Statement on the AIA Draft Optional Federal Charter Bill(Sep. 20, 2001

The Marine and Fire Insurance Association of Japan supports the initiative taken in the United States by the American Insurance Association (AIA) to advance federal regulation of insurance by proposing legislation in July of this year for the creation of an optional federal insurance chartering authority. Mr. Hiroyuki Uemura, Chairman
Mr. Hiroyuki Uemura, Chairman
The United States represents the largest insurance market in the world and has had a great influence on the development of the insurance business throughout the world. However, notwithstanding current widespread consolidation in the financial industry generally, the insurance business remains the only sector left in this field over which individual states hold exclusive regulatory authority. Regulations which vary from state to state not only operate as a virtual barrier to foreign insurers, including Japanese insurance companies, they also impose on all insurers who operate in the United States significant costs and burdens, and hamper the efficiency of their operations. State regulations require insurers to obtain a license in every state in which they wish to do business and to comply with the respective (and often contradictory) regulatory requirements of all of them. This causes various inefficient effects on the market, such as preventing insurers from timely marketing new products to consumers throughout the United States and increasing operational costs due to multiple filings, applications and reporting requirements.

In response to calls from both within and beyond the U.S. market for reform to the state-by-state regulatory system, the National Association of Insurance Commissioners (NAIC) is undertaking measures to unify regulations among the states. If, in addition to the NAIC's unification efforts, an optional federal charter program of the sort proposed by the AIA is introduced, we believe it will be possible to solve the problems presented by inconsistent state regulation. This will lead to the further development of the insurance market in the United States, by encouraging the entry by new participants and by promoting the efficiency of the insurance business overall.

The Japanese non-life insurance industry has called for regulatory uniformity among the different states on as many occasions as possible, including the recent Japan - U.S. Insurance Talks and the negotiations on the WTO Financial Services Agreement as part of the General Agreement on Trade in Services. We applaud the current initiatives to seek the introduction of a federal regulatory structure into the U.S. insurance industry, and we sincerely hope that an in-depth discussion on this issue will take place among the concerned parties, including the private sector, to realize truly effective federal regulation. As the trade association representing non-life insurers operating in Japan, it is to us especially encouraging that the AIA, noted in the world as the leading trade association representing property & casualty insurers in the United States, is one of the advocates initiating this move, along with other organizations representing different parties in the industry, such as the American Council of Life Insurers (ACLI) and the American Bankers Insurance Association (ABIA). While we will continue to follow the debate on the Federal charter bill, we will maintain our support for this important initiative.

Statement on the AIA Draft Optional Federal Charter Bill (PDF 12KB)