Optional Federal Chartering of Insurers and Hurricane Risk

The 110th Congress considered several bills for Optional Federal Chartering (OFC) for insurance companies. The bills would create a federal insurance regulator and allow companies to organize under federal law, in contrast to the current set-up where firms must organize under state regulation. The plans do not add an extra layer of regulation to an industry already regulated at the state level, but instead provide an alternative way to organize companies, similar to national- and state-chartered banks.

A federally chartered insurer would face federal regulation for its operations throughout the country. OFC should reduce the regulatory burden on insurers who opt for federal chartering, as they will have to deal with only the federal regulator as opposed to fifty state regulators, each with their own filing and regulatory requirements. This Mercatus on Policy considers how OFC potentially affects hurricane insurance, which Congress also examined last session.