The chairman of a key House Financial Services panel last night unveiled draft legislation creating a federal insurance regulatory agency.

A draft of legislation creating a Federal Insurance Office with strong authority over solvency and international issues was released by Rep. Paul Kanjorski, D-Pa.., chairman of the Capital Markets Subcommittee of the House Financial Services panel.

The bill won immediate support from the American Council of Life Insurance.

Frank Keating, president and CEO of the ACLI, said the trade group would support the FIO, noting the ACLI had supported a similar proposal in the past sponsored by Kanjorski and Rep. Judy Biggert, R-Ill.. That bill would have created an Office of Insurance Information.

“The events of the past 12 months have only served to strengthen the arguments for creating this office,” Keating said. “The financial crisis has all too clearly illustrated the problems associated with the lack of insurance industry expertise at the federal level.”

The bill will be the subject of a full committee hearing Tuesday and is likely to be reported out by the committee to the full House by the end of the month.

After full House passage, it would then have to be reconciled with legislation dealing with financial services regulatory reform now being drafted in the Senate Banking Committee.

A key difference between the approaches of the House and Senate is that the House is dealing with financial services regulatory reform issues on a bill-by-bill basis, while the Senate committee plans to propose an omnibus bill with up to 13 titles incorporating all of its proposed financial services reform provisions.

The omnibus Senate Banking bill is expected to be unveiled late this month, followed by a prompt markup of the legislation by the committee.

The bill introduced by Kanjorski mirrors legislation submitted by the Obama administration except for deletion of subpoena and enforcement provisions sought by Treasury. That legislation would have created an Office of National Insurance.

Kanjorski decided to delete the 2 provisions at the request of industry and state regulatory representatives who oppose any initiatives to give the federal government a role in insurance regulation.

The draft was released in advance of a hearing scheduled Tuesday by the full committee to discuss the new Kanjorski bill as well as other components of financial services reform legislation, including the Investor Protection Act and the Private Fund Investment Advisers Registration Act.

The FIO bill would give an insurance agency within Treasury to designate insurers as systemically risky.

Under the new proposal, the FIO would be headed by a director appointed by the Secretary of the Treasury. Its authority would cover all lines of insurance except health insurance. It would also have the authority to oversee the Terrorism Risk Insurance Act.

The new agency would have the power to monitor the insurance industry, including identifying gaps in regulation that could contribute to systemic risk issues. It would also represent the U.S. at the International Association of Insurance Supervisors and in the negotiation of international regulatory agreements. The bill also would authorize the Secretary of the Treasury to negotiate and enter into these international agreements.

In addition, the bill would provide the agency with authority to preempt state insurance measures, consult with the states on insurance matters and advise the Treasury secretary on domestic and international insurance policy issues.

In carrying out its functions, the FIO would be authorized to gather insurance data and information from insurers. It would also be authorized to coordinate data and information collection efforts with the states.

Small insurers would be exempt from any reporting requirements, however.

A Federal Insurance Office would “provide national policymakers with access to the information and resources needed to respond to crises, mitigate systemic risks, and help ensure a well functioning financial system,” Kanjorski said. In addition, the office would “provide a unified voice on insurance matters for the United States in global deliberations,” he concluded.