In a riposte to consumer groups challenging the establishment of an optional federal charter for insurers, Frank Keating, president and CEO of the American Council of Life Insurers (ACLI), says the federal government needs to develop a regulatory structure that realizes the interrelation of the insurance, banking and securities industries.

“The federal government must develop an insurance regulatory presence with the capacity to monitor the insurance marketplace and identify risks to consumers, the industry and the broader financial system before they reach the crisis stage,” Keating writes. “Life insurance is a $5 trillion industry which affects the lives of almost all Americans and closely interacts with banks and securities firms. Consumers cannot afford a regulatory structure in which federal financial regulators are effectively walled-off overseeing the insurance marketplace.”

Keating also hit back at charges that an optional charter is shorthand for lax regulation or regulatory arbitrage.

“To the contrary, in the wake of the financial crisis, the marketplace will not have confidence in an insurance company that comes under weak financial and market conduct standards,” he says. “The rhetoric about ‘regulatory arbitrage’ is overblown. An optional system would preserve state regulation for insurance companies that would be better served by it, perhaps smaller or regional companies. The key is to maintain high standards of financial solvency and marketplace conduct at both the state and federal levels.”

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