by: Bill Kenealy

The 85-page document may be seen as something of regulatory Rorschach, as associations firmly ensconced on either side of the debate over an optional federal charter (OFC) for insurers were quick to claim vindications of their individual viewpoints. The framework acknowledges the existing gaps in the regulatory structure for insurers and calls for creation of an Office of National Insurance housed with in the Treasury Department, but stops short of endorsing an OFC.

''The white paper recognizes that the property/casualty insurance industry remains significantly hampered by an outdated and fragmented state-based regulatory system that is inherently limited and cannot effectively meet today's global economic challenges,'' Leigh Ann Pusey, president of the American Insurance Association, a leading proponent of an OFC, said in a statement. ''The white paper supports efforts to modernize and improve the state based insurance regulatory framework, specifically referencing the federal charter as an alternative.''

Rep. Ed Royce (R. – Calif.), co-sponsor of the National Insurance Consumer Protection Act, which explicitly calls for creation of a federal charter, also lauded the President's plan. ''The Administration's proposal for insurance regulatory reform is a strong step in the right direction,'' Royce said. ''As suggested in the proposal, leaving the business of insurance regulation solely up to the states is no longer a viable option. This patchwork system of 50-plus regulators is costly for consumers and fails to provide adequate oversight necessary for our 21st century economy.''

Also weighing in with praise for the document were staunch opponents of a federal charter for insurers, such as the Independent Insurance Agents & Brokers of America (IIABA).

''We are pleased that the Obama administration's proposal retains the current state regulatory system and does not directly call for the creation of a federal regulator,'' Robert Rusbuldt, IIABA president & CEO said in a statement. ''The proposal clearly states that any changes to the insurance regulatory system that weaken or undermine important consumer protections should be discarded, and we will continue to press the point that the state regulatory system has done and will continue to do a solid job of protecting consumers and ensuring that they receive the insurance coverage they need.''

However, the framework did elicit some unease regarding the exact nature of the ONI from the National Association of Mututal Insurance Companies (NAMIC), which opposes an OFC but supports pending legislation that would create a limited, national Office of Insurance Information.

''Since the paper does not propose assigning regulatory authority to the ONI, we believe that 'any new insurance regulatory regime' refers to regulatory reforms that potentially could be undertaken within the existing state-based regulatory system, which the paper leaves undisturbed and fully intact,'' Charles Chamness, president and CEO of NAMIC said in a statement. ''NAMIC does have concerns with some of the language in the draft paper, and we look forward to providing further input as we review the legislative language and listen to the perspective of President Obama and [Treasury] Secretary Geithner.''

Conversely, supporters of an OFC view the creation of the ONI as a launching pad.

''We applaud Treasury's proposa to create an Office of National Insurance as a first step towards eventual establishment of a federal functional insurance regulator that will directly regulate federally-chartered insurers,'' Frank Keating, president and CEO of the American Council of Life Insurers said in a statement.