Despite the recent health scare involving Sen. Tim Johnson,D-S.D., the balance of power in the U.S. Senate is not one heartattack or car accident away from shifting 180 degrees, Capitol Hillobservers contend.

Indeed, even if Sen. Johnson–recovering from surgery to stopbleeding in his brain–is unable to serve out his Senate term and isreplaced by the state's Republican Governor Michael Rounds (aformer insurance agent), leaving the Senate technically deadlockedat 50-50, the practical impact would be somewhat muted by Senaterules.

Although Republicans would take an effective majority using thevice president as a tie-breaker on the Senate floor, committeeswould remain in Democratic control. Once the committee chairs areofficially set this month, those positions will be kept until thenext Congress convenes in 2009.

That said, the property-casualty insurance industry has a fullagenda for the year ahead no matter who is in charge, with a numberof major issues on the table.

Perhaps the most important issue for the industry–from a timingstandpoint as well as a policy position–is obtaining an extensionof the federal backstop under the Terrorism Risk Insurance Act, orperhaps even the establishment of a permanent mechanism to helpinsurers provide such coverage.

Both Rep. Barney Frank, D-Mass., and Sen. Chris Dodd, D-Conn.,have expressed support for establishing a permanent form of theTRIA program (or at least a longer–perhaps five-year–extension), aswell as a vow to resolve the issue sooner rather than later.“Frankly, if TRIA fails to get done, shame on us,” said Joel Wood,senior vice president of government affairs for the Council ofInsurance Agents and Brokers.

“We now have as broad a swath of business and policymakers inagreement on the fundamental need for extended federal involvementto assure the marketplace is accessible and affordable,” hesaid.

“We have two key chairmen who think that we should look at thisin an extended way, as opposed to merely kicking the ball down theroad, as [former Financial Services Committee Chairman] Mike Oxleyonce said,” he noted. “We have a universal acknowledgement that[nuclear, biological, chemical and radiation] risks absolutelycannot be underwritten in the private marketplace. And we have agrowing awareness that ours is not a private, free marketplace tobegin with.”

Rep. Frank has also expressed support for expanding the programto include more lines of coverage. While those representing theinsurance industry aren't necessarily opposed to broadening theTRIA backstop, they put more of a premium on ensuring the currentprogram will still be in place when the clock strikes midnight onJan. 1, 2008.

“We just want to make sure there's some backstop,” said CharlesSymington, senior vice president of government affairs and federalrelations for the Independent Insurance Agents and Brokers ofAmerica. “The earlier, the better. We can't wait until the lastminute.”

Ben McKay, director of federal affairs for the Property CasualtyInsurers Association of America, echoed that sentiment, saying thestatements being made by lawmakers on TRIA “show that Congress isfocused in the right place.”

Mr. McKay also has little concern that the change in power overto Democrats in Congress would affect the issue, noting thatterrorism risk had been an important part of the agenda underRepublicans as well. “This is one of those issues that crosses theaisle,” he said. “It's an economic issue that also touches onterrorism.”

Mr. McKay raised the specter that the push to increase the linesof coverage under TRIA's umbrella could become a problem, notingthat “passage of TRIA is not a foregone conclusion,” as thingsseldom are in Congress.

“There's going to be a lot of competing interests” that will belooking to work themselves into the program's protection, heexplained. The bigger the program gets, he warned, the moredifficult it could become to win lawmakers' approval.

Carl Parks, senior vice president of government affairs for theNational Association of Mutual Insurance Companies, said animportant goal for his group is to ensure that small and midsizeinsurers can still afford to participate in TRIA. The work on anextension–expected to begin as early as January–is “a very goodopportunity to get a long-term solution.”

Ultimately, “Congress will work out the details,” according toan American Insurance Association representative, Dennis Kelly.“What's important is that we have something long-term in place assoon as possible.”

Also time-sensitive are the issues surrounding the NationalFlood Insurance Program. Although 2006's mild storm season means itwon't run out of money to pay claims until the summer of 2007,AIA's Mr. McKay said it is vital for lawmakers to ensure that thosewho still have 2005 hurricane-related claims are paid in full.

While it's likely that Congress will pass a bill to ensureclaims are paid, Mr. McKay said the industry needs to look at “whatwill come with that–reform,” and whether legislation will be thesame bills introduced last year, or if changes will be made.

