WASHINGTON In a sign of the rough road ahead
for a Bush administration proposal to overhaul financial
regulation, state insurance authorities on Monday criticized
the plan's call for a federal insurance regulator.
Calling the proposal "a solution in search of a problem," a
group that represents state insurance commissioners warned
Treasury Secretary Henry Paulson against trying to bring more
federal power to a regulatory system now run by the states.
"State regulators are glad that someone at the federal
level is finally paying attention to the financial crisis
facing our nation," said Sandy Praeger, who is president of the
National Association of Insurance Commissioners and the
insurance commissioner of Kansas. "However, any change should
not put the needs and convenience of Wall Street ahead of the
cares and concerns of Main Street."
Amid a widening housing market crisis and recession fears,
Paulson on Monday unveiled a package of proposals to overhaul
how Washington polices commercial and investment banks and the
financial markets. Several of Paulson's ideas have been kicking
around Washington for years.
One is his proposal to create an optional federal charter
for insurers, a long-standing goal of some of the largest
competitors among the nation's more than 6,000 insurers.
States now regulate insurers, forcing companies with
national scope to comply with more than 50 different rulebooks.
These companies favor an optional federal charter, which would
save them money and centralize their lobbying efforts. Under
the Paulson plan, companies could continue answering to state
authorities if they chose.
Supporters of an optional federal charter include Allstate
Corp (ALL.N) and others.
Asked about Paulson's backing of an optional federal
charter, Senate Banking Committee Chairman Christopher Dodd on
Monday said: "That's a matter we're already talking about up
Legislation for such an approach is pending in the Senate
and the House of Representatives, but has gained little support
despite persistent lobbying by some of the industry's biggest
After Paulson's announcement, the American Insurance
Association praised the optional federal charter component of
"Providing insurers with the option of a single regulator
for insurance will benefit consumers and will be more
efficient, effective and rational," said Marc Racicot,
president of the group of large property-casualty insurers.
But the National Association of Mutual Insurance Companies,
another industry group, said it was "disappointed" because the
Paulson plan "recommends a shift in insurance regulatory
authority away from the states to the federal government."
The mutual association's president, Charles Chamness, said,
"One threat to effective insurance regulation is the creation
of a dual regulatory structure. The Treasury recommendation for
an oversight office and a federal guarantee system appears to
be a step toward dual and overlapping regulation."
Opponents of optional federal charter, such as insurance
agents and state regulators, tend to favor keeping a
state-based system, but improving it to make state rules and
procedures more uniform.
(Editing by Leslie Adler)