WASHINGTON - Fearing they could be replaced by a federal regulator, state insurance commissioners are pushing ahead with plans to make their insurance company charters more appealing.

A task force of the National Association of Insurance Commissioners is trying to devise a system under which insurance companies - which are regulated separately by each state - could use a single state charter to operate nationally. Its goal would be to standardize insurance rules as much as possible and make the insurance commissioner in a company's headquarters state its lead supervisor.

To do that, commissioners are weighing such options as consensus legislation that each state could enact, getting Congress to impose a model law, and drafting an interstate compact.

The task force will hold a public hearing May 16 in Kansas City, Mo., and invite comments on how best to draft rules for multi-state operation. Their challenges include establishing eligibility requirements for companies that seek to operate across state borders, reconciling supervisory conflicts that could crop up among state regulators, and maintaining consumer protections.

A proposal will be submitted June 10 for all 50 commissioners to approve, and a final draft is expected by yearend, according to Kentucky Insurance Commissioner George Nichols 3d., who is also the association's president and co-chairman of the task force.

Enactment of the Gramm-Leach-Bliley Act last fall has moved the issue to the front burner. Now that the financial reform law lets banking organizations own insurance companies, they have begun promoting an optional federal insurance charter that would give their insurance operations the same preemption and other advantages that national banks have long enjoyed.

Congress is slowly starting to consider a federal insurance charter. Rep. Michael G. Oxley, chairman of House Commerce's finance subcommittee, plans to hold a hearing on the issue this summer, a spokeswoman said.

This proposal threatens the turf and traditional political muscle of insurance commissioners, but bankers are concerned that the states will take too long to develop alternatives.

"You've got 50 different insurance commissioners that need to agree on how to implement uniform licensing and then go back to their state legislatures to get the appropriate laws passed," said Glen J. Milesko, chairman and chief executive of Banc One Insurance Group. "I just think that has a pretty remote chance of happening anytime soon."

Mr. Milesko said he favors congressional legislation to create a federal regulator and a dual insurance system, which would let companies choose between a state or federal charter. He said a federal charter would allow his bank to take advantage of Gramm-Leach-Bliley more quickly and provide cheaper products to consumers.

Managing director of the ABA Insurance Association Beth L. Climo agreed. She said that competing regulators would create more innovative and efficient regulation. And that would ultimately benefit her members, some of the largest banks in the country.

"We believe the best system is a dual system where we have an option between the state and the federal system," Ms. Climo said.

But insurance commissioners argue that a dual system will dilute their authority.

"We don't want a dual-charter system," said Elizabeth R. Costle, co-chairman of the task force and insurance commissioner of Vermont. "Insurance companies like to play regulatory agencies against each other, trying to get the least regulation possible."

Mr. Nichols agreed. "Just because bankers believe a dual regulatory system works for banking doesn't mean it would work for insurance," he said. "Insurance is a unique thing.

"We fully support and agree that we need more uniformity, streamlining, and more efficiency than we currently have. And I recognize that it will be a great difficulty to get all 50 states to pass this. But I'd like to meet the banker who thinks they can get a bill creating a federal regulator through Congress and in place anytime soon. You saw how long it took them to repeal Glass-Steagall."

Mr. Nichols said that his group will work aggressively with commissioners and industry representatives to find a solution that everyone can live with.

"There is a sense of urgency by the state commissioners that we will either evolve and survive or not evolve and be replaced," Mr. Nichols said. "We're trying to give bankers what they want: more efficiency and less oversight. That means one regulatory system for all 50 states and one state-based regulator."

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