ORLANDO–The insurance industry made significant progress this year toward enactment of optional federal charter legislation, but there is still a long way to go.

That was the essence of comments of lobbyists for the American Council of Life Insurers while speaking at the group's annual meeting in Orlando.

“We've made a lot of progress this year,” said Kim Dorgan, executive vice president of federal relations for the ACLI. However, she predicted passage by both chambers could take two to four years, and perhaps five depending on how the ultimate bill is crafted.

Ms. Dorgan noted that bills establishing an optional federal charter for insurers have been introduced in both the House and the Senate. She added that the measure has strong bipartisan support in the Senate.

In discussions with Senate staff, Ms. Dorgan said a recurring theme is that the federal charter option is “an issue whose time has come.”

Ms. Dorgan said some in Congress have suggested a staggered implementation, with only life products having the federal option initially and property-casualty products gaining the option after the system has been solidly established. She doubted such a concept “has legs.”

The House version of the charter bill was introduced by Rep. Edward Royce, R-Calif., who Ms. Dorgan said is a strong supporter of the federal option. The measure's main Democratic supporter, Rep. Paul Kanjorksi, D-Penn., is “not quite there on property and casualty,” she noted, but is a strong supporter of the federal option for life insurance.

Rep. Kanjorksi is also in line to assume control of a key House Financial Services subcommittee should the Democrats win control of the House in November, but Ms. Dorgan noted that the Republicans maintaining control would also put key supporters of the federal option in charge of the relevant committees.

“Regardless of who has the majority, we're in a very good position,” she said.

But despite the increasing support, Ms. Dorgan said enactment of a federal charter option is not in the near future.

Gary Hughes, executive vice president and general counsel, said that with legislation introduced, “the political people have made it possible for the substance people to get involved again,” and work to resolve issues that could weaken support for the federal option within the industry.

“We have a number of companies that for the first time are taking a good look at the bill” and seeing how it would affect their business, he said.

For the most part, Mr. Hughes said, the current federal charter bills “track closely with what the industry has done.”

However, he noted that the current versions, “by no stretch of the imagination,” should be expected to remain unchanged, and that the ACLI has been working with its members to craft a series of recommendations for when the bill is reintroduced in the next Congress.

Those recommendations, he said, will be largely guided by two key principles: charter neutrality and exclusivity.

Charter neutrality, Mr. Hughes explained, will ensure that opting for federal regulation will not provide any additional benefits, such as a tax advantage, other than the uniformity of having one regulator.

“The decision of whether to exercise the option or not should be driven by the number of jurisdictions that you're operating in, or other factors involving how your business operates,” he said, and should not be based on “external factors,” such as tax issues.

While charter neutrality ensures that the playing field between state and federal regulation remains level, the exclusivity principle is meant to ensure that an insurance company is only on one of those fields at a time. “If you choose to remain state regulated, then what the federal regulator is going to do shouldn't be a concern for you,” Mr. Hughes said.

While support for enacting a federal option for only life products may have support in Washington, Mr. Hughes said that enacting such a proposal would not necessarily be better, or easier.

Although the “Capitol Hill equation gets a lot simpler” under a life-only proposal, the debate within the industry would increase, creating more conflict that could confuse the issue, Mr. Hughes advised.

Conversely, he said, health lines have been excluded from the optional federal charter discussion because their inclusion would increase the number of committees necessary for the legislation to move through and the number of advocacy groups that would demand a say in crafting the legislation.

Ultimately, Mr. Hughes said, what lines will be included in the bill and when their charters will be available for insurance companies is, like much in Washington, at the mercy of lawmakers.

“Hill politics will dictate the question of how broad this is,” he said.

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