Optional Federal Chartering of Insurance: Rationale and Design of a Regulatory Structure

58 Pages Posted: 5 Aug 2008

See all articles by Martin F. Grace

Martin F. Grace

Temple University - Risk Management & Insurance & Actuarial Science

Hal S. Scott

Harvard Law School

Multiple version iconThere are 2 versions of this paper

Date Written: June, 26 2008

Abstract

The U.S. insurance industry is primarily regulated by the states. This is in contrast to the regulatory structure for other financial intermediaries which have a federal regulator. Banks, for example, may choose to be regulated by either the federal government or by the states. Recent legislation proposes to provide a similar optional federal chartering (OFC) system for insurers. Given the proposed legislation we make two contributions to the discussion. First, we examine the case for optional federal charters focusing on the costs and benefits of regulation at the federal versus the state level and conclude that and optional federal chartering system dominates the status quo. Second, we add to the discussion by describing what additional issues need to be addressed if we adopt an insurance OFC system. While the merits of OFC have been much debated, comparatively little consideration has been given to the matter of how such a system should function if enacted.

Keywords: insurance regulation, federalism, optional federal charter

Suggested Citation

Grace, Martin F. and Scott, Hal S., Optional Federal Chartering of Insurance: Rationale and Design of a Regulatory Structure (June, 26 2008). Available at SSRN: https://ssrn.com/abstract=1175104 or http://dx.doi.org/10.2139/ssrn.1175104

Martin F. Grace (Contact Author)

Temple University - Risk Management & Insurance & Actuarial Science ( email )

Fox School of Business and Management
1301 Cecil B. Moore Ave.
Philadelphia, PA 19122
United States

Hal S. Scott

Harvard Law School ( email )

1557 Massachusetts Avenue
Cambridge, MA 02138
United States
617-495-4590 (Phone)
617-495-9593 (Fax)

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