Top Gov Official Underscores Commitment to Creating OFC

On Thursday, a top Treasury Department official made it clear that forming an Office of Insurance Information within the Treasury Department is merely an interim step, and that the Bush administration’s “intermediate” priority remains creating a federal charter option for insurers. 
 
David Nason, assistant secretary for financial institutions in the Treasury Department, made his comments at an all-day seminar on the future of insurance regulation sponsored by the American Enterprise Institute. 
 
In his comments, Mr. Nason said the first priority of the new office would be dealing with global issues, especially those pertaining to the European Union’s new Solvency-II framework for insurance regulation. 
 
He said that scheme is viewed as putting U.S. insurers at a disadvantage. Mr. Nason also said the inability of state regulators to act uniformly has created the potential for U.S. insurers to be at a disadvantage in competing internationally. 
 
In answering a question, Mr. Nason said the goal of the new OII would not be to “supplant the Office of the U.S. Trade Representative or the Commerce Department.” Legislation to create the OII was approved yesterday by the House Capital Markets Subcommittee. 
 
“We want it to play the same role it plays in the securities, commodities and banking area,” he said. 
 
“In insurance, we don’t have someone who can give us an opinion as to whether a different foreign regulatory scheme is equivalent to ours,” he said. 
 
And, in answering a question as to why health insurance was not included in the areas that would be covered by an optional federal charter, Mr. Nason said that “to ; INSERT health insurance into the OFC debate seemed to be at odds with where the reality was.” 
 
He confided that Treasury officials spent “a fairly long time discussing it. That structure is nimble enough to deal with health insurance.” But, he said, the conclusion was that in the “near and medium term, we wanted to deal with issues we could get done quickly.” 
 
And, he explained that “the only pieces of legislation that deal with the optional federal charter have long since taken health insurance off the table because of the differences associated with that business, the complexities over how it is regulated, and even the committees that have jurisdiction over it. It was jettisoned in [the deliberations over] the legislation over all those difficulties.” 
 
Moreover, he said, “as far as the debate over the OFC is pushed, the issue is not over whether it is going to be expanded, but the issue is whether or not it is going to stay with p-c and life, or whether it is going to be moved to just life.” 
 
He conceded, “The industry is fracturing a little bit. We think it is important that it should stay where it is, p-c and life, but we recognize that there are tensions and differences associated with how those businesses are regulated.” 
 
He said the administration is “very encouraged that Congress is taking up the [OII] idea.” And Congress seems “very supportive of the idea.” 
 
In answering a question, Mr. Nason said, “We recognize the OII is a limited vehicle. The authorities we think it should have should be quite limited. It should not be viewed as starting creation of an OFC mechanism within Treasury, or dealing with the broader issues that we talked about in an OFC.” 
 
Mr. Nason said he did not think an OFC measure “is achievable in the very short run.” But, “in the intermediate term it is something that we can think about.” 
 
“In the view of Treasury officials, the OFC offers the best opportunity to establish a modern and comprehensive system of insurance regulation which will provide insurance market participants a choice of being regulated at either the federal or state level,” said Mr. Nason. 
 
He said it would be “broadly consistent with banking regulation, specifically dealing with charter, licensing, regulation and supervision for insurers and producers.” He said that as Treasury envisions an OFC, with the principles embodied in legislation currently introduced in both the House and the Senate, “the state-based system would continue for those deciding not to operate at the national level.”