OFC No Harm To States, Says Ex Gov. Racicot

Former Montana governor Marc Racicot, who heads a trade group backing legislation for optional federal chartering of insurers, said such a measure will be good for consumers and won't impact state revenues.

Mr. Racicot, who served two terms in Montana and is now president of the American Insurance Association, made his argument in response to a letter sent by the National Conference of Insurance Legislators urging governors to oppose an optional federal charter.

The message from Troy, N.Y.-based NCOIL was sent last Friday to the National Governors Association criticizing OFC legislation as a measure that would create a costly federal insurance bureaucracy.

NCOIL's letter said the bill in question--S. 40/H.R. 3200, the National Insurance Act of 2007--"would set up a bifurcated regulatory system for insurance, put at risk important state revenue, nullify critical state-initiated consumer safeguards, and delay and deny important consumer access and recourse in problem times."

An earlier letter supporting an OFC from Mr. Racicot's organization and the American Council of Life Insurers, Washington, was "ill-advised," said NCOIL.

When asked how he would review the NCOIL letter if he was still serving as a governor, Mr. Racicot said that both he and ACLI President Frank Keating, a former Oklahoma governor, have the perspective that "if it wasn't good for the consumer, and there wasn't a convincing case, then we wouldn't try to be manufacturing one."

"The logic is overpowering," Mr. Racicot continued. And, he added, bipartisan support for the bill by both Democrats and Republicans is testimony to that logic.

Mr. Racicot said there is "an enormous effort on a global scale to eliminate trade barriers," and an OFC would help accomplish this goal.

He also noted that a dual regulatory system of banking has existed since the Civil War and has worked "exceptionally well."

In fact, it has not hurt the state banking track, with 70 percent of the banks still choosing a state charter, according to Mr. Racicot. On the insurance front, "not all companies are positioned to cover property-casualty coverage or life coverage on a broad, national basis," he noted.

State revenue will not be threatened by provisions in the bill and states will continue to assess and collect premium taxes, he said.

And, an OFC could make it possible to offer a whole new array of products that would be spread across different geographic regions, he said. For existing products, it would eliminate different requirements among states and make it possible to offer products more uniformly.

ACLI in responding to the NCOIL letter said, "Insurance regulatory reform has been cited by several major studies as a vital competitiveness issue. That is why states should support optional federal chartering."

Meanwhile, the National Association of Insurance Commissioners sent a letter Tuesday to the NGA thanking the governors' organization for reaffirming its policy position in support of state-based regulation at its recent national meeting.

NAIC's letter told the governors that state-based insurance regulation "is accessible, accountable and responsive," and a federal regulator "is little more than a tool to circumvent those laws at the expense of your constituents."