WASHINGTON--Representatives of two large insurance trade groupsasked the National Governors Association yesterday to reconsideropposition to optional federal charters for insurers and supportlegislation creating a regulatory system similar to thefederal/state system that regulates banks.

In their letter, leaders of the American Insurance Associationand American Council of Life Insurers cite the competitiveadvantages of an OFC, while reassuring the governors that thelegislation, as introduced this year in both houses of Congress,"will allow states to collect premium taxes on insurancetransactions just as they do today."

The letters were signed by Marc Racicot, president of theAmerican Insurance Association, and Frank Keating, president andCEO of the American Council of Life Insurers.

It was sent to Tim Pawlenty, Republican governor of Minnesota,who is chairman of the National Governors Association.

The last NGA policy statement on the issue was made in October2006 in conjunction with the National Conference of StateLegislators.

It was issued in response to legislation introduced in theSenate that would create an optional federal charter. The bill hassince been reintroduced in the new Congress.

The 2006 letter said the two groups oppose the bill because itwould "radically restructure the current system of insuranceregulation by installing a new federal regulator, creating amassive new federal bureaucracy in Washington, and permittinginsurance companies to 'opt out' of comprehensive state oversightand policyholder protection."

It argued that "states are better positioned than the federalgovernment to balance the interests of U.S. insurance consumerswith that of commercial competition."

But the letter from Mr. Racicot and Mr. Keating contends that,"The success of the insurance industry, a major revenue producerfor state governments, depends on the existence of a modern andefficient regulatory system that reacts quickly to rapid changes inthe marketplace and provides efficiencies and convenience tocustomers."

And, the letter added, "The insurance regulatory reformlegislation under consideration on Capitol Hill in both the Houseand Senate provides for such a system."

The letter cited support for such a regulatory system from aMcKinsey & Co., study sponsored by Sen. Charles Schumer,D-N.Y., and New York City mayor Michael Bloomberg, as well as froma separate study on capital markets commissioned by the U.S.Chamber of Commerce.

"As former governors, we have the utmost respect for the role ofstates in the nation's political and economic landscape," theletter said. Mr. Racicot was governor of Montana and Mr. Keatinggovernor of Oklahoma.

"We have spared no efforts in working with the states toadvocate for needed reforms of insurance regulation," the lettersaid. "But, while there has been some progress, it has come aboutmuch too slowly."

The letter also says that the stimulus provided by an OFC systemcan help states accomplish their goal of reforming the insuranceregulatory system. "An OFC system will encourage states to achievelong-delayed uniformity and thus make state charters an attractivealternative to a federal charter," the letter said.