In a recent press conference, Sen. Dodd said that for hischamber, he hoped to reintroduce legislation already approved bythe committee last year and pass it through to the full Senate withonly a brief hearing to bring new members of the panel up to speed.That legislation was designed to increase participation in theprogram and require more homeowners to pay fair market rates fortheir coverage.

IIABA's Mr. Symington also expects “a lot of activity this year”as Congress looks to reform the NFIP, which he said “is in direneed” of repair.

Somewhere between the NFIP and the TRIA legislation are issuesinvolving natural disaster risk in the aftermath of HurricaneKatrina, as property insurers move out of high-risk areas along thecoasts. The situation “is truly of crisis proportion,” Mr.Symington said, noting that it is “getting harder and harder” forconsumers in Gulf Coast states to find coverage.

Although a number of proposals for establishing a mechanism fornatural disaster risks were proposed in the last Congress, Mr.Symington pointed to a bill introduced by Rep. Debbie WassermanSchultz, D-Fla., and Sen. Bill Nelson, D-Fla., that would create acommission to study the issue and make recommendations.

“This is a great first step,” he said, adding that the billwould reduce the controversy surrounding the issue because it onlycalls for examining what can be done, rather than jumping toconclusions.

Perhaps the largest issue for the insurance industry isregulatory reform and the possible establishment of an optionalfederal charter–which is also among the least likely to get throughCongress, lobbyists contend.

“There's still a lot of work to do,” Mr. Kelly said, which theAIA expected. Although AIA supports the establishment of an OFC,it's unlikely anything would be passed this year, he added,characterizing the work for 2007 as “a case of moving the debatedownfield.”

Others representing the insurance industry are hoping to keepthe OFC from progressing any further. For example, the IIABAremains “strongly opposed” to an OFC, Mr. Symington said, andinstead “supports targeted reforms to modernize the stateregulatory system.”

Chief among those initiatives in 2006 was a bill reforming theregulation of multistate surplus lines risks and reinsurance thatwas approved in the House 417-0, although it failed to gaintraction in the Senate.

Mr. McKay said there's “no reason to believe” the surplus linesbill would not win House approval again this year, but added thatit “remains to be seen” if other areas of insurance could getsimilar legislation.

Although his group supports the proposed OFC, CIAB's Mr. Woodalso put passage of the surplus lines and reinsurance bill on his“wish list” for 2007.

“We just ran out of time in the Senate,” he said of the 2006version of the bill. “Along the way, thanks to the bipartisanleadership of the House Financial Services Committee, we workedthrough the weeds and got everyone important–including even theregulators–to agree that this was a bill worth enacting.”

The bill, he said, “will save tens of millions of dollars, itwill cut bureaucratic red tape, and it will make the surplus linesmarketplace more accessible to consumers, and thus improve pricingand availability. It's a total win-win, and it's our highestlegislative priority.”

Sen. Dodd has said he is interested in examining insuranceregulation, as have Rep. Frank and other members of the HouseFinancial Services Committee–including Rep. Paul Kanjorksi, D-Pa.,who will chair the insurance subcommittee.

This interest, opponents of the OFC note, should make supportersthink twice about what they are seeking.

“Some of the large insurance companies pushing for an optionalfederal charter should be careful what they ask for,” Mr. Symingtonwarned, noting that the version of OFC legislation they want mightnot be the same as any bill that comes out of the legislativeprocess. “Sure, there will be optional federal charter billsintroduced, but it is yet to be determined what they will looklike,” he noted.

Mr. McKay said “there are a lot of issues on the table” in OFCdiscussions–among them the possibility of a community reinvestmentrequirement, or a mandate to offer an “all-perils” policy.

Len Brevik, executive vice president of the National Associationof Professional Insurance Agents, said that while his groupwelcomes the debate on insurance regulatory reform in Congress, PIAactively supports the current state-based system and believes thatCongress should not impose itself on insurance regulation.

“It's about the mega-banks and the mega-insurance companiesversus Main Street,” he said, contending that OFC supporters aremore focused on boosting their profits than providing customerservice.

Opposing federal regulation will be the focus of a grassrootseffort by PIA members that Mr. Brevik said will involve thousandsof letters and phone calls to members of Congress.