ACLI Eyes Life-Only Optional Federal Charter


Apparently frustrated over the lack of progress on regulatory modernization, the American Council of Life Insurers is considering a go-it-alone approach on an optional federal charter that represents a potential split with the property-casualty industry.

Although the ACLI officially denies it, National Underwriter has learned that the issue could be brought up at the next ACLI board meeting in January. In addition, the position apparently will not have the support of key bank-insurance allies, who say they will continue their push for an all-inclusive OFC.

The Financial Services Roundtable and the American Bankers Insurance Association both said last week that they prefer a uniform approach to the federal charter issue. “The FSR is supportive of a comprehensive solution, rather than a life-only federal charter,” a staff official at the Roundtable said.

The Roundtable believes that only a dual insurance charter option appears likely to accomplish the goal of greater uniformity in insurance supervision and regulation, according to a Roundtable representative, Kim Sears.

Steve Bartlett, the Roundtables president and CEO, added that “separate regulatory frameworks and requirements have created unnecessary barriers that limit the ability of consumers to benefit from an efficient nationwide insurance market. The benefits from a dual insurance system would be enormous and The Financial Services Roundtable will work with other organizations and Congress to have a public policy discussion and to advance necessary legislation.”

Beth Climo, executive director of the American Bankers Insurance Association, said her group also does not back a life-only charter. “We continue to support a comprehensive approach,” she said.

The issue first surfaced publicly at a Consumer Federation of America conference on Dec. 2, when Gary Hughes, general counsel of the ACLI, implied that ACLI members are considering a go-it-alone policy on optional federal charters.

Mr. Hughes said at the meeting that an OFC bill might have a better chance if it were targeted solely at life insurance. “Our business is more suitable to a national regulator” than to state-by-state regulation, he said.

Jack Dolan, ACLIs director of media relations, later sought to dampen such speculation. “Some have raised the idea of a life-only bill, but it remains a hypothetical concept at this point. No legislation to this effect has been introduced, and we have not sought such a measure,” he said.

Mr. Hughes argument is that the insurance industry is not a monoliththat the life and p-c industries are different. While p-c carriers are insuring against perils that are geographically-basedsuch as earthquakes, tornadoes and hurricanes, for examplethe life industry is insuring against peoples lives, which is a more uniform risk throughout the country, he added.

Mr. Hughes also argued that life companies compete against banks, securities firms and mutual funds that are either dual-regulated or federally-regulated.

Currently, the p-c industry as well as the National Association of Insurance and Financial Advisers are supporting passage of the SMART (State Modernization and Regulatory Transparency) Act as drafted by the staff of the House Financial Services Committee. This is a much less drastic means of federal involvement in state insurance regulation, but even its chances of enactment in the new Congress are clouded because of the ongoing probe of conflicts of interest by insurance brokers.

While an optional federal charter is supported in principle by the American Insurance Association, it is opposed by the Independent Insurance Agents & Brokers of America, the National Association of Mutual Insurance Companies, and the Property Casualty Insurers Association of America.

AIA, NAMIC and PCI declined to comment on Mr. Hughes remarks.

Reproduced from National Underwriter Edition, December 16, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.