They say politics makes strange bedfellows, but now that Democrats are poised to take control of Congress next week, insurance industry lobbyists might actually find a more receptive crowd on at least one key industry objective on Capitol Hill--TRIA extension.
While insurance leaders are more often identified with the Republican party, the GOP has been anything but friendly towards the industry lately—what with incoming Senate Minority Whip Trent Lott targeting insurers on Hurricane Katrina claims-handling--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 towards 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 under-funded 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 towards--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.
What do you think will happen?
Comments (1)
The Democratic win is literally a win/lose situation.
We (the industry) probably won because Senator Trent Lott, R-Missl, has lost luster and influence as a result of the elections. This may quiet him some.
We will very likely get a TRIA extension and it may become permanent.
On the downside, we may have more federal oversight as Democrats typically favor this view. We will not likely get any significant tort reform as this is not popular with the Dems.
The federal government has no business being in the reinsurance business for flood or any other line of insurance. This is what Rep. Barney Frank, D-Mass., proposes when he suggests that TRIA be used to cover catastrophes as well.
We have seen how well the bureaucracy runs the NFIP, so why would we anticipate that they would be able to run a reinsurance role as well or better?
It appears as if there is some appetite for flood insurance in the private market. AIG and Chubb have both made offerings in this area. Maybe we could give a tax break to a Bermuda insurer to step in and reinsure our NFIP. With the favorable tax status, maybe this would bring the monetary infusion that the program needs.
Another possibility is to have the government allow an insurance entity to operate the NFIP for a fee.
Posted by Craig Dolan | December 27, 2006 2:42 PM
Posted on December 27, 2006 14:42