsor an OFC bill with Bean, reiterated the need for such legislation. He noted that earlier this week, Federal Reserve Chairman Ben Bernanke had expressed his frustration with the ability of American Insurance Group Inc. to “exploit a huge gap in the regulatory system.” That gap “must be filled by a world-class federal regulator for insurance,” Royce said.

“The various state insurance regulators simply do not have the ability to oversee massive global financial firms like AIG,” he said. “This void has gone unfilled for too long, and the problems that have resulted because of this gap are many.”

Royce added that taxpayers “have a vested interest in the ability of this Congress to establish a world-class regulatory alternative to the fragmented 50 state system overseeing the insurance market.”

And at the Senate Banking Committee hearing where federal and state regulators came under fire for their supervision of AIG, Sen. Johnson said, “Our current, outdated, state-by-state regulatory system is ill-equipped to deal with a 21st century insurance company.”