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Under the Dome by Joel Wood Shattered Glass

This has nothing to do with women butting up against a federal glass ceiling, but everything to do with my foggy crystal ball.

By  Joel Wood

With national elections only weeks away, it is fitting that your lobbyist should gaze into the crystal ball, anticipate the big issues affecting our industry in the coming congressional year, and predict some outcomes. But glib predictions can be a source of great regret. Here are some of my previously held strong opinions, openly professed in these pages:

  • Hillary Clinton will be the next president.
  • No matter what, Chris Dodd will be chairman of the Senate Banking Committee for the next four years.
  • The Banking Committee’s ranking Republican, Sen. Richard Shelby, will block any serious consideration of the Optional Federal Charter (OFC) for insurers and intermediaries.
  • The leadership of the National Association of Insurance Commissioners will oppose even the narrowest of federal preemptive insurance reforms—including surplus lines legislation and proposals to create a federal insurance advisor at the Treasury Department.
  • Neither chamber of Congress would ever approve legislation adding wind coverage to the National Flood Insurance Program.

Whoops on all counts.

I wish I could have compensated with bold, correct predictions, like figuring out Sarah Palin would be McCain’s VP nominee.

On the big picture, obviously Obama and McCain emerged despite the conventional wisdom, and though I wouldn’t have guessed it a year ago, I wouldn’t have found it shocking either, given their skills. But a year ago, if you’d have told me that Hillary Clinton would emerge as the voice of the disaffected, blue collar, rural Reagan Democrats, I would have laughed.

On the particular issues, here’s the reality: If Obama becomes president, chances are overwhelming that Dodd will move on to chair the Foreign Relations Committee to succeed Sen. Joe Biden or to the Health Education Labor and Pensions Committee if, God forbid, Sen. Ted Kennedy, D-Mass., is incapacitated. That puts Sen. Tim Johnson, D-S.D., author of the OFC legislation, next in line at Banking. Johnson would be just fine by us.

Sen. Richard Shelby, R-Ala., surprised all of us in the industry when he openly expressed philosophical support for the OFC during a Banking Committee hearing at which Council Chairman Shad Steadman (of Rutherfoord) testified. Shelby is a conservative southerner long skeptical of federal intervention on much of anything. But without endorsing the particulars, Shelby indicated the idea of an optional national regulator made sense, giving a big shot of adrenaline to the long-running debate over the extent to which the feds should be engaged in insurance regulation.

For a presidential election year in which few expectations for congressional progress are fulfilled, the federal regulation issue has gotten a lot more juice than I would have imagined. The NAIC, perhaps feeling the heat and the potential loss of state hegemony, has come a long way in short time. Led by Kansas Commissioner Sandy Praeger, the organization’s leadership has endorsed The Council’s top legislative priority: surplus lines reform. And perhaps more impressively, the NAIC has worked with Congress on enactment of what many see as the “camel’s nose”—creation of an Office of Insurance Information at the Treasury Department. It will serve as a clearinghouse and federal advisor with limited preemptive authority (to overwhelm state laws that interfere with foreign treaties).

Finally, I was stunned to see the House passing (fairly easily) a proposal to add wind coverage to the federal flood program. In dismissing that prospect, I figured the vote would inevitably splinter along coastal/non-coastal grounds, with only Gulf State representatives aggressively supporting it. I hadn’t figured that House Speaker Nancy Pelosi, D-Calif., would put so much of her clout behind conservative Mississippi Democrat Gene Taylor, who harbors all of the Trent Lott, post-Katrina animosity toward the industry. Lesson learned: Never underestimate one seriously talented, committed, and pissed-off member of Congress who wants his way.

From a practical standpoint, I didn’t miss much. After all, Congress has not passed major insurance reform. The Senate made it clear that it will never go for the wind-coverage issue as a part of flood reform, thanks in large part to the adamant opposition of Sen. Shelby. And the NAIC still hates the general idea of federal regulation.

Indeed, I may be nothing more than a vessel of conventional wisdom.

Without knowing the outcome of the presidential election, it is trickier than ever to assess our opportunities and challenges. But here are two predictions anyway: Democrats will pick up three to six Senate seats. Under no circumstance will Republicans reclaim control of the Senate. And House control will remain in Democratic hands, give or take a few.

Hearings will be exhaustive next year on insurance reform. Expect to see some real action, though serious obstacles remain for a full-blown, rate-and-form-preemptive federal charter for all kinds of insurance companies. Will it be life-only, plus large commercial p-c? Will it be something less and more incremental? Will the soft market turn hard and flip congressional sentiment against the industry? Will a natural disaster of some kind create the environment for a federal catastrophic reinsurance backstop? Will the energy, housing and credit crisis crowd out health insurance reform as a top-tier issue regardless of whether McCain or Obama is elected?

Stay tuned.

Wood is The Council’s senior vp of Government Affairs.

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