OFC Opponents Assess GAO Report

Chicago — Two paragraphs in a 107-page report, it seems, are sufficient to reignite the ongoing debate about an optional federal charter (OFC) for insurers.

Released by the U.S. Government Accountability Office last week, the report, “Framework for Crafting and Assessing Proposals to Modernize the Outdated U.S. Financial Regulatory System,” summarizes the history of the U.S. financial regulatory system and contemplates its future.

Upon its release, organizations on both sides of the OFC debate claimed its findings validated their positions. While criticizing the current financial regulatory system as “fragmented and complex,” the report does not offer a position on an OFC, proponents of state regulation note.

“This report clearly indicates the need for better regulation and coordination of those sectors responsible for the economic turmoil,” says Jimi Grande, VP for federal and political affairs for the National Association Of Mutual Insurance Companies. “The fact that the authors did not consider proposals to federally regulate the property/casualty insurance industry only emphasizes the fact that the state-based solvency regulation of the p/c industry has proven effective and sets the industry apart in continuing to protect the needs of policyholders.”

Likewise, Charles Symington, SVP of government affairs for the Independent Insurance Agents & Brokers of America, says that those hailing the GAO report as an endorsement of federal regulation are misconstruing the report.

“Despite some assertions to the contrary, the GAO does not formally recommend that an optional federal charter (OFC) be debated,” Symington says. “The study only mentions OFC in passing and that an OFC regime could be considered by Congress.”