Ken Crerar gives his full backing to new proposals to introduce optional federal charter legislation.
One of the great ironies in the US drive to bring down trade barriers and open markets overseas is our own antiquated insurance regulatory system that is as difficult and challenging for foreign businesses as anything American businesses encounter in the international marketplace.
The current state regulatory system for insurers and insurance agents and brokers is a crazy quilt of market conduct rules, pricing provisions and other conflicting regulatory and licensing requirements, to say nothing of the layers of bureaucracy found in the 50 states and other US territories and jurisdictions.
That is why the Council of Insurance Agents & Brokers is pleased that senators John Sununu and Tim Johnson introduced legislation recently giving property/casualty and life insurers the option of being regulated under either a state or federal system. This is the same approach as the dual charter system for banks that has worked well and enhanced competitiveness.
An optional charter means just that. No company would be forced to accept federal regulation unless it chose to do so. Producers who opt for a federal licence could sell, solicit and negotiate insurance in any state on behalf of federally licensed insurers and state licensed insurers. And producers who choose to remain licensed at the state level would be subject to the laws and regulations of those states, including resident and non-resident requirements.
An optional federal charter system would greatly improve the ability of regulators to monitor the solvency and financial stability of insurers. It stretches credulity to believe that a state regulator has the financial expertise and staff necessary to effectively monitor the safety and soundness of a major global insurer, but financial stability is at the very heart of an insurance relationship.
The Council believes the time for a rational regulatory regime is long overdue. Although we do not expect action on the optional charter to occur during this session of Congress, it is important that the concept be out on the table for discussion when the time comes to consider insurance regulatory reform.