On July 28, HLS Professor Hal Scott testified before the Senate Banking Committee at hearings held by committee Chairman Christopher Dodd, D-Conn., addressing how the insurance sector could be better regulated.

[Read Scott’s prepared written testimony or view webcast of the hearings.]

The hearings followed the Treasury Department’s unveiling last week of the administration’s regulatory overhaul plan, which includes the creation of a national insurance office, to address systemic risk in the insurance sector.

Scott called for reforming the regulation of the insurance industry—currently chartered at the state level—through the establishment of optional federal charters for insurers.

Lawmakers, he said, should explore mandatory chartering and regulation for some larger firms. But a national charter, he advised, should be kept optional for some large and smaller insurance companies. Some large insurance firms that might become federally chartered under a broad mandate, he said, may not pose real systemic risk.

Scott is director of the school’s Program on International Financial Systems. His op-ed “The Fed Can Lead on Financial Supervision,” co-written with R. Glenn Hubbard, appeared in the Wall Street Journal on July 24.