Former Montana governor Marc Racicot, who heads a trade groupbacking legislation for optional federal chartering of insurers,said such a measure will be good for consumers and won't impactstate revenues.

Mr. Racicot, who served two terms in Montana and is nowpresident of the American Insurance Association, made his argumentin response to a letter sent by the National Conference ofInsurance Legislators urging governors to oppose an optionalfederal charter.

The message from Troy, N.Y.-based NCOIL was sent last Friday tothe National Governors Association criticizing OFC legislation as ameasure that would create a costly federal insurancebureaucracy.

NCOIL's letter said the bill in question--S. 40/H.R. 3200, theNational Insurance Act of 2007--"would set up a bifurcatedregulatory system for insurance, put at risk important staterevenue, nullify critical state-initiated consumer safeguards, anddelay and deny important consumer access and recourse in problemtimes."

An earlier letter supporting an OFC from Mr. Racicot'sorganization and the American Council of Life Insurers, Washington,was "ill-advised," said NCOIL.

When asked how he would review the NCOIL letter if he was stillserving as a governor, Mr. Racicot said that both he and ACLIPresident Frank Keating, a former Oklahoma governor, have theperspective that "if it wasn't good for the consumer, and therewasn't a convincing case, then we wouldn't try to be manufacturingone."

"The logic is overpowering," Mr. Racicot continued. And, headded, bipartisan support for the bill by both Democrats andRepublicans is testimony to that logic.

Mr. Racicot said there is "an enormous effort on a global scaleto eliminate trade barriers," and an OFC would help accomplish thisgoal.

He also noted that a dual regulatory system of banking hasexisted since the Civil War and has worked "exceptionallywell."

In fact, it has not hurt the state banking track, with 70percent of the banks still choosing a state charter, according toMr. Racicot. On the insurance front, "not all companies arepositioned to cover property-casualty coverage or life coverage ona broad, national basis," he noted.

State revenue will not be threatened by provisions in the billand states will continue to assess and collect premium taxes, hesaid.

And, an OFC could make it possible to offer a whole new array ofproducts that would be spread across different geographic regions,he said. For existing products, it would eliminate differentrequirements among states and make it possible to offer productsmore uniformly.

ACLI in responding to the NCOIL letter said, "Insuranceregulatory reform has been cited by several major studies as avital competitiveness issue. That is why states should supportoptional federal chartering."

Meanwhile, the National Association of Insurance Commissionerssent a letter Tuesday to the NGA thanking the governors'organization for reaffirming its policy position in support ofstate-based regulation at its recent national meeting.

NAIC's letter told the governors that state-based insuranceregulation "is accessible, accountable and responsive," and afederal regulator "is little more than a tool to circumvent thoselaws at the expense of your constituents."