Congress and the outgoing Bush administration are exploring whether to expand the Federal Deposit Insurance Corp. to guarantee insurance products if an optional federal charter is approved down the road.
FDIC Chair Sheila Bair said that with Congress interested in a federal mechanism to regulate insurers, providing a guarantee similar to bank deposit insurance “might be a direction where our abilities would be expanded.”
It was not clear from her comments–made in response to a question during an international banking conference of deposit insurers in Arlington, Va.–whether Ms. Bair was referring solely to guarantees on life insurance products, or both life and property-casualty products. She declined to elaborate further.
There was also no comment from the Treasury Department, which in early April proposed a new system of insurance regulation based on the principles included in legislation creating an optional federal charter introduced in Congress.
Reacting to Ms. Bair’s comments, a representative for the American Insurance Association, Blain Rethmeier, said that “as longtime supporters of an optional federal charter, Americans deserve a financial regulatory structure that protects consumers and provides banks, insurance companies and other financial institutions with a high degree of confidence in their business transactions.”
But an official with the Property Casualty Insurers Association of America, Cliston Brown, said PCI’s “reaction is that the insurance industry is strong, and we support reforming the state-based insurance regulatory system based on sound principles of good regulation and preserving the prerogatives of the states.”
A representative for the National Association of Mutual Insurance Companies, Nancy Grover, said NAMIC “does not think shifting the regulation of insurance from the states to the federal government is either needed or warranted. The system of state-based guarantee funds is strong and well placed to deal with insurer insolvency.”
She added that “unlike the significantly federally regulated banking industry, which has suffered many failures, the property-casualty insurance sector remains solvent and resilient even in these difficult economic conditions.”