As reported in our previous blog posts here and here, Congress has for some time been considering an Optional Federal Charter that would allow insurance companies to choose between state and federal regulation. As an outgrowth of this concept and in light of the recent the federal bailout of insurance giant America International Group, Congress is now considering expanding the power of the Federal Deposit Insurance Corp. (“FDIC”) to cover insurance companies. According to industry reports, at the annual conference of the International Association of Deposit Insurers, FDIC Chairman Sheila Blair commented on the potential expansion of the FDIC’s powers, noting that such expansion would likely authorize the FDIC to guarantee insurance products in a manner similar to the way in which it guarantees bank deposits. According to one source, it was unclear whether Blair was talking about guaranteeing life products, property-casualty products, or both. If Congress decides to expand the FDIC’s powers, another issue that would need to be considered is the role state guaranty funds would play in light of the FDIC’s guaranty of insurance products.
We will continue to monitor this issue and provide further updates at InsureReinsure.com.
