Feds to Step up Insurance Oversight

First step: a new federal office. The option of a federal charter for insurers -- long regulated by the states -- could follow.

Congress will soon establish a new federal office within the Treasury Department to oversee the insurance industry. Initially, the office will have limited power. But as is the way in Washington, expect the office’s authority to grow over time.

With the failure of insurance giant AIG fresh on their minds, lawmakers want to make sure no other major insurers fall through the cracks in the patchwork of state insurance and national bank regulators that now govern the system. AIG eventually took more than $180 billion in government support after risky deals caused the company to implode. “We need federal regulation, and the federal insurance office is a good first step,” says Blain Rethmeier, senior vice president for public affairs at the American Insurance Association.

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Associate Editor, The Kiplinger Letter