D.C. Power Shift Could Benefit Insurers
TRIA more likely to be renewed, perhaps permanently, under Democratic rule
They say politics makes strange bedfellows, but now that Democrats are poised to take control of at least the U.S. House of Representatives, if not the Senate as well, in a few short days, insurance industry lobbyists might actually find a more receptive crowd on at least one key industry objective among Capitol Hill's new power brokers.
The uncertainty surrounding the health of Sen. Tim Johnson, D-S.D., put control of the Senate back into play, while reminding everyone how precarious the balance of power is right now in Washington. But at the time this story went to press, Democrats were still preparing to move into the driver's seat in both houses on Capitol Hill.
While insurance leaders are more often identified with the Republican party, the GOP has been anything but friendly toward the industry lately-what with incoming Senate Minority Whip Trent Lott targeting insurers on Hurricane Katrina claims-handling (see page 15)-so dealing with the Democrats might not be the worst turn of events.
Indeed, on the one issue totally uniting the industry-keeping the federal reinsurance backstop under the Terrorism Risk Insurance Act, due to expire at the end of 2007-insurers, producers and corporate insurance buyers will likely have a more sympathetic ear with the Democrats. After all, it was Senator Hillary Clinton, D-N.Y., who last year said that saving TRIA was a matter of national security.
Early on, key leaders such as Sen. Chris Dodd, D-Conn., and Rep. Barney Frank, D-Mass., have indicated that TRIA extension-perhaps on a permanent basis-will be put on a fast track.
Once approved by Congress, it's unlikely President George W. Bush-whose administration has been lukewarm at best toward TRIA, believing such risks belong in the private market-would veto any bill designed to protect the nation from a terrorist attack.
Meanwhile, Rep. Frank said finding a long-term solution to catastrophe insurance threats is also a priority, but laid out no clear path of action for Congress on that front-although he did throw out the idea of expanding TRIA to include natural disasters.
ProtectingAmerica.org, backed by Allstate Insurance, has been pushing hard for consideration of a national disaster fund of some sort to back up private carriers. But while the industry is united on the need for a terrorism facility, many powerful carriers and industry groups oppose federal meddling in the catastrophe market beyond shoring up the badly underfunded National Flood Insurance Program.
It's unclear how the new Congress will handle insurance regulatory initiatives-including bills to standardize surplus lines and reinsurance oversight, and establish an optional federal charter system-but those who support more federal involvement are unlikely to be hurt by the change in power, as Democrats traditionally are more open to oversight from Washington. Challenges to the industry's federal antitrust exemption under the McCarran-Ferguson Act could accelerate the process.
However, the industry will find tougher sledding for any bill related to tort reform under the Democrats, who draw strong financial support from plaintiff attorneys specializing in class-action suits.
In local elections, the big news-though expected-was the elevation of the industry's chief nemesis of the past two years, New York Attorney General Eliot Spitzer, to the governor's office.
After exposing bid-rigging, contingency fee deal manipulation and finite reinsurance abuse, Mr. Spitzer's choice for superintendent of insurance will no doubt be far less conciliatory toward-and far more skeptical of-the industry than the state's current regulator, Republican Howard Mills.
One can't help but wonder whether Gov. Spitzer will try to abolish all contingency fees in his state-the independent agency system's worst nightmare.
There was also a seismic shift in California's regulatory foundation. Insurance Commissioner John Garamendi-in his second tour of duty making life miserable for insurers and producers-was elected lieutenant governor to serve under "The Terminator," Arnold Schwarzenegger.
Elected to replace him is a Republican, Steve Poizner, who beat Democrat Cruz Bustamante after the latter accepted (and later returned) $150,000 in campaign contributions from the industry he was hoping to regulate. Whether having a Republican as commissioner makes life any easier for California carriers and agents, however, remains to be seen.
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