WASHINGTON–Bush administration officials will testify on insurance regulation Tuesday before the Senate Banking Committee in another sign of growing federal interest in revamping the insurance regulatory landscape.

In advance of the Treasury Department's testimony before the panel the National Conference of Insurance Legislators ramped up its opposition to any federal involvement in insurance regulation. There is speculation among insurance industry representatives that the Treasury Department may use the hearing to outline its views on optional federal charter legislation introduced in the Senate in April.

Testifying on “Perspectives on Insurance Regulation” will be Randal K. Quarles, Undersecretary of the Treasury for Domestic Finance.

Also testifying will be Scott Harrington, Alan B. Miller professor, the Wharton School, University of Pennsylvania; and Terri Vaughan with Aon consulting and Robb B. Kelley, a professor of insurance and actuarial science at Drake University, Des Moines, Iowa wh a former Iowa insurance commissioner.

The Bush administration has so far not taken a position on whether it will support a greater federal involvement in insurance regulation.

But an industry lobbyist said Emil Henry, assistant secretary for financial institutions and the point man for administration policy on insurance, has recently been seriously discussing whether the administration should support legislation creating an optional federal charter for insurance with a number of stakeholders, including insurers and brokers.

Another industry lobbyist said one of the questions the administration is considering is, “Doesn't Treasury need a greater presence in insurance because, for example, of its role in administering the Terrorism Risk Insurance Act?”

Treasury Department spokesmen did not respond to request for comments.

Meanwhile, NCOIL disclosed that its president had written a July 10 letter to the leadership of the Senate Banking Committee criticizing not only a Senate bill that would create an optional federal charter for insurance, but also legislation pending in the House Financial Services Committee that would revamp state regulation of the surplus lines and reinsurance industries.

The NCOIL letter proposes that these initiatives, if enacted, would “Shanghai state modernization efforts that are already in full swing,” including the interstate insurance regulatory compact for life insurance products, which is now becoming operational, as well as rate deregulation facilitated by flex rating and more recent market conduct reform efforts.

The NCOIL reaction was contained in a letter to Senators Richard Shelby, R-Ala., and Paul Sarbanes, D-Md., chairman and ranking minority member, respectively, of the Senate Banking Committee.

It was signed by North Dakota State Rep. Frank Wald, R-Dickinson., president of NCOIL.

The letter reaffirms NCOIL's commitment to work with other advocates of what it termed “sound public policy” regarding regulation of insurance, such as the National Governors Association and the National Conference of State Legislators.

In the letter, Mr. Wald said NCOIL believes the federal legislative initiatives “are flawed proposals–ones that would cause more harm than good to the industry and the clients it serves.”

The Tuesday proceedings are not expected to be the committee's last on the insurance regulation topic. Insurance trade group lobbyists said they believe there will be a hearing in September by the committee.

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