The battle lines are already being drawn in anticipation of a battle royal in Congress in 2011 over the creation of an optional federal charter (OFC) for insurers.

The first step was the announcement last month by Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, that an OFC will be on Congress’ 2011 agenda because it has strong bipartisan support.

He made his comments in a conference call with state insurance legislators at the summer meeting of the National Conference of State Legislators.

That prompted disclosure earlier this month that a new group headed by Ernest Csiszar is being formed to oppose any form of federal regulation of insurance.

Csiszar will be chairman of the board of a group to be called the States Alliance for Balanced Insurance Regulation (SABIR).

It will represent small to mid-size insurers in an effort to fend off increased federal regulation of the industry, according to David Bass, president and CEO of Raptor Strategies L.L.C., Washington.

Bass will serve as executive director of SABIR with Rep. Barry Goldwater Jr. as president.

In a statement, Csiszar said, “SABIR’s founding membership spans the industry, representing providers as well as purchasers of insurance products, including healthcare.”

Csiszar and Bass said SABIR was scheduled to host its first event at NAIC’s meeting, held last week in Seattle.

Csiszar formerly served as South Carolina insurance commissioner as well as NAIC president, he then resigned to head the Property Casualty Insurers Association of America in 2005. He left that post in 2006.

The American Council of Life Insurers (ACLI) has been a strong supporter of an OFC but backed off a bit this year to focus on limiting the impact of omnibus financial services reform legislation, which life insurance companies feared was too “bank-centric.”

ACLI was successful in carving out some exceptions, including blanket exemption from the Consumer Financial Protection Agency and some relief from derivatives regulations and the so-called Volcker rule, which governs investment by financial firms in hedge funds and private equity arrangements.

A consensus of life industry lobbyists and top officials is that the while the ACLI remains an advocate of an OFC, it also recognizes that its members need to reassess their position in light of the impact of the Dodd-Frank Act on the life insurance business.

Proponents of an OFC view the new Federal Insurance Office as a stepping stone to a federal regulator, one industry official said, while opponents view the Dodd-Frank Act as reaffirming state insurance regulation.

“Many large insurers now understand that at least for big companies, federal regulation is unlikely to be optional but would be mandatory,” the official, a policy-maker at an ACLI-member insurer said.

“And some question whether federal regulation would be layered on top of state regulation instead of being an alternative to state regulation,” one industry policy-maker said.

“The OFC will be reexamined by the ACLI board in light of these developments,” the official said.

And the National Association of Insurance and Financial Advisers is taking a cautious approach to insurance regulation, supporting an OFIC in concept but saying it must ensure that any final legislation meets the needs of its members before signing on.

Rep. Frank made his comments to the National Conference of Insurance Legislators (NCOIL) during their summer meeting late last month.

NCOIL provided a summary of his remarks in its monthly newsletter.

But Frank said that as the committee chair, he would remain neutral during the debate.