by: Keith L. Martin

ACLI President and CEO Frank Keating expressed the organization's ''strong belief'' that the mechanism should be included on behalf of the organization's 340 life insurance member companies in a letter to U.S. Treasury Secretary Timothy Geithner June 2.

In the letter, Keating wrote, ''Without question, the life insurance business is systemically important both to consumers and to the economy.'' He noted that insurers hold more than 22% of all private-employer-provided retirement assets, have more than $20 trillion of coverage in force, another $2.6 trillion in annuity reserves and hold $5 trillion in total assets.

''In short, Congress can ill-afford to ignore life insurers as it revamps the regulatory landscape,'' Keating wrote. ''A major concern in this regard is the inability to effectively implement emerging federal financial regulatory policy.''

As the administration and Congress work on policy decisions for improving regulation of the U.S. financial markets and minimize the likelihood of another economic crisis, he wrote, policy decision will be carried out by federal financial regulatory bodies.

''However, absent a federal insurance regulatory agency, there will be no federal agency with the necessary expertise on insurance to either advise Congress on relevant policy matters or to implement policy with respect to life insurance companies,'' Keating advised. ''Understanding and implementing critical federal policy solely through reliance on hoped for cooperation on the part of 51 state regulators rather than through enforceable federal statute is not a model this administration should embrace.

He added that effective systemic risk regulation for life insurers, whether conducted by one or a group of federal agencies, ''will be difficult absent any in-depth regulatory knowledge or understanding of the business at the federal level.''

''Even in the current legislative environment, we continue to believe that making a federal insurance charter available to life insurers on an optional basis is realistic and appropriate,'' Keating wrote. ''Two issues need to be addressed in this regard, the first being regulatory arbitrage and the second being mandatory federal chartering for an industry that is systemically important.''

The letter also states that the life insurance industry is not seeking a federal insurance regulatory system that is ''weak'' regarding consumer protection and solvency oversight, and if the charter were made available on an optional basis, and assuming it provided for a strong and effective regulatory alternative for those companies doing business in multiple jurisdictions as well as globally, there is no question that life insurers representing a significant portion of the industry would elect the federal option.''

''That, in turn, would mean that the federal functional regulator would have direct jurisdiction over a critical mass of the industry - whether measured by assets or otherwise - and would be able to implement national regulatory policy in a meaningful manner, partner effectively with the new federal systemic risk regulator and effectively represent the U.S. internationally on trade and regulatory matters,'' Keating wrote.