AIA To Treasury: Consider OFC In Finance Industry Study

WASHINGTON--The American Insurance Association asked the Treasury Department yesterday to consider supporting an optional federal charter for insurers in its study of ways to improve the financial services sector.

AIA President Marc Racicot asked that the OFC issue for all insurers be addressed as part of Treasury's comprehensive review of how the regulatory scheme for financial institutions should be changed, and how they should be altered to improve the competitiveness of the U.S. capital markets.

The American Council of Life Insurers made a similar request last Thursday, a day after Treasury Secretary Henry Paulson announced that he was initiating such a review.

At the press conference, Mr. Paulson and Robert Steel, undersecretary of the Treasury for domestic finance, said the review is aimed at "rationalizing" the regulatory structure. The objective is to improve oversight, increase efficiency, reduce overlap, and make it easier for the regulatory system to adapt to market participants' constantly changing strategies and tools.

In responding to a question, Mr. Steel said the plan will suggest improvements for all financial market participants, including the insurance industry.

"We believe your effort to evaluate the current regulatory regimes in the financial services sector is particularly important for the insurance industry because insurers are governed by an outdated, inefficient regulatory structure," Mr. Racicot said in the letter.

"It stands to reason that insurance--one of the pillars of the financial services industry--should function with oversight by a world-class regulator in a modernized, uniform framework."

He added: "...We feel strongly that such a framework can be achieved through an optional federal charter for insurers. Modeled after the dual banking system, this approach would provide the option for insurers to be nationally regulated and would preserve the state-based regulatory structure for those choosing to remain in the current system."