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Optional federal charter bill may stimulate action

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NO ONE EXPECTS Congress to achieve much in the way of risk management and insurance-related legislation during the few remaining days before it adjourns for the November elections. Nevertheless, we still welcome the decision of a member of the House Financial Services Committee to introduce a bill that would allow insurers to choose a new federal charter in place of today's state charters.

As we report on page 4, Rep. Edward R. Royce, R-Calif., used an address to the American Bankers Insurance Assn. to announce his plan to introduce an optional federal charter bill later this month. Although he didn't give details of the bill, he said it would resemble an optional federal charter measure introduced earlier this year by Sens. John Sununu, R-N.H., and Tim Johnson, D-S.D. The senators' National Insurance Act would allow both life and property/casualty insurers to seek a federal charter.

Federal charter advocates recognized when the Senate bill was introduced that getting a bill enacted into law would be a long process. Yet it's one that's certainly worth pursuing. The current patchwork system of state-based regulation results in both inefficiency and unnecessary costs, both of which are ultimately borne by the buyer. The current system can also put U.S. insurers at a competitive disadvantage with their foreign counterparts, who deal with single regulators.

It's worth stressing that federal charters would be optional. No insurer that wanted to remain subject to state regulation would be forced to accept a federal regulator. But we firmly believe that those insurers that prefer federal regulation should be given the right to choose that course.

Rep. Royce's introduction of an optional federal charter bill, even this late in the session, will help keep this issue before Congress. Given the legislative calendar, introducing a bill is a symbolic gesture. But symbolic gestures have their virtues, too. Having a bill before Congress in its waning days may help prod the next Congress to approach the issue sooner rather than later when it convenes next year.