OFC No Rx For Market Problems, Say Experts

WASHINGTON--An optional federal charter for insurers would not eliminate the sort of property insurance marketplace problems that now exist in coastal states, a group of industry officials cautioned last week.

But creation of an OFC would give the federal government a complete view of the insurance industry that the current regulatory scheme doesn't provide, said Scott Sinder, a member of the Washington, D.C. law firm of Steptoe & Johnson.

His comments were made at a panel discussion sponsored jointly by the American Enterprise Institute for Public Policy Research and the Competitive Enterprise Institute on, "Could More Competition Have Solved the Post-Katrina Insurance Problems on the Gulf Coast?"

Deborah Ballen, executive vice president for public policy management at the American Insurance Association, added that she would give "a qualified yes" to the question of whether a federal insurance regulator would help the coastal states deal with the catastrophic storm issue.

"There are things an OFC can do that would really help the ability of coastal states to manage catastrophic risk." But, she said, "there are issues that go beyond that."

At the same time, a representative of smaller insurers said creating an OFC would be "exacerbating" the problems coastal states have in coping with the current onslaught of catastrophic storm.

"You are not going to get what you started out with," said Carl Parks, senior vice president-government affairs, for the National Association of Mutual Insurance Companies.

"You are going to have the same problems you already have in the states dealing with catastrophic storms," he said, calling an OFC the "worst form of dual regulation."

But, in a surprising turn, a conservative Louisiana state legislator said the interstate compact being proposed by the National Association of Insurance Commissioners as the appropriate state-based solution to uniform insurance regulation is "anti-Democratic."

State Rep. Shirley Bowler, R-Harahan, said the interstate compact "misses the boat in every area of government accountability."

She called it "a totally unworkable solution to uniformity" and a "total aberration of government as we know it."

By contrast, Ms. Bowler said that what attracts her to the OFC "is that at least it is government. It is bound by open meetings and public deliberations of policy."

She said, "I agree that insurers trying to compete in the global market need to find some measure of uniformity instead of being jockeyed from one set of rules in one state to another set of rules in another state."

She added, "It also represents to me an environment where competitive tensions could exist." She explained that Louisiana "would be smarter about its regulations if we had a model to go by or somebody we could point to and say, 'They are dumber than we are and we are going to do it right.'"