The US insurance industry has some divisions over the proposal for a new federal insurance office, with the National Association of Mutual Insurance Companies (NAMIC) warning it would “harm consumers” and the state-based regulators struggling to retain their own power.

Draft legislation proposing a national insurance office within the US Treasury was released last week, bringing the federal regulation of insurance a step closer.

The plan is supported by the powerful American Insurance Association, which represents the major insurers operating in the US, and the Reinsurance Association of America, which says the international aspects of insurance and reinsurance require federal involvement.

But NAMIC Senior VP of Federal Affairs Jimi Grande says any measure that can be used to set different standards for different companies “runs the risk of distorting the market and ultimately harming consumers”.

“NAMIC believes that an Office of Insurance Information as proposed by the original bill would provide the Federal Government with the information it needs without affecting the market or establishing a de facto federal insurance regulator,” he said.

Testifying before the House Financial Services Committee, the National Association of Insurance Commissioners said the proposed office should be a tool to connect the state and federal regulatory systems, and “not be an instrument to displace or diminish state insurance regulation”.

“A formal federal interface is appropriate, but the current Office of National Insurance proposal strays too far from past legislation that included important safeguards against pre-emption of state laws and consumer protections,” NAIC CEO Therese Vaughan said.