Mr. Racicot countered that the entire premise of that argument is bogus, stating that federal regulatory agencies lacked the authority to supervise the elements that got the subprime mortgage market into trouble. Such a mistake would not be repeated in creating a new national insurance oversight system under an optional federal charter, he added.

The pair will face off again on Sept. 25--this time nationwide over the Web--as part of National Underwriter's second annual virtual conference, "Facing The Future of Insurance."

"We're seeing problems in financial services solvency, but not in the insurance business," said Ms. Praeger, who opined that "the federal government did not do such a good job" with the subprime mortgage market.

In contrast, she said, when it comes to state regulation of insurer solvency, "our house is in order...State regulation is working, and consumers are being protected. We have a robust [insurance] marketplace."

But Mr. Racicot, the former governor of Montana, challenged the validity of comparing how the subprime mortgage market was regulated with how insurance might be handled by a federal regulator as part of an optional federal charter system for insurers.

He said that most of the activities leading up to the collapse of the mortgage market did not come under the purview of any specific federal regulatory agency--a gap that is being addressed by Congress now in debates over how best to improve and modernize the oversight system.

"We want vigorous regulation [of insurance]," he added. "We just want insurers and producers to have the option of having that regulation under a federal charter."

But Ms. Praeger would not let Washington off the hook for the subprime mess. "Congress was asleep at the switch. They failed to recognize the problem and respond accordingly," she said.

"Had Congress been paying closer attention," said Ms. Praeger, "they would have seen the problem developing in the subprime mortgage market. If their agencies lacked the regulatory authority to act, they should have found a way to sound the alarm and fix the problem before it got this bad."

The duo debated the merits, or lack thereof, of either establishing an optional federal charter, leaving the status quo intact, or adopting one of the in-between measures working their way through Congress--to establish a federal Office of Insurance Information, set national benchmarks for regulation of surplus lines and reinsurance, and/or create a nationwide producer licensing system.

Mr. Racicot made it clear that OFC is the preference of AIA member companies--although he emphasized the "optional" part of the charter proposal, noting that anyone who wished to remain state-regulated could do so, just like in the banking business.

But Ms. Praeger argued that having two regulatory systems would end up being "a race to the bottom. With such an option, we could end up with regulatory arbitrage, with carriers opting for the less vigorous federal alternative," to the ultimate detriment of consumers.

Mr. Racicot dismissed such concerns, arguing that a federal regulator would add efficiency and cut costs from the oversight system, while speeding products to market and encouraging more capital to flow into domestic insurance sectors--all to the benefit of consumers.

He added that no matter how well-meaning and hard-working state insurance commissioners are, "fifty-six U.S. regulators are not authorized, let alone capable, of presenting a cohesive system" to the global insurance market.

He added that under the current system, "it is virtually impossible to drive new products to market in a reasonable period of time and at a reasonable expense."

He said this puts his carriers and the U.S. market as a whole at a competitive disadvantage in this "planetary economy," while driving insurance capital offshore.

Ms. Praeger countered that the U.S. insurance industry is vigorous, profitable and growing. "If anyone says we have a problem in insurance, the evidence does not bear that out," she concluded.