NU Online News Service

WASHINGTON --Democrats have seized control of the U.S. House ofRepresentatives, and possibly the Senate, for the first time since1994 in mid-term elections, which will create a moreconsumer-oriented agenda for the property-casualty insuranceindustry to deal with, according to lobbyists.

Several industry analysts said in notes to clients Wednesdaymorning that they believed James Webb, leading in Virginia by asmall margin, will prevail over incumbent Sen. George Allen; andthat Jon Tester, who is leading incumbent Sen. Conrad Burns,R-Mont., will win as well.

That would mean that Sen. Chris Dodd, D-Conn., who is pridefulof his support for the insurance industry, would become chairman ofthe Senate Banking Committee. Sen. Dodd was primary author of theoriginal Terrorism Risk Insurance Act, enacted in late 2002, and isalso an author of legislation reining in class-action litigationinvolving securities enacted in the Clinton administration.

There were some losses of familiar faces in the House, caught upin the Democratic tide.

Rep. Nancy Johnson, R-Conn., serving her 11th term in Congressand a strong supporter of the industry, was defeated handily. AndRep. Jim Leach, R-Iowa, the first Republican chairman of theFinancial Services Committee after the Republican takeover in 1995,but stepped down because of term limits in 2001, also was defeated.He was in his 14th term in Congress.

Rep. Sue Kelly, R-N.Y., also was apparently defeated in theDemocratic wave. She chaired the Oversight panel of the HouseFinancial Services Committee and was a strong voice for theindustry on the committee, especially on terrorism risk insuranceissues.

For the here and now, there are two p-c insurance issues on thecongressional agenda for a lame-duck session now scheduled to startnext Tuesday. They are the surplus lines/reinsurance regulationbill passed by the House in late September, and legislationreforming the National Flood Insurance Program.

Given the scope of Republican losses and the fact the programdoesn't need reauthorization, and because there were no hurricanes,the program has enough money on hand to pay claims, said. CarlParks, senior vice president of government affairs of the NationalAssociation of Mutual Insurance Companies. He sees the lame-ducksession as punting on the issue and confining itself to must-dolegislation.

While the agenda will move to the left in the Senate, Joel Wood,senior vice president for federal government relations at theCouncil of Insurance Agents and Brokers, said he believedbipartisanship will continue to prevail in negotiations for newlegislation at the House Financial Services Committee, and, likely,in the Senate Banking Committee as well.

At the same time, Mr. Parks said he sees a potential for moreoversight hearings in the House, where Rep. Luis Gutierrez, D-Ill.,is the presumptive head of that committee. Mr. Parks pointed outthat Rep. Gutierrez was the primary sponsor of legislationmandating a study of the use of credit-scoring in setting rates forfinancial services transactions by the Federal Trade Commission.The study was due this fall, but the FTC is now saying that thestudy is unlikely to be completed until spring, Mr. Parks said.

Because of the presence of Rep. Gutierrez and the fact thatcommittees other than Financial Services may seek to airinsurance-oriented issues, Mr. Parks said he also anticipatedgreater scrutiny of such issues as mold, the industry's antitrustexemption under the McCarran-Ferguson Act, data security, andprivacy. He noted that the Supreme Court has agreed to review acase involving when personal lines insurers must provide an adverseaction notice to customers.

Under Democratic control of the House, Rep. Barney Frank,D-Mass., will become chairman of the Financial Services Committee,with Rep. Richard Baker, R-La., the ranking minority member.

Rep. Paul Kanjorski, D-Pa., will assume Mr. Baker's role aschair of the Capital Markets, Insurance and Government-SponsoredEnterprises Subcommittee.

Mr. Parks said insurance regulation will be a key topic on thecongressional agenda in the next Congress. But whether legislationcreating an optional federal charter or something more like thefederal standards legislative proposal initiated by Rep. MikeOxley, R-Ohio, current chair of the committee, through the draftsof the so-called State Modernization and Regulatory TransparencyAct (SMART) will prevail is unclear.

While hearings are likely, Mr. Parks said that because theindustry is divided, Congress is expected to be hesitant aboutinvolvement in something now dominated by the states, and supportfor either approach is cloudy.

Mr. Parks sees Democratic control of the House to be positivefor extension of the Terrorism Risk Insurance Act before it expiresDec. 31, 2007, and more sympathy for creation for a long-term,public/private partnership to deal with catastrophic risk andterrorism risk issues going forward.

In California, GOP candidate Steve Poizner captured theinsurance commissioner's office, riding on the coattails of Gov.Arnold Schwarzenegger and benefiting from a lack of enthusiasm fromtraditional Democratic quarters for Lt. Gov. Cruz Bustamante.

In Oregon, a public question, Measure 42, that would have barredthe use of credit scoring by insurers in calculating premiums wentdown to defeat, with more than 65 percent of the electorate votingagainst the measure.

Incumbency ruled in Oklahoma where Democrat Kim Holland turnedback a nasty challenge, and in Kansas where GOP insurancecommissioner Sandy Praeger bucked a blue trend in her state. Thiswas credited in part to her predecessor, former NationalAssociation of Insurance Commissioners president, KathleenSebelius, who rode to an easy victory.

Mark E. Ruquet and Steve Tuckey also contributed to thisstory.