Tag Archives: Addendum Fixed

New Paper on Optional Federal Chartering

David Marlett has a new working paper discussing how an optional federal charter (OFC) for insurers would impact community resilience to natural disasters. Here’s the abstract:

The ability of communities to recover from disasters depends on a well-functioning property insurance market.  However, many states insurance markets are substantially distorted or are hobbled by excessive regulation.

As a solution, there has been proposed an Optional Federal Charter (OFC) system, under which insurers would be able to opt into a federal regulatory system, leaving behind the system of patchwork state regulations.

The merits of moving toward federal regulation have been debated for many years to try and alleviate some of the problems of current regulatory systems. The most common model in recent years is the Optional Federal Charter (OFC). This approach would provide insurers the option of obtaining either a state or a federal charter.

This paper discusses the benefits and problems with both the state-based and federal-based regulatory systems and suggests that, if policy makers choose to proceed with an Optional Federal Charter system, they should focus attention on:

1.       Minimizing political risk,
2.       Allowing competitive rating and minimizing rate suppression,
3.       Minimizing the immediate impact on policy holders, and
4.       Maintaining the antitrust exemption.

Download the paper here.

Addendum: Fixed the block quote which was not formatting properly.

Virginia's Stimulus Reservations

The Virginia House rejected $125 million in federal stimulus funds to be used to expand unemployment benefits to part-time workers and those in job training programs. As mentioned earlier this week, concerns were raised that by accepting the funds, the state is also accepting a higher level of future spending on unemployment benefits — something it will have to pay for via
increased taxes on business once stimulus funds disappear.

Virginia joins South Carolina, Texas, Louisiana, and Alaska in expressing reservations about the strings attached to stimulus funding, a debate led by South Carolina Governor Mark Sanford, who on April 3 became the last governor to accept funds — after his formal rejection of the funds was denied by the Administration.

Addendum: Fixed typo in header — apologies for the oversight.