U.S. Senator Chris Dodd may have been out of his element when hespent a year on the campaign trail running for the presidency in2007 and early 2008. But whatever his shortcomings, word that hewill remain in charge of the committee handling insurance is goodnews indeed for the industry.

The Connecticut Democrat spent perhaps $5 million–some of itraised from companies and trade groups that have business beforethe Senate Banking Committee he heads–thus he came back toWashington with his tail between his legs, without garnering asingle delegate for his labors.

He may also have used poor judgment when he took a mortgage loanfrom a special program provided to Washington insiders and othersfrom Countrywide Financial, the now-humbled mortgageoriginator.

But to borrow a phrase used so correctly by Robert Caro in hisexcellent biography of the career of former President and Senatemajority leader Lyndon Johnson, Sen. Dodd is clearly a “master ofthe Senate.”

Sen. Dodd's is a charter member of the Senate's inner circle,someone who understands and can translate its internal workingsinto accomplishments for his constituents. There is an ebb and flowto this august body that takes years to master.

Therefore, Sen. Dodd's decision after the election to retain thechairmanship of the Senate Banking Committee, so he may help slogthrough a restructuring of financial services regulation that willlikely take up all of next year, was appropriate and certainly goodnews for insurers.

Everyone “Inside the Beltway” knew Sen. Dodd wanted off Bankingand onto the Foreign Relations Committee, if an opening developed,because he was frustrated and depressed over the huge loss ofinsurance jobs over the last several years in his belovedConnecticut. (The opening on Foreign Relations occurred becauseSen. Joe Biden, the current chair, was elected vice president.)

Consolidation, heavy losses from 9/11, asbestos, environmentaland malpractice claims, and strong competition from banks andsecurities firms have taken a mounting toll on Connecticut'sinsurance companies.

This was felt most deeply by Sen. Dodd, who used to openly boastthat he was “Senator Insurance,” and was highly effective inrepresenting insurance interests in such high-stakes legislation asbills curbing securities lawsuits during the Clintonadministration, Gramm-Leach-Bliley in 1999, and the Terrorism RiskInsurance Act of 2002, among others–his “liberal,”consumer-oriented reputation notwithstanding.

However, with the Connecticut insurance industry deeply affectedby the fallout from the current financial tsunami, Sen. Dodd didnot hesitate to prove that all politics are local.

Let it not be said that insurance is his sole interest. It isnot only life insurance, property-casualty and health insurancefirms that have strong roots in Connecticut–whichh also happens tobe the headquarters for some of the nation's leading hedge funds.Protecting them amidst a clear mandate to strongly regulate allthings financial is certainly a factor in his decision.

But insurance is clearly Sen. Dodd's favorite. At a recenthearing on insurance regulation before his committee, heacknowledged that “a few years ago, even the notion of a federalcharter would have been met with vehement opposition. It was thethird rail.” Now, he will get a chance to shape whatever role thefederal government assumes, if any, in overseeing insurance.

It appears federal regulation–certainly for p-c carriers–is noslam dunk. But problems among insurers–especially the astonishingneed to bail out American International Group, at a publicliability that has now risen to $150 billion, as well as efforts bymore carriers to get a piece of the Troubled Asset Relief Program(even if it means buying a thrift to qualify)–certainly provide astrong public mandate for far greater federal oversight.

Given the stakes and his experience, Sen. Dodd is the rightperson to look out for insurance interests as an energized Congressand a new Democratic administration–armed with a strong mandate toimprove regulation–start work in earnest.

Sen. Dodd has been there, done that, and, in a term he usesfrequently, knows how to flourish in the “weeds”–in the staffmeetings, negotiations with fellow committee members, on the flooras a manager of legislation, and in something that has been missingduring the period of Republican ascendancy, but may be revived:reconciliation panels.

Anything goes in these closed door meetings, where legislationtakes its final shape. Sen. Dodd has the experience, energy andgoodwill needed to ensure that in crafting bills that will affectinsurance regulation going forward for 10 years or more, theindustry's voices are heard.