Optional Federal Insurance Charter

Issue

Creation of an optional federal insurance charter to bring benefits of dual chartering options to the insurance system.

Position Statement

ABA, and its separately chartered insurance affiliate, the American Bankers Insurance Association (ABIA), support creating an Optional Federal Charter (OFC) for insurance companies and agents as an alternative to, not a replacement for, the existing system of state insurance regulation. Proposed legislation creating an OFC exists in both the U.S. Senate and the House of Representatives, and both ABA and ABIA support this legislation (H.R. 3200/S.40). The legislation creates a new federal insurance regulator and pays for the cost of the new agency through fees charged to entities seeking the federal charter. The federal charter created under this legislation embraces market principles for risk pricing and uniform insurance laws.

Explanation

For more than 130 years, the stewards of state insurance regulation have been working towards but never actually achieving, a uniform system of insurance laws and regulation. Several proposals establishing a national regulatory framework have come before Congress. However, an Optional Federal Charter respects the principle of charter choice while at the same time offering those entities which choose to pay for it a uniform, national system of regulation.

The benefits of an Optional Federal Charter include the efficiency a uniform system of regulation provides, especially in the areas of agent licensing, product innovation, and competitive pricing. In addition, creating an OFC would place the insurance industry on the same regulatory footing as other financial industries modernized under the 1999 Gramm-Leach-Bliley Act.

Contact for further information: Kevin McKechnie (202) 663-5172.