WASHINGTON--A new study paid for by two insurance trade groupsand a financial services organization says federal oversight wouldallow regulators to move more quickly on industry problems thanstate insurance departments.

The study by the Promontory Financial Group consulting firm inWashington also found that a federal insurance regulator wouldreduce the cost of regulation to the industry.

Promontory is headed by Eugene Ludwig a former comptroller ofthe currency. The study was funded by the American Council of LifeInsurers, the American Insurance Association and the FinancialServices Roundtable.

A national insurance regulatory office "would give Congress theleverage it presently lacks to force action to address newproblems," Promontory found.

Mr. Ludwig, Promontory founder and chief executive officer, saidthe group "approached this project as an analyst, not an advocate."Mr. Ludwig served as comptroller of the currency during the Clintonadministration.

"The objective was to assess the nuts-and-bolts of creating anew federal regulatory agency," he said today in unveiling thestudy.

Ultimately, he said, "it will be up to Congress and the ObamaAdministration to determine the overall structure of financialservices regulation and how insurance fits into thatstructure."

The study found that a federal insurance office would likelyemploy 2,390 full-time staff and have an annual budget of $465million.

This would make the insurance office a "relatively small agency"compared with the OCC, the Securities and Exchange Commission andthe Federal Deposit Insurance Corp., the study found.

"Moreover, these figures do not take into account economies ofscale that would occur if the largest insurers come under federaloversight, which would reduce costs [of regulation]," the studyfound.

Since the federal office would be funded by user fees, it wouldimpose no new burden on the federal government and taxpayers, thestudy found.

It stated that a national insurance regulatory office would beable to attract and retain top specialists in insurance regulation,such as experts in capital markets, because of the professionalinteraction and development afforded by a national regulator.

"Because ONI would be a national regulator, the staff would bebetter positioned than state regulators to apply industry-widesolutions to emerging issues," the study found.

As for market conduct, ongoing oversight by Congress will ensureagainst deterioration in standards. The interplay betweenconsumer-oriented legislators and regulators on the state andfederal levels could raise the bar for best practices in marketconduct regulation, thus leading to a "race-to-the-top" as opposedto a feared "race-to-the-bottom."

The study is titled The Proposed Office of National Insurance:Organization, Functions, Size and Cost."

Mr. Ludwig said the purpose of the study was to analyze thestructure, cost and operations of a federal insurance regulatoryoffice modeled on the Office of National Insurance legislation thatwould have been created by S. 40 and H.R. 3200, legislationintroduced in the last Congress.

On the international front, a federal office would improve theway the U.S. relates to the international regulatory community,according to the Promontory analysis.

As a national regulator, the federal office would carry therequisite weight and authority to negotiate and collaborate ininternational forums as a peer to regulators from otherjurisdictions, Promontory said.