GAO Says Congress Should Weigh OFC

Chicago — A mammoth new report from the U.S. Government Accountability Office, “A Framework for Crafting and Assessing Proposals to Modernize the Outdated U.S. Financial Regulatory System,” offers support, somewhat tepidly, for an expanded federal role in insurance regulation.

“Congress could consider the advantages and disadvantages of providing a federal charter option for insurance and creating a federal insurance regulatory entity,” it states. “We have not studied the issue of an optional federal charter (OFC) for insurers, but have through the years noted difficulties with efforts to harmonize insurance regulation across states through the NAIC-based structure. The establishment of a federal insurance charter and regulator could help alleviate some of these challenges, but such an approach could also have unintended consequences for state regulatory bodies and for insurance firms as well.”

Proponents of an OFC cheered the report.

“Having insurance regulation at the federal level would provide the national framework to effectively monitor the safety and soundness of nationally-chartered insurers to the benefit of U.S. businesses and individuals that rely on those institutions,” says Leigh Ann Pusey, incoming president of the American Insurance Association. “It is important, however, that federal insurance regulation is flexible and responsive to consumer demands in a dynamic marketplace, not duplicative or bifurcated.”