Following in the footsteps of the American Bankers Asso-ciation Insurance Association (ABAIA), which proposed an optional federal charter for insurers, Washington, D.C.-based American Council of Life Insurers (ACLI) has released its own draft proposal-this one geared to the life insurance industry.The draft-which was assembled by about 30 working groups involving more than 200 ACLI member companies-calls for the creation of the National Insurer Act, the National Insurer Solvency Act and an Office of National Insurers in the Department of the Treasury.
Unlike the banking and securities industries, insurers currently have no choice but to be regulated by the states. Similar to the ABAIA proposal, the ACLI draft would enable an insurer to choose whether to obtain a federal or a state charter-based on the specific needs of their operations.
Critics of the state-based insurance regulatory system have argued that the patchwork of regulation across the United States hinders competitiveness by making it harder for insurers to roll out products nationwide (see "Here Come the Feds," May 2001).
But supporters of state regulation claim that the states are making progress to modernize the system.
"Everything that the ACLI has identified as an issue has been addressed (by the National Associ-ation of Insurance Commissioners) in some way," says Frank Fitzgerald, commissioner in the Michigan Office of Financial & Insurance Regulation and chair of the financial services modernization working group of the NAIC, Kansas City, Mo.
The ACLI proposal "presents a very conflicting message to Washington as well as to the state legislatures and governors," he says.
The ACLI is still commited to improving the state-based regulatory system, says Herb Perone, spokesperson for the ACLI. The ACLI has been working closely for a couple of years with the NAIC, "and we will continue to do that. We have no higher priority than that."
At this point, Perone says, the ACLI is seeking comments from all stakeholders in the life insurance regulatory process before the board determines whether to seek introduction of optional federal chartering legislation in Congress.
Meanwhile, Washington, D.C.-based American Insurance Associ-ation (AIA) is working on its own draft proposal for a federal charter. The ACLI proposal is very comprehensive, but there are differences between life insurance and property and casualty insurance, which the AIA will address in its draft, says Julie Rochman, senior vice president of public affairs at the AIA.
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