WASHINGTON--U.S. Representatives preparing legislation to createa federal insurance regulator have disclosed that the measure willcall for supervision of nationally registered insurers, agencies,and producers.

States would still maintain responsibility for regulating statelicensed insurers, agencies and producers even as the act created anational system of regulation and supervision for insurers,agencies, agents and brokers that chose to be nationallyregistered.

The outline was provided last night at the request of TheNational Underwriter. Staff for sponsors Rep. Melissa Bean, D-Ill.,and Ed Royce, R-Calif said the bill would be introduced in theHouse when Congress returns from the President's Day recess.

Titled the "National Insurance Consumer Protection andRegulatory Modernization Act," the bill will allow the market toset rates for personal lines property-casualty insurance lines.

Specifically, the outline says, "national insurers will be ableto set rates at actuarially sound prices."

Under the new law, national insurers will be required to followguidelines set forth by the Office of National Insurance and filetheir new forms with the Office for review, the outline says.Insurers and agencies will be examined for financial and marketconduct, it adds.

It would also give the authority to monitor insurers to afederal risk regulator for the financial services industry, a postthat would be created under legislation, expected to be introducedby the end of this month by Rep. Barney Frank, D-Mass., chairman ofthe House Financial Services Committee.

The new law would also require federally registered insuranceholding companies that have a predominant share of insurancebusinesses, as determined by the commissioner, as the regulatorwould be called, to be regulated at the holding company level as aninsurance holding company by an Office of National Insurance.

Regarding consumer protections, the new bill will implement themodel laws of the National Association of Insurance Commissionersthat govern market conduct.

The measure also calls for providing a single telephone numberthat consumers with complaints or inquiries can call to locate theappropriate federal or state insurance regulator.

It will also mandate that "there is a physical office of theOffice of National Insurance in every state either through theOffice of the Ombudsman or the Division of Consumer Affairs."

It will also require national insurers and agencies to have aconsumer liaison that will work with the Division of Consumeraffairs for expeditious handling of consumer complaints.

In disclosing their plans, Ms. Bean and Mr. Royce said that, "Inadvancing this legislation, we believe we can provide a moreeffective regulatory regime over insurance that will enhanceconsumer protections, ensure our capital markets are protected fromsystemic threats within the insurance sector, and address many ofthe problems that have resulted from the fragmented state-basedsystem."

Under the proposed law, states would still be able to assesspremium taxes on nationally chartered entities, the authors of thebill state in their outline.

In addition, nationally chartered entities would still besubject to state unclaimed property and escheat laws, participatingin assigned risk plans, mandatory residual market mechanisms, andstate laws requiring compulsory coverage of workers' compensationand vehicle insurance.

The proposed law will maintain "that if a state guarantyassociation does not provide policyholders a level of protectionequivalent to the NAIC Model standards, a national guarantycorporation would be created for national insurers," the outlinesays.

(Arthur Postal can be contacted a [email protected] or202728-0506)