By Silla Brush - 09/24/09 11:37 PM EDT
Rep. Barney Frank (D-Mass.) said on Thursday that lawmakers next year will begin to consider whether parts of the insurance industry should be overseen by the federal government instead of state authorities.
The issue of creating an “optional federal charter” (OFC) divides the insurance industry and has been the source of a major lobbying battle within the financial community and on Capitol Hill for several years. But the insurance industry has not yet been a focal point of the broader debate in Congress about how to revamp the nation’s financial system.
“The question of an optional federal charter for insurance, particularly life insurance, is on the committee’s agenda for probably next year,” Frank said. “It just would be more weight than I think this issue could carry.”
Insurance has long been regulated at the state level, but as some insurers grew in size and had a larger impact on the economy, they and their allies have pushed for a federal office to oversee them, preferring one regulatory body to the various state regulatory authorities.
Reps. Melissa Bean (D-Ill.) and Ed Royce (R-Calif.) have sponsored a bill to set up a federal charter.
The American Council of Life Insurers (ACLI) has been a strong supporter of a federal charter. But other insurance lobbying associations, including the National Association of Mutual Insurance Companies (NAMIC) and the Property Casualty Insurers Association of America (PCI), prefer maintaining state regulation.
“There is no urgent need for the committee to delve into the property/casualty marketplace,” said Jimi Grande, senior vice president at NAMIC.
Ben McKay, senior vice president of PCI, said Frank’s comments clearly “bifurcate” the insurance debate and the broader regulatory overhaul now under way. “It signals that it isn’t really part of the reform issue,” he said.
Frank’s comments came at a hearing with Paul Volcker, an economic adviser to President Barack Obama and a former chairman of the Federal Reserve. Volcker said he hoped lawmakers would go much further than the Obama administration’s proposal.