WASHINGTON--A Treasury Department study of possible financial services reforms should recommend keeping insurance under state regulation, an insurance agents' group urged in a letter.
The Independent Insurance Agents and Brokers of America said it asked the Treasury to support keeping the current insurance system as it examines potential changes to the regulatory structure for U.S. financial services providers to enhance U.S. global competitiveness.
The July 13 IIABA letter to Secretary of the Treasury Henry Paulson is in response to calls by the American Insurance Association and the American Council of Life Insurance that the Treasury support creation of an optional federal charter to improve U.S. companies' position in the global marketplace.
"As you undertake this task, the IIABA encourages you to consider regulatory reforms that will improve and enhance the state-based system of insurance regulation," said Robert Rusbuldt, IIABA chief executive officer.
Mr. Rusbuldt said his organization "understands the need for greater efficiency and uniformity in insurance regulation" and supports targeted federal legislation to streamline the current state-based system, particularly in the areas of agent/company licensing, surplus lines and speed to market.
He added, "While some in the insurance industry advocate for the creation of an optional federal charter for insurance, the IIABA believes that an OFC would create problems rather than solve them."
He said that "an OFC would result in the creation of a new federal bureaucracy on top of the current state-based system, thereby increasing inefficiencies and regulatory overlap."
However, a pragmatic and targeted approach establishing national standards, using preemption "and utilizing other federal tools to improve functional regulation would be a rational and efficient way to enact appropriate insurance regulatory reforms," he said.
Despite some inefficiencies and uniformity challenges, "state insurance regulation has worked effectively to ensure insurance company solvency and protect both individual and business consumers," Mr. Rusbuldt said.
"Unlike a distant federal regulator, state regulators understand marketplace differences and can respond quickly and appropriately," he added.
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