Insurance regulation should remain with the states, and switching to an optional federal insurance charter (OFC) would be tantamount to deregulation, according to a letter sent yesterday to the Treasury Department by a consumer advocacy group.

Consumer Watchdog, based in California, wrote to Treasury Secretary Tim Geithner, “Recently, a few members of Congress wrote you urging the creation of an office or position responsible for insurance oversight in the Department of Treasury. The request is couched as part of a regulatory overhaul of the financial markets. While the need for a financial regulatory overhaul is clear, it should be not used as a stalking horse for insurance deregulation.”

The letter was announced on a day when House members Rep. Melissa Bean, D-Ill., and Rep. Ed Royce, R-Calif., said they would sponsor legislation to create a federal office of insurance regulation.