WASHINGTON–The property-casualty insurance sector remainsdivided over an appropriate industry regulatory system for thefuture.

Their varied views were displayed in comment letters to theTreasury Department, which has asked for views in connection withthe Treasury's initiative to prepare a blueprint for an improvedU.S. financial regulatory structure.

On the issue, two insurance trade groups voiced support for anoptional federal charter approach. Two others said they see theneed for a “vital but limited federal legislative role” tomodernize the current state regulatory system and “overcomeobstacles that currently exist,” as stated in comments by theIndependent Insurance Agents and Brokers of America.

At the same time, the National Association of ProfessionalInsurance Agents is critical of the whole process, saying theTreasury Department's broad review of financial regulation “isbiased in favor of federal regulation of insurance and foreignbusiness entities.”

Specifically, the PIA said in its comment letter, the tradegroup “supports continued state regulation and oversight ofinsurance, not industry-managed self-regulation under the guise ofglobal competitiveness.”

In its comments, the Council of Insurance Agents and Brokerssaid that “creation of an OFC regime is the Council's preferredmethod of reform because such a system would give insurers andproducers the choice between a single federal regulator andmultiple state regulators.”

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

The American Insurance Association also asked Treasury tosupport an OFC. “We urge Treasury to develop an ambitious blueprintfor regulatory modernization that includes as a linchpin OFC forproperty-casualty insurers,” said Debra Ballen, AIA's executivevice president for public policy management.

“What's needed is a fundamental restructuring of insuranceregulation that addresses the market inefficiencies of governmentprice and product controls, the non-uniform implementation ofregulatory standards, and the structural barriers to a moreholistic approach to the regulation of all U.S. financialservices–one that will ultimately work to benefit and empower U.S.insurance consumers,” Ms. Ballen said.

Charles Chamness, president and chief executive officer of theNational Association of Mutual Insurance Companies, said, “With theBush administration's strong record of support for small businessesand states' rights, NAMIC is confident the Treasury Department willagree with our comments that any significant reforms should takeplace at the state level.”

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

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

The group added, “Despite our historic and longstanding supportof state regulation, we do not believe the state system caneffectively address the efficiency and uniformity issues on itsown.”

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

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