A bill to federalize the regulation of insurance may be introduced in the U.S. House of Representatives as early as next week. In a conference call, Reps. Ed Royce (R - Calif.) and Melissa Bean (D - Ill.), sponsors of the National Insurance Consumer Protection and Regulatory Modernization Act, said the bill would create a national insurance regulator who will work with a pan-industry systemic risk regulator to better protect the financial system.

Royce noted the legislation would empower a federal regulator with the ability to monitor insurers at the holding company level. He said the travails of American International Group underscored the need for a regulator with a wider purview than a state regulator has. While the insurance operations under state regulation remained viable, Royce noted, obscure investments and over use of leverage elsewhere within the company put the business at risk.

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