The insurance industry may be large, but it is far from monolithic.

From the editor's seat, the "industry" actually is an amalgamation of several constituencies. Agents and brokers have interlocking, and often competing, interests with carriers, who themselves are further divided along issues of size and lines of business. No issue reveals these fault lines more clearly than the optional federal charter for insurers.

Though fought over for many years, until quite recently, the OFC debate seemed at a stalemate. Proponents of a federal charter tend to be large carriers who operate in many states. Associations, including the American Insurance Association and the American Council of Life Insurers, champion their interests.

Opponents of federalizing insurance regulation are more varied, but largely represent smaller, regional organizations, and include the Independent Insurance Agents & Brokers of America, the National Association of Mutual Insurance Companies and the National Association of Insurance Commissioners.

Both sides field small armies of lobbyists, and, much like the First World War, the well-entrenched sides, and the debate itself, seem stuck in the mud. Yet, now the battle seems to be shifting. Just as the arrival of U.S. troops signaled the beginning of the end of the war, the financial services meltdown seems to be a turning point. One thing people on both sides of the issue seem to agree on is that the crisis will, for good or ill, spur legislative action.

Proponents are keen to portray an optional federal charter as part of a larger effort to modernize not just insurance regulation, but regulation of the financial services industry as a whole. It's probably not a coincidence then that the newest federal charter bill, soon to be introduced to the House, is dubbed the National Insurance Consumer Protection and Regulatory Modernization Act. Opponents of an OFC accuse backers of using the financial crisis as cover to pass legislation that has been rejected in previous legislative sessions.

Just as generals trained their field glasses to the no man's land between the trenches, all eyes are now on the ever-shifting human terrain on Capitol Hill. One of the more interesting turns is that an optional charter may emerge solely for life insurers. As regulators look to address systemic risk, the interconnectedness of life insurance to other financial services industries makes it more likely to fall under the purview of federal regulators. Senate Banking Committee Chairman Christopher Dodd floated such an idea last year, and in March, House Financial Services Committee Chairman Barney Frank said the prospect of a separate deal was "overwhelmingly likely," if only to mollify European regulators' concerns about regulatory uniformity.

If this life-insurance-only charter comes to pass, property/casualty insurers fighting for a federal charter may well see a long-time ally withdraw from the trenches.

Bill Kenealy is a senior editor with Insurance Networking News. He can be reached at

(c) 2009 Insurance Networking News and SourceMedia, Inc. All Rights Reserved.

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