He explained that the "difficulty of entering the U.S. markets under the current state regulatory system dissuades foreign capital from investing in the U.S., thereby restricting overall insurance capacity and reducing the number of insurance products available to U.S. consumers.

"It simply is the case that relatively few foreign companies are willing to expend the time and resources necessary to navigate all of the harbors in our state-based regulatory system," Mr. Yingling added.

Voicing similar comments in their testimony were representatives of the Financial Services Roundtable and the Securities Industry and Financial Markets Association.

In his comments, Timothy Ryan, president and CEO of SIFMA and a former director of the Office of Thrift Supervision, suggested that, at the very least, Congress should consider creating a financial markets stability regulator.

This regulator should at least have power "over systemically important financial institutions," Mr. Ryan said. Although he did not state so explicitly, this would include oversight over such institutions as American International Group, which was recently effectively taken over by the government as an alternative to insolvency.

Mr. Ryan said that, among things, this office should have the authority, alone or in coordination with the institution's functional or prudential regulator, to set consolidated capital requirements at the parent company level and to recommend capital requirements at any subsidiary level.

It should, he said, also have the authority to examine the parent company and any of its subsidiaries, and to bring enforcement actions.

"In short, its powers could correspond to those that the Federal Reserve currently has as the umbrella supervisor of bank holding companies, but we believe it would not be appropriate to include the authority to impose the kind of activity restrictions that apply to bank holding companies," Mr. Ryan said.

In addition to creating a financial markets stability regulator, Mr. Ryan said, Congress should, "in addition, consider the creation of a federal insurance charter and a federal insurance regulator."

Steve Bartlett, president and CEO of the FSR, agreed. Congress, he said, should "strengthen the oversight of insurance markets and potential insurance risks by authorizing optional Federal chartering and supervision of firms engaged in the business of insurance."

And, in answering a question from a member of Congress about whether passage of the Gramm-Leach-Bliley Act in 1999, contributed to the market meltdown, Alice Rivlin, who also testified, said, "I don't think we can go back to a world where we separate the different kinds of financial services," she said, "that didn't work."

She also counseled against recreating the barriers between sale of financial products created by the 1933 Glass Steagall Act, which the Gramm-Leach-Bliley Financial Services Modernization Act replaced, and also warned that Congress should not reintroduce the barriers to interstate banking between 1927 and 1994.

The National Council of Insurance Legislators wrote a letter to the committee in conjunction with the hearing that made clear that states will work hard to sustain the current state-based insurance regulatory system when the issue of future regulation of all financial services companies is dealt with by Congress next year.

The letter noted that, "The stability of state-regulated insurance companies during this ongoing financial crisis, as compared to other financial sectors, demonstrates the effectiveness of our state insurance laws and regulations."

The letter added that, "While finger-pointing will not repair the problems with the present system, we are proud to note that state-regulated insurers were largely unharmed when compared to federally regulated banking and investment institutions."