The chief executive of the Property Casualty InsurersAssociation of America (PCI) said he believes if the Democratsexpand their majorities in Congress next year and perhaps even winthe White House, the insurance business will face the threat of anexpanded federal presence that will unite the industry.

PCI President and CEO David Sampson, in an exclusive interviewtoday at the National Underwriter headquarters office in Hoboken,N.J., said he believes the effect of complete Democratic control inWