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Federal Charter Regulation
Archived July 13, 2010

Archived Key Issue

Insurance is a fundamentally different financial product from banking and securities. It presents unique public policy, regulatory and consumer protection issues which state officials are best able to address. State officials have been effective stewards of the U.S. insurance marketplace, updating and retooling insurance supervision to meet the needs of the modern economy while preserving and enhancing consumer protections. Federal chartering of insurance companies would dismantle comprehensive state protections, confuse and disrupt insurance markets, undo reforms and harm insurance consumers

For more than a century, state officials have supervised insurance to promote the public interest, ensure competitive markets, facilitate the fair and equitable treatment of consumers, and oversee the financial strength of the insurance industry. The Gramm-Leach-Bliley Financial Modernization Act of 1999 created a comprehensive framework to permit affiliations among banks and investment firms. Although the Act reaffirmed state insurance regulation, it also signaled increased federal interest in insurance issues and encouraged efforts to modernize state supervision. Despite state success, congressional interest in insurance reform has included proposals to establish a bifurcated federal-state regime for insurance regulation that would allow insurers and producers to elect either state or federal regulation.

Key Points

  • Effective consumer protection is the hallmark of state regulation. State insurance protections successfully and effectively safeguard individual and commercial policyholders and ensure the financial strength of U.S. insurance markets.
  • The NAIC is modernizing insurance supervision across the regulatory spectrum to establish national platforms to provide operational efficiencies while enhancing the ability of local officials to protect consumer in the communities where they live.
  • Federal chartering would create a new federal bureaucracy from scratch and allow insurance companies to “opt out” of comprehensive consumer protections and state oversight. Current proposals would gut consumer protection while outsourcing most critical regulatory functions to industry-run self-regulatory organizations.
  • A bifurcated regulatory regime where insurers pick their regulator threatens regulatory arbitrage. This sort of race-to-the-bottom oversight is especially dangerous in insurance, where families and businesses faced with a storm, fire, illness or injury often rely on a hands-on regulator to make insurers keep their promises and help them rebuild quickly after an unforeseen disaster.

Additional Resources

White Paper: The Financial Crisis, Systemic Risk, and the Future of Insurance Regulation – Scott E. Harrington, Ph.D. (Posted with permission from the National Association of Mutual Insurance Companies)

White Paper: Future of the Business Disciplines, Regulation and Oversight of the U.S. Insurance Marketplace – Mark Boozell (Posted with permission from the Professional Insurance Agents Insurance Foundation)


Media queries should be directed to the NAIC Communications Division at 816-783-8909 or

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