While increased federal insurance regulation is “inevitable,” the chances of legislation creating an optional federal charter for insurers are slim in the near term, according to a report released by Fitch Ratings last week.

Fitch, which says it is neutral on the OFC issue, says “continued strong opposition from several influential constituencies, election-year uncertainties and continued divisiveness in Washington” make passage of OFC legislation unlikely anytime soon. But in the report—“Optional Federal Charter: Will Treasury Support, Promote Passage?”—Fitch holds that the Treasury Department’s March 31 “support of an OFC as part of a larger financial services modernization plan improves the prospects for ultimate passage of this long-debated legislation…making passage more likely than at any point in recent history.”

May 20, 2008