Hoping to move the discussion beyond the theoretical, a new study funded by proponents of an optional federal charter (OFC) for insurers say a consolidated regulatory structure would have many practical benefits.
The Washington-based consulting firm Promontory Financial Group Llc, undertook the study at the behest of the American Council of Life Insurers (ACLI), American Insurance Association (AIA) and the Financial Services Roundtable (FSR). Promontory reported their findings in a 77-page reported titled “The Proposed Office of National Insurance: Organization, Functions, Size and Cost.”
Even though OFC proponents funded the work, Promontory said the purpose of the study was to “enrich the debate by turning the Office of National Insurance (ONI) from a shadowy abstraction to a more concrete and comprehensible concept.” Eugene Ludwig, Promontory’s founder and CEO says the consultancy approached the project as analysts, not advocates. “The objective was to assess the nuts-and-bolts of creating a new federal regulatory agency,” he says.
According the study, the proposed ONI would likely employ 2,390 full-time staff and have an annual budget of $465 million, which compares favorably to other federal agencies tasked with financial services oversight the authors studied, including the Office of the Comptroller of the Currency, the Securities and Exchange Commission and the Federal Deposit Insurance Corp. The study also says as larger insurers come under federal oversight, economies of scale would further reduce oversight costs.
Moreover, the report contends that compared to state insurance departments, the ONI would have greater depth and better leverage to respond to wide-ranging issues. “The new office would be able to attract and retain top specialists in insurance regulation, such as experts in capital markets, because of the professional interaction and development afforded by a national regulator,” the report states. “Because ONI would be a national regulator, the staff would be better positioned than state regulators to apply industry-wide solutions to emerging issues. There are also reasons to believe that the ONI would engage in more effective international cooperation efforts, and apply consistently strong market conduct standards—all for roughly the same cost as the present system, and possibly less.”
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