The Obama administration will call for a new U.S. Treasury Department office on insurance but won’t propose federal regulation of the industry in the sweeping financial reform plan it will unveil Wednesday.
The Office of National Insurance, as proposed, would monitor all aspects of the industry and flag any risks that could contribute to a future financial crisis, according to a document obtained by Reuters.
It could recommend to the Federal Reserve that large insurers be subjected to strict capital and risk rules that would apply to large financial holding companies under other aspects of the Obama plan.
And it would attempt to coordinate industry policy, but it would stop short of being a direct regulator, according to the document.
The nation’s 6,000 insurers are now regulated by state and territorial governments. The industry has been divided for years about changing this. Large life insurers and some large property-casualty firms favor creating an optional federal charter.
The administration’s plan represents limited centralization, and postpones further any final decision on federal oversight.
Representative Barney Frank, chairman of the House Financial Services Committee, said earlier Tuesday that the administration would not weigh in on the “optional federal charter'” question, said industry sources who heard him speak at a fundraiser hosted by the American Council of Life Insurers.
Frank said his committee would resume debate on key insurance questions around September, said the industry sources.
Congress and international industry groups have complained in the past about the absence of a central source for insurance market information.
Legislation has been introduced in Congress in recent years, but not approved, to create a federal insurance information office to provide advice and expertise to the administration and Congress and track industry developments.
(Reporting by Kevin Drawbaugh, Patrick Rucker, Karey Wutkowski, Rachelle Younglai and Corbett Daly; Editing by Gary Hill)
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