Liberty Mutual is a member of PCI.

The letters were sent to the Federal Insurance Office in response to a request for comment from the agency on how insurance should be regulated going forward.

The FIO requested the comments because under the Dodd-Frank financial services law it is mandated to present to Congress by Jan. 21 a study on insurance regulation and how it should be modernized going forward.

Most letters either strongly support continued state regulation or call for some form of federal regulation of insurance going forward.

But the PCI and Liberty Mutual letters appear to acknowledge that only the federal government has the power to slow or moderate the demands of European regulators for high capital and rigid accounting rules for financial firms doing business in the international marketplace.

For example, the PCI letter says, "In particular, FIO's leadership is necessary in ongoing international discussions where theU.S.marketplace faces both opportunities and threat of bank-centric Eurocratic regulation that could impose harmful standards or at best significant transition costs as we head towards global convergence."

The Liberty Mutual letter, signed by Paul Mattera, senior vice president and chief public affairs officer, says a federal role is necessary because insurance markets and related products, transactions and capital flows are "becoming increasingly interstate and international."

Mattera adds that a federal-regulatory role for insurance should be considered for insurance products that serve increasingly borderless markets.

"Consumers of these products are not well served by discordant state regulations…nor are insurers that face increasingly global challenges such as terrorism risk, reinsurance and capital adequacy, and cross-border financial and trade regulation," Mattera says.

In its letter, PCI says that before the FIO considers solutions or long-term regulatory recommendations, it should analyze the dimensions of the insurance marketplace, consider what the regulatory philosophy of insurance has traditionally been and should be, and determine good principles of insurance regulation—regardless of where the regulation is conducted.

"After FIO has determined the optimal regulatory philosophy and principles of good regulation for insurance, it can then provide more insightful recommendations to Congress on how to improve insurance regulation, recognizing current political realities and available resources," PCI says.

The letter said that while arguments are likely to continue over where insurance should be regulated and to what extent regulation should be functional or objectives-based, "those discussions are putting the cart before the horse."

The letter adds, "While FIO may not have regulatory power, it can play an extremely important role in coordinating U.S. policy on international matters among the various state and federal entities and resolving conflicts between federal agencies and the U.S. marketplace, and helping Congress understand and prepare for anticipated insurance issues and vulnerabilities."