WASHINGTON–New York's mayor and senior senator have jumped into the insurance regulation debate on the side of optional federal charter regulation.
In a bi-partisan move, Republican Mayor Michael Bloomberg and Democratic Sen. Charles Schumer released a consultant's report they commissioned that finds an optional federal charter for insurers should be a component of a broad-based program designed to sustain "New York's and the U.S.' global financial leadership."
The report says the "historically local life insurance and property-casualty insurance markets are now internationalizing, although not as fast as the securities industry," and that an OFC "would benefit the competitiveness of both domestic and international insurers doing business in the U.S."
Prepared by McKinsey & Co., the report explains that "a single charter would give U.S. companies a uniform regulatory platform from which to operate and serve their customers more efficiently nationwide as well as globally."
It states that an OFC would also remove arbitrary pricing and product constraints that exist in many of the 50 state regimes, lower their duplicated regulatory costs, and ensure faster speed to market for new products under a uniform set of standards for serving customers effectively and efficiently.
Moreover, the report said, it would give "these companies a common regulatory regime more in line with their major competitors, especially in Europe."
Foreign companies doing business in the U.S. "would have a single regulatory platform more comparable to what they enjoy in most of their home markets, which would make it easier for them to do business and establish operations across the U.S., rather than continuing to meet the varying and often inconsistent regulations found in the current state-based system," according to the report.
In response, the American Insurance Association, which unlike some segments of the industry supports OFC, issued a statement "lauding" the report.
Marc Racicot, AIA president and former North Dakota governor, said it "speaks volumes that a national legislator and the chief executive of the nation's largest city are putting forth bold proposals to help the United States maintain its position as a global financial services leader."
Mr. Racicot said "this kind of meaningful reform of the domestic financial services sector–including property-casualty insurance regulation–is critically important to our nation's continued economic vitality."
The report specifically cites federal legislation introduced during the previous Congress by Senators John Sununu, R-N.H., and Tim Johnson, D-S.D. Companion legislation was introduced in the House by Rep. Ed Royce, R-Calif. It notes that reintroduction of OFC legislation in the current Congress is expected.
"Such legislation would be rooted in free-market principles and allow competition and innovation to flourish," Mr. Racicot said. "Modernizing the U.S. insurance regulatory system would empower both individual and business insurance consumers, and allow insurers to customize products and meet customer needs more quickly."
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