WASHINGTON BUREAU — Congress should think about federal regulation of life insurers as it seeks to revamp the financial services regulatory landscape, the American Council of Life Insurers says.

Frank Keating, president of the ACLI, Washington, summarizes the group’s views on regulatory reform in a letter sent to congressional leaders and Obama administration officials.

Administration officials could unveil the “principles” that will underlie their financial services regulatory reform proposals as early as next week, according to industry lobbyists.

Treasury officials are meeting today with bankers and some insurance industry officials to hear their reaction to various proposals, the lobbyists report.

Insurance industry trade group representatives are scheduled to participate Thursday “in a listening session” with the White House officials who are coordinating efforts to draft the regulatory reform proposals, the lobbyists say.

Keating says it is the ACLI’s “strong belief” that a provision giving insurers the option to choose between state and federal regulation must be included in reform efforts, to assure that the resulting regulatory structure operates effectively with respect to all segments of the U.S. financial services industry.”

The claim that an “optional federal charter provision” would lead insurers to engage in regulatory arbitrage “is without merit,” and is being made primarily by state regulators, Keating says.

The “life insurance business is not seeking, nor would this Congress ever consider enacting, a federal insurance regulatory system that is weak in terms of consumer protections and solvency oversight,” Keating writes. “Indeed, the ACLI has consistently advocated for a federal alternative that is as strong as, if not stronger than, the best state regulatory system.”

Today, insurers’ ability to “redomesticate” from one state to another already create opportunities for regulatory arbitrage, Keating writes.

Most life insurers would likely choose a federal charter, if given the option, Keating predicts.

If that proves to be true, “the federal functional regulator would have direct jurisdiction over a critical mass of the industry – whether measured by assets or otherwise – and would be able to implement national regulatory policy in a meaningful manner, partner effectively with the new federal systemic risk regulator and effectively represent the U.S. internationally on trade and regulatory matters,” Keating writes in the letter.

Keating says implementation of any new regulatory scheme will be accomplished by federal agencies.

“Understanding and implementing critical federal policy solely through reliance on hoped for cooperation on the part of 51 state regulators rather than through enforceable federal statute is not a model this administration should embrace,” Keating writes.

“Absent a federal insurance regulatory agency, there will be no federal agency with the necessary expertise on insurance to either advise Congress on relevant policy matters or to implement policy with respect to life insurance companies,” Keating adds.

Keating says effective systemic risk regulation relative to life insurers, whether conducted by a single federal agency or a group of federal agencies, “will be difficult absent any in-depth regulatory knowledge or understanding of the business at the federal level.”

He cites Treasury’s experience with life insurers applying for Capital Purchase Program funds, a component of the Troubled Asset Relief Program.

Having the systemic risk regulator rely on the states in this regard is certainly an option, “but it will never be as effective as being able to partner with a knowledgeable federal regulatory counterpart,” Keating writes.

“Even in the current legislative environment, we continue to believe that making a federal insurance charter available to life insurers on an optional basis is realistic and appropriate,” Keating writes.

The ACLI letter was sent to Larry Summers, director of the National Economic Council, which is housed in the White House; the chairmen and highest-ranking Republican members of the Senate Banking Committee and the House Financial Services Committee; and the chairman and highest-ranking Republican member of the House Financial Services Committee’s Capital Markets Subcommittee.