WASHINGTON--Two members of the House Financial ServicesCommittee will ask the Obama administration's new Treasurysecretary to unilaterally create an Office of Insurance Informationwithin that agency, it was learned.

The request is contained in a letter obtained by NationalUnderwriter, which was drafted by Reps. Melissa Bean, D-Ill., andEd Royce, R-Calif., in anticipation that the Senate will confirmSecretary-designate Timothy Geithner.

Their message, still to be formally sent, would ask that move asone of Mr. Geithner's first steps on taking office.

According to officials and industry lobbyists close to theletter's authors, who declined to be identified, the request by thetwo lawmakers is of particular import.

They said it indicates a key strategy change by segments of theinsurance industry that are pushing for a greater federal role inoverseeing regulation of insurers and agents.

Supporters of federal regulation, the sources said, will nowseek creation of an OII within Treasury, either unilaterally orthrough legislation, while creation of a federal charter forinsurers would be considered as part of overall regulatoryrestructuring expected to be considered by Congress either laterthis year or early next year.

Reps. Bean and Royce were the primary sponsors of legislationintroduced in the last Congress that would create an optionalfederal charter for insurers.

The draft letter said creating an OII in the lawmakers' viewwould be an important first step to provide an operation with aknowledge base and understanding of insurance operations to preventa reoccurrence of the American International Group financialdisaster.

Such a unit, they suggested, could have headed off the problemsat bond insurers "that resulted in a tightened credit market forinsurers and significant losses by banks and other financialinstitutions."

The letter was drafted last week in anticipation that Mr.Geithner would now be in office, but his confirmation hearingbefore the Senate Finance Committee was delayed until today byRepublicans so they could circulate to all members informationregarding Mr. Geithner's failure to pay taxes on income earnedwhile he worked for the International Monetary Fund in 2001 and2002.

Mr. Geithner, who later paid those taxes, apologized for what hecalled an oversight during today's hearing. He is expected to beconfirmed shortly by the Senate, especially since committee memberSen. Judd Gregg, R-N.H., is expected to support his nomination.

At his confirmation hearing, Mr. Geithner called the taxtransgressions "careless mistakes" and unavoidable ones. He toldthe Senate Finance Committee the failure to pay was"unintentional." But he also said, "I should have been morecareful."

Sen. Max Baucus, D-Mont., chairman of the panel, said he hopesto have a committee vote on the nomination tomorrow.

Officials at the Financial Services Roundtable said therepresentatives' letter is a "key first step" in getting the ballrolling toward a stronger federal presence in insuranceregulation.

But, said Scott Talbott, senior vice president of governmentaffairs at the Financial Services Roundtable, while an OII withinTreasury is a "good first step," a federal charter for insurancemust follow.

He said creation of an OFC is likely to be discussed by Congressthis year as part of legislation restructuring the currentfinancial services regulatory system, not as a separate bill.

Leigh Ann Pusey, incoming president of the American InsuranceAssociation, agreed with the FSR comments.

"These issues (OFC and OII) are not mutually exclusive," shesaid. "It's critical for Treasury and other public policy leadersto develop and institutionalize an insurance expertise at thefederal level," Ms. Pusey said.

"Congress will soon debate the scope of federal regulation andwhether to apply that oversight to insurers," she added.

That debate is certain to focus on the need to monitor systemicrisk on a national basis, Ms. Pusey noted, and "an OII would be atremendously valuable tool for helping inform that debate."

Mr. Talbott said lawyers at his trade group believe the TreasuryDepartment has independent authority to establish an OII. But, itwould have to be limited in size and could not preempt stateregulation.

It would not have the preemption authority proposed in federallegislation introduced last year by Rep. Paul Kanjorski, D-Pa.,chairman of the Capital Markets Subcommittee, that would havecreated an OII with authority to preempt state law as it affectedU.S. relations with foreign governments, for example, tradetreaties.

That bill stalled on the House floor last Sept. 17 because ofobjections by Rep. Jackie Speier, D-Calif., that it was too broadand could possibly be used to preempt the strong consumerprotection provisions of California's insurance laws.

The bill was pulled from the suspension calendar by HouseSpeaker Nancy Pelosi, D-Calif., at Ms. Speier's request, accordingto several staffers at the House Financial Services Committee, aswell as several industry lobbyists. Ms. Pelosi and Ms. Speierrepresent neighboring districts in California.

In the letter, Ms. Bean and Mr. Royce said they want to"encourage" Mr. Geithner to either "create an office withinTreasury or assign a high-level Treasury appointee to an insuranceportfolio to fill a void on insurance oversight and expertise atthe federal level."

Specifically, the letter cited the failure of AIG, saying "theapparent risk of a systemic shock to the broader economy was thereason behind the government's intervention to prevent the collapseof AIG."

"We all share the belief that we must take steps to ensure thata similar situation does not occur in the future, and we believethat an important first step ought to be the establishment of anoffice within Treasury which would have a knowledge base andunderstanding of insurance operations."