I was lucky enough to attend a conference on the regulation of the insurance industry, held yesterday at NYU’s Stern School of Business.

What was most interesting during this meet-up of industry minds, was the discussion between Roger Ferguson and Eric Dinallo. For a quick background, Ferguson is president and CEO of TIAA-CREF and a member of Obama’s Economic Recovery Advisory Board. Ferguson also has experience working with SwissRe and the U.S. Federal Reserve System.

Dinallo recently served as the superintendent of the New York state insurance department. He has also worked with U.S. Treasury, the Federal Reserve Bank of New York and has testified to in front of Congress 11 times — calling for the regulation of the credit default swaps (CDS) that were integral to the creation of the financial crisis.

The two met for an early morning, head-to-head discussion of the federal regulator option with their moderator, John H. Biggs. Ferguson began the discussion, stating his views on the oft-discussed Optional Federal Charter (OFC) proposal that would allow insurance companies to choose a single, federal regulator instead of what some see as an onerous, 50-state regulatory scheme.

“I think the reality is that insurance and reinsurance are the key shock absorbers in this country,” said Ferguson. “We at TIAA-CREF should have the creation of an Optional Federal Charter. We think it should be optional for many reasons, one being that international insurers would have the benefit of a regulator  — it’s the argument for consistency of treatment — there needs to be consistency across the various segments of financial services. Also, dual regulation, as we have in financial services, could be applied to insurance.”

In response to that, Dinallo fired back with his own thoughts on the OFC. “Insurance performed extremely well under the crisis — I think the industry should be proud,” he said. “There might be areas where OFC may be a good idea, such as reinsurance and monolines. However, I think the optional part of the federal charter is a disaster. It’s like AIG having the Office of Thrift Supervision supervise them even though 99% of their business wasn’t in thrift. I don’t agree that the federal charter should be optional, unless Tim Geithner wants a stack of auto insurance complaints on his desk.”

Also on hand were Viral V. Acharya, professor of finance at the Stern School of Business, Matthew Richardson, professor of applied economics at Stern, and Stephen Ryan, professor of accounting at Stern. These three, along with John H. Biggs, former chairman, president and CEO of TIAA-CREF and current professor of finance at Stern, published a white paper entitled On the Financial Regulation of Insurance Companies. Within it, the four academics discuss numerous proposals for regulation of the industry, including the OFC.

So, what do you think — the optional federal charter … needed or not?