WASHINGTON–The property-casualty insurance sector remains divided over an appropriate industry regulatory system for the future.

Their varied views were displayed in comment letters to the Treasury Department, which has asked for views in connection with the Treasury’s initiative to prepare a blueprint for an improved U.S. financial regulatory structure.

On the issue, two insurance trade groups voiced support for an optional federal charter approach. Two others said they see the need for a “vital but limited federal legislative role” to modernize the current state regulatory system and “overcome obstacles that currently exist,” as stated in comments by the Independent Insurance Agents and Brokers of America.

At the same time, the National Association of Professional Insurance Agents is critical of the whole process, saying the Treasury Department’s broad review of financial regulation “is biased in favor of federal regulation of insurance and foreign business entities.”

Specifically, the PIA said in its comment letter, the trade group “supports continued state regulation and oversight of insurance, not industry-managed self-regulation under the guise of global competitiveness.”

In its comments, the Council of Insurance Agents and Brokers said that “creation of an OFC regime is the Council’s preferred method of reform because such a system would give insurers and producers the choice between a single federal regulator and multiple state regulators.”

The CIAB comments, by Scott Sinder, outside regulatory counsel, explained that such an approach “would not dismantle the state system; rather it would complement the state system with the addition of a federal partner.”

The American Insurance Association also asked Treasury to support an OFC. “We urge Treasury to develop an ambitious blueprint for regulatory modernization that includes as a linchpin OFC for property-casualty insurers,” said Debra Ballen, AIA’s executive vice president for public policy management.

“What’s needed is a fundamental restructuring of insurance regulation that addresses the market inefficiencies of government price and product controls, the non-uniform implementation of regulatory standards, and the structural barriers to a more holistic approach to the regulation of all U.S. financial services–one that will ultimately work to benefit and empower U.S. insurance consumers,” Ms. Ballen said.

Charles Chamness, president and chief executive officer of the National Association of Mutual Insurance Companies, said, “With the Bush administration’s strong record of support for small businesses and states’ rights, NAMIC is confident the Treasury Department will agree with our comments that any significant reforms should take place at the state level.”

At the same time, Mr. Chamness said, “there are situations in which the federal government can assist and support the insurance marketplace,” citing such programs as terrorism risk insurance, the National Flood Insurance Program, privacy and credit standards, and regulatory coordination with the states.

IIABA asked Treasury “to consider regulatory reforms that will improve and enhance the state-based system of insurance regulation, and not concentrate solely on options for a federal takeover of insurance regulation via mandatory or optional federal regulation of insurance.”

The group added, “Despite our historic and longstanding support of state regulation, we do not believe the state system can effectively address the efficiency and uniformity issues on its own.”

In its comment letter, PIA said the Treasury notice for comment in the Federal Register poses “a series of ‘loaded questions’ designed to encourage predetermined responses.”

“No attempt is made to disguise the clear bias of these questions,” noted Leonard Brevik, executive vice president and CEO of PIA. “For example, three questions that specifically relate to insurance all attempt to elicit comments supportive of federal regulation of insurance,” he said. “This survey clearly lacks objectivity and is slanted toward expanding federal regulation of insurance.”