Optional federal charter

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Optional Federal Charter (OFC) is a proposal to streamline and simplify US insurance regulation by allowing insurance companies to choose between a state-based regulatory system and a single federal regulatory agency. This would make insurance regulation similar to the banking system where companies can choose either a state or a federal charter.

Larger insurance companies which operate in multiple states favor the proposal,^[1] saying it would cut industry-wide costs by billions per year without reducing consumer protections and encourage free-market competition for insurance on the national level. They also say that the current state-run regulatory system makes it more difficult for insurers to bring innovative products to the market, and consumers are the ones who ultimately pay the price for the inefficiencies of the state-run regulatory system through higher prices. Both the 2007 Bloomberg-Schumer Report ^[2] and the Financial Services Roundtable’s Blue Ribbon Commission on Mega Catastrophes^[3] have called on Congress to enact Optional Federal Charter legislation. A bill introduced by Rep. Melissa Bean (D, IL-08), H.R. 3200, the National Insurance Act,^[4] would create an Optional Federal Charter.

The proposed new federal regulatory system would be housed within the United States Department of the Treasury. Treasury Secretary Henry Paulson came out in favor of an Optional Federal Charter on March 31, 2008.^[5]