Chairman of two giant insurers are calling for a federal charter for insurance.
Thomas Wilson, chairman of Allstate Corp., Northbrook, Ill., and Stuart Reese, chairman of Massachusetts Mutual Life Insurance Company, Springfield, Mass., expressed support for a federal charter earlier this week at a capital markets meeting organized by the U.S. Chamber of Commerce, Washington.
Advocates of the an “optional federal charter” system want to give U.S. insurers a choice between staying with the traditional state-based insurance regulatory system and coming under the jurisdiction of a new federal insurance regulatory agency.
Wilson said creating a federal charter option “would allow strong consumer protections and uniform regulation across states that would lower administrative costs and improve access to new and innovative products.”
“The United States has the most sophisticated capital markets in the world, with the most competitive and innovative financial instruments,” Wilson said. “Yet our system for regulating them is a Depression-era hodgepodge. We need real regulatory reform, better oversight and greater transparency,” he added.
Federal regulation of insurance should take place within the context of creating a comprehensive regulatory framework that will ensure “that middle-income consumers can create more secure economic futures and better manage the financial risks that are a part of everyday life,” Wilson said.
“As leaders, we have to do more than just talk about restoring confidence,” Wilson said. “We must re-examine the way risk is shared between government, business and the American people.”
Reese, who appeared on the same panel as Wilson, said the current state-based regulatory system “requires each insurance company to deal with 50 regulators.”
Reese said he is opposed to eliminating the state regulatory system: But adding “an optional federal charter would give companies the option to be federally or state regulated,” he said.
Today, “the insurance industry lacks of a spokesman at the federal level and a federal regulator would provide a presence in Washington with knowledge of the insurance industry,” Reese said.
Reese questioned how effectively a systemic risk regulator could work without a functional federal insurance regulator.
“It seems like there has to be some sort of insurance presence at the federal level with a systemic regulator,” David Hirschmann, the moderator of the panel and a senior vice president at the chamber, said in response to agreed Reese’s remarks.
During a later panel, Robert Pozen, chairman of MFS Management, a Boston-based mutual fund complex owned by Sun Life Financial Inc., Toronto, said creating a systemic regulator is “the most important component of reform for our current system.”
A systemic regulator will be “in place by this summer or fall,” Pozen predicted.