WASHINGTON—Supporters of a federal Office of National Insurance hope the Obama administration's call for such an entity within its broader financial services regulatory reform proposal will help them realize their goal.

The Obama administration proposed the new office as part of broad financial services regulatory reform legislation it unveiled last week. The draft fleshes out a proposal to create the office contained in the administration's June white paper on financial services regulatory reform and builds upon a measure introduced in May by Rep. Paul Kanjorski, D-Pa., that would create a similar Office of Insurance Information (BI, June 29).

The new office would have the power to “monitor all aspects of the insurance industry,” including gaps in existing regulation that could “contribute to a systemic crisis,” according to the draft legislative language. The office could recommend to the Federal Reserve that that it designate an insurer and its affiliates as a so-called Tier 1 financial holding company subject to heightened regulation.

The ONI also would oversee the federal terrorism insurance backstop program and coordinate federal international insurance matters. The office would have a limited ability to pre-empt state regulation under certain circumstances. In addition, the draft legislation also would grant the Treasury secretary power “to negotiate and enter into international insurance agreements.”

Rep. Kanjorski's bill enjoyed support from most of the property/casualty insurance industry, and the administration's proposal received a generally warm welcome, although with some caveats.

The Risk & Insurance Management Society Inc. “supports the efforts of the Obama administration to establish an Office of National Insurance within the U.S. Treasury Department,” said Nikolas Kapatos, chairman of RIMS' external affairs committee and senior vp and enterprise risk manager for Houston-based Sterling Bancshares Inc. “This important legislation represents a much-needed step forward in the process of financial services modernization.”

The bill would “establish for the first time a repository for the collection and dissemination of information at the federal level, which would facilitate the federal government's development of much-needed expertise in insurance matters. It would also enable us to establish federal policy on international insurance matters,” Mr. Kapatos said.

No one, though, expects Congress to deal with the issue until at least September.

“It's my understanding that it's going to be in the fall,” said Ben McKay, senior vp in the Property Casualty Insurers Assn. of America's Washington office. The PCI has not taken a position on the bill.

Mr. McKay said the Treasury Department “recognizes that the House wants to work on this over the recess,” by getting staff work done and working out problems to get the bill ready to move in September.

“I expect broad regulatory reform issues to move in tandem later this year, and we probably won't see legislative introduction of the ONI until September,” said Joel Wood, senior vp at the Council of Insurance Agents & Brokers in Washington. “I do think that of all the aspects of reform that involve pre-emption, this has the most legs...I expect the ONI to eventually be enacted in this session of Congress. I don't see any insurmountable political obstacles,” Mr. Wood said in an e-mail.

Another supporter of the bill—Leigh Ann Pusey, president of the Washington-based American Insurance Assn.—said she found the fact the administration was issuing elements of the white paper in legislative language to be significant. The Treasury Department treats all of the elements of the white paper as being important, is not prioritizing among them and is moving them together, she said. “We take that as a good sign.”

Lawmakers will “focus their attention on these proposals in the fall,” said Ms. Pusey. “I think there's a chance something on insurance can get accomplished this Congress.”

But the National Assn. of Mutual Insurance Cos. prefers the approach taken by Rep. Kanjorski's bill.

Rep. Kanjorski's bill is “a targeted approach that solves real problems without supplanting the state-based system” of regulating insurance, said Jimi Grande, vp in NAMIC's Washington office. He said NAMIC is concerned about the administration bill, particularly regarding privacy and data collection provisions. “I would encourage the administration to consider” the Kanjorski bill as its reform vehicle “because it has already been vetted and supported by most of the industry.”

The Kanjorski measure is not as wide ranging as the Treasury proposal. For example, it does not give the Treasury secretary power to negotiate and enter into international agreements on prudential matters. It also does not specifically grant subpoena power to the office in its efforts to collect data, nor does it not grant the office the power to oversee the terrorism insurance program.

For his part, Rep. Kanjorski hailed the administration bill.

“The current economic crisis, including the meltdown of the American International Group, has poignantly shown that an office to provide a knowledge center within the federal government on insurance is urgently needed,” Rep. Kanjorski said in a statement last week.

The larger legislative package focuses on systemic risk throughout the financial services industry. The proposed bill would provide for greater regulatory oversight of “all of the largest, most interconnected firms,” according to a fact sheet released by the Treasury Department last week. It also would allow the federal government to wind down distressed financial institutions.