U.S. Federal Treasury proposes federal regulation of insurance

The United States Federal Treasury has called for federal regulation of the nation’s insurance industry, drawing criticism from the association representing U.S. state insurance regulators.
A backgrounder to a speech delivered by Treasury Secretary Henry M. Paulson, Jr. notes insurance regulation in the United States “is almost wholly state-based, with 50-plus regulators. This structure raises a number of issues with an international dimension that can be inefficient and costly.”
Paulson said in a Mar. 31 speech: “A state-based regulatory system [for the insurance industry] is quite burdensome. It allows price controls to create market distortions. It can hinder development of national products and can directly impact the competitiveness of U.S. insurers.”
There have been numerous attempts to modernize the regulatory structure for insurance, Paulson added. “At this time, it seems clear that the way forward is to give insurers the ability to elect for federal regulation.”
The Federal Treasury is recommending the creation of a federal insurance regulatory structure “to provide for the creation of an Optional Federal Charter for insurance companies, similar to the current dual-chartering system for banking.”
The proposed system would be housed within the Treasury Department.
The National Association of Insurance Commissioners (NAIC), representing 50 state insurance regulators, opposes the plan.
“While we certainly support better coordinating and modernizing of [state regulators’] oversight efforts, ‘modern’ does not mean ‘federal,'” NAIC said in a press release. “State insurance regulators are marginalized in this report and, frankly, for our sector it looks more like a solution in search of a problem
“We agree that the federal government needs to remodel their financial regulatory house, but they need to leave the insurance ‘room’ alone!”