"A poorly designed [federal] system could irreparably harm both insurance companies and their customers," CEI industry analyst Catherine England says in "Federal Insurance Chartering: The Devil's in the Details."

"Most state banking regulators and attorneys general oppose federal intervention," she notes.

Ms. England says she wrote the study because the issue "is slated for congressional debate this year, with the Senate Banking Committee already planning hearings."

Ms. England concludes that a well-designed system that includes a federal chartering option could benefit both insurance company owners and their policyholders.

But "federal chartering is not a panacea," she added. Guiding principles for optional federal insurance chartering should include consumer education, state-based guaranty systems and Treasury Department oversight, Ms. England said.

In one reaction to the study, Jack Dolan, a staff official at the American Council of Life Insurers, says that, "One part of the report that is right on target relates to the value of a federal regulator in Washington to represent the industry on trade and tax issues. We sorely need a regulator at the table who knows how policy initiatives would impact our industry.

"In all," Mr. Dolan added, "the report contains points we agree and disagree on. But we certainly agree that the 'devil is in the details.' The creation of an OFC would have to be done right and promote regulatory uniformity."

But Cliston Brown, director of public affairs at the Independent Insurance Agents and Brokers of America, which opposes an OFC, said, "We certainly agree that federal chartering could cause serious and irreparable harm, both to the insurance industry and to consumers. That is why we have always strongly opposed any move toward federal regulation of insurance."

Mr. Brown explained that "consumers are far better served by the expertise and accessibility of state insurance regulators than they would be by a new, less accessible, federal insurance bureaucracy lacking the state-specific knowledge of issues our state regulators can offer."

"We agree regulatory reform is needed, but this can and should be done without creating a new federal bureaucracy," Mr. Brown added.