NU Online News Service, June 17, 3:50 p.m.EDT

WASHINGTON–Supporters and opponents of a new federal regulatoryregime for the insurance sector all found something to like in theObama administration's white paper on financial services regulatoryreform.

Among those reacting with positive comments were insurance tradegroups that support retention of the current state-based regulatorysystem for insurance, the Independent Insurance Agents and Brokersof America, the Property Casualty Insurers Association of America(PCI) and the National Association of Mutual InsuranceCompanies.

Also reacting were groups that support creation of an optionalfederal insurance charter for companies including the AmericanInsurance Association, the Council of Insurance Agents and Brokersand the Financial Services Roundtable. The proposal is an importantfirst step in a stronger federal role in regulating insurance, theysaid.

The "white paper," unveiled by President Barack Obama in anappearance in the East Room of the White House, would add severalfederal components to the current, state-based insurance regulationsystem.

Specifically, these include an agency within the TreasuryDepartment called the Office of National Insurance which wouldadvise the Treasury Department on various issues, includinginternational trade and industry solvency and market conductissues. The ONI would also recommend which insurance companiesrepresent a systemic risk to the system and should be overseen bythe Federal Reserve Board, in addition to state regulators.

The paper also said the administration would support "increasednational uniformity through either a federal charter or effectiveaction by the states."

Robert Rusbuldt, IIABA president and CEO, said the IIABA"strongly supports" President Barack Obama's decision not topropose a complete overhaul of insurance regulation. "We arepleased that the Obama administration's proposal retains thecurrent state regulatory system and does not directly call for thecreation of a federal regulator," he said.

Charles Symington, IIABA senior vice president for governmentaffairs, said "We are optimistic that the President's plan will notbe used as a precursor to federal regulation and that this proposedONI will be designed to work with the existing state system toprotect consumers and the marketplace and ensure internationalcoordination."

Leigh Ann Pusey, president of the American InsuranceAssociation, which supports federal regulation, said the whitepaper "recognizes that the property-casualty insurance industryremains significantly hampered by an outdated and fragmentedstate-based regulatory system that is inherently limited and cannoteffectively meet today's global economic challenges."

Her view is that the white paper "supports efforts to modernizeand improve the state based insurance regulatory framework,specifically referencing the federal charter as analternative."

Further, Ms. Pusey said, "It addresses the need for a strongnational policy voice on insurance matters by establishing anOffice of National Insurance – a critical step.

David A. Sampson, PCI president and CEO said his group supportstargeted reforms and agrees with the need to create a federalsystemic risk overseer to help ward off future crises in thefinancial services sector."

He added, "Property/casualty insurers, who have remainedwell-capitalized and solvent throughout the current fiscal crunch,do not present a systemic risk and did not cause the existingcrisis." The plan, he said would not "add a duplicative layer offederal regulation" to a "successful state system."

Charles Chamness, president and CEO of NAMIC, said that "thepaper implicitly recognizes that property/casualty insurancecompanies – particularly mutual insurers whose sole focus is thepolicyholder – have performed exceptionally well throughout thiscrisis and do not pose a risk to the financial system."

At the same time, he said, "the paper recognizes that afinancial holding company such as AIG, which containedwell-regulated insurance subsidiaries as well as a poorly regulatednon-insurance subsidiary that engaged in risky non-insuranceactivities, should be considered systemically important and thussubject to oversight by the Federal Reserve."

The proposed ONI has a structure with limited authority which"closely parallels the Office of Insurance Information that hasbeen proposed in legislation currently pending in the House ofRepresentatives and which NAMIC has endorsed," he said.

The Financial Services Roundtable, which represents largefinancial institutions, including multinational insurers, said theproposal represents a strong recognition of the need to modernizeinsurance regulation.

"The Roundtable applauds the initial legislative proposal of anOffice of National Insurance, but believes we must go farther," itsaid.

"The ideals of consolidated supervision, consistent consumerprotection, uniform regulatory treatment, among others, necessitatethe enactment of a comprehensive, uniform federal charter," SteveBartlett, FSR president, said.

"State regulation has simply failed to keep pace with what,today, is a national and international business," he added.

Ken A. Crerar, president of The Council of Insurance Agents& Brokers, added that its members appreciate theAdministration's interest in working toward a modernized insuranceregulatory system.

"We support the proposed establishment of the Office of NationalInsurance within the Treasury Department, and hope this will serveas the first step toward establishing an optional federal charter,which the Administration identifies as one method of reaching theobjectives in its proposal," Mr. Crerar said.

Frank Nutter, president of the Reinsurance Association ofAmerica, said his trade group was "encouraged" that the "whitepaper" indicated the administration is "open to a Federal role inthe regulation of insurance."

Mr. Nutter added that last year's financial crisis "clearlydemonstrated the need for international coordination andcommunication across all financial services industries."

He said that, "Because of the increasingly global nature of thereinsurance business, it is essential that we have residentexpertise about the industry at the federal level, and further, theauthority to effectively negotiate international agreements."

He noted that the U.S. is the only country in the InternationalAssociation of Insurance

Supervisors (IAIS) not represented by a federal insuranceregulatory body, and our industry is sorely disadvantaged by thisin an increasingly global marketplace."