Until last month, the strongest positions regarding modernization of insurance regulation have been proposals for an optional federal charter for insurance companies. But another compelling-and opposing-perspective entered the debate in August, when the Alliance of American Insurers published a report that firmly argues against federal regulation for property/casualty insurance."Optional federal chartering entails a significant risk of adverse and unexpected consequences, no matter how carefully and narrowly initial legislation is crafted," the report concludes. "The better and more prudent policy is to reject federal chartering and encourage and support further modernization of state regulation."

Ever since the Gramm-Leach-Bliley Act of 1999 removed barriers between banks, insurers and securities firms, enabling them to compete with each other, insurance regulation had been under intense scrutiny. Because insurance is regulated solely by the states, several groups and a few large carriers have claimed they are competitively disadvantaged because they are forced to comply with an inefficient, patchwork system, which prevents them from bringing products to market quickly.

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