The American Insurance Association (AIA) Board of Directors formally endorsed draft legislation that would allow property/casualty insurance companies to obtain a federal business charter. Although the AIA proposal is designed for primary property/casualty insurance companies, it could be expanded to include other types of insurers, agents and brokers, and reinsurers.
The legislative concepts approved by the Board are wholly consistent with AIA’s previously released Guiding Principles for Regulatory Reform.
“This proposal fleshes out our collective vision of how an optional federal charter for insurers could look and work,” stated AIA President Robert E. Vagley. “We offer it as a template for policymakers working to create the optimal regulatory system for insurers, consumers, and regulators. This draft applies only to property/casualty insurance companies and contains no provisions for life insurers, reinsurers, agents or brokers. However, such provisions could be added in the future. To that end, we look forward to what we hope will be extensive dialogue with other industry groups and individual companies interested in advancing optional federal chartering.”
Vagley noted that the insurance operating environment has changed dramatically in the past few years. For example, technology and trade liberalization have produced a truly global market for insurance, as it has for other products and services. In addition, enactment of the federal Gramm-Leach-Bliley Act of 1999 means ever-increasing and expanding competition among the banking, securities, and insurance industries. “We must not ignore the realities of today’s marketplace, or the potential of tomorrow’s,” Vagley said. “AIA’s principles and our new draft legislation envision a progressive, market-based insurance regulatory model that both levels the playing field for insurers with respect to competitors at home and abroad, and provides strong consumer protections.”
AIA expects that enactment of optional federal chartering legislation is likely to be a multi-year process. “As AIA pushes forward at the federal level, we will continue our ongoing, active efforts with state officials to improve and update their regulatory systems,” Vagley added, “because our ultimate goal is to reform the current structure in every regulatory venue to reflect of our guiding principles.” Copies of the AIA draft optional federal chartering legislation may be obtained by clicking on the document link on the AIA’s Internet home page at www.aiadc.org. .