In his Blueprint for a Modernized Financial Regulatory Structure, Treasury Secretary Henry Paulson calls for sweeping reform to the current financial regulatory system including insurance.  The proposal calls for a three headed regulatory structure that would be answerable to the Federal Reserve under it’s role as regulator of market stability. 

It would shift control of insurance regulation, now under the jurisdiction of states, to the federal level.  Insurance regulation as it now stands is highly inefficient due to the lack of uniformity across state lines.

Our financial system is much more interconnected structure these days, with the distinction between commercial banking, securities and insurance sectors now blurred.  State level insurance regulation leaves a glaring weakness for federal oversight of the financial marketplace.

A dual federal and state regulatory system would be established that would allow insurance companies the choice of being regulated at the national level under the optional federal charter(OFC).  The proposal calls for the creation of the Office of National Insurance(ONI) that would help facilitate regulatory cooperation and consistency between state and federal regulatory structures.

The National Association of Insurance Commissioners(NAIC), a coalition of state insurance regulators, have already spoken out against the proposed changes that would supplant their current regulatory powers.  Insurance companies on the other hand have come out in full support of the proposal as they have been criticizing state level regulation for years and have been seeking this type of reform for some time.