WASHINGTON–Treasury Secretary Henry Paulson's remarks yesterdaythat the Bush administration will consider the optional federalcharter concepts for insurers were hailed by industry proponents ofthe idea.

Mr. Paulson made his remarks in response to questioning during aSenate Banking Committee hearing that was primarily focused on U.S.relations with China and economic competitiveness.

The secretary said that while the administration has yet to takea clear position on the regulation issue, he personally is in favorof a federal option for insurers and that regulatory structuralissues will be considered as part of a Treasury conferenceexamining U.S. competitiveness in March.

“I was very encouraged by Secretary Paulson's comments in favorof examining the merits of an optional federal charter,” said KevinMcKechnie, director of government relations for the AmericanBankers Insurance Association.

Mr. McKechnie, who is one of the leaders of the OFC Coalition,said: “Repair or replacement of the current system of stateinsurance regulation is a national issue that speaks to thechallenges America faces in its effort to maintain its place ofprimacy as the world's financial services leader.”

He added that the Treasury's “interest in making Americaninsurance regulation as modern and streamlined as regulation inother financial sectors is both timely and necessary.”

Dennis Kelly, a spokesman for the American InsuranceAssociation, said the AIA also found Sec. Paulson's remarksencouraging in its push for the federal option.

He added that the AIA hopes Congress will revisit the issue aswell.

“We look forward to the expected reintroduction of OFClegislation this year and what we hope will be a meaningful debateon the issue,” he said.

Mr. McKechnie offered support for the legislation, which wasoriginally introduced last year by Senators John Sununu, R-N.H.,and Tim Johnson, D-S.D., and would have established an optionalfederal charter based on that in use for the banking system.

When the reintroduction will happen remains unclear, given thecrowded agenda of the new Democratic majority. However, Mr. Kellysaid it could not occur soon enough for the AIA. “The soonerCongress can focus its attention on this, the better,” he said.

Opponents of the OFC proposal expressed dismay at the comments,arguing that the proposal should be especially objectionable to aRepublican administration.

“It is disappointing to learn that an administration that waselected on the promise of a smaller federal government is nowgiving strong consideration to creating a new federal bureaucracythat would oversee the regulation of insurance,” said Justin Roth,a senior director and lobbyist for the National Association ofMutual Insurance Companies.

Additionally, Mr. Roth said that NAMIC intends to argue the caseagainst a federal regulator when the Treasury holds its conferencenext month.

“We are hopeful that when the Treasury department holds itsconference on insurance regulation in March, NAMIC is given theopportunity to point out the serious problems that would occur ifan optional federal charter were created,” he said.

Charles E. Symington Jr., Independent Insurance Agents &Brokers of America senior vice president for government affairs andfederal relations, complained in the same vein as NAMIC, saying, “Amassive new federal bureaucracy to regulate the insurance industryis not going to ultimately create less regulation, but moreregulation.

“We urge the Treasury Department to be very careful in analyzingthe insurance regulatory system and to consider all of theimplications of reform. The Big I strongly supports targetedregulatory reform to address problems in the market, and we hopethe Treasury Department will consider this approach when reviewingthe issue,” Mr. Symington added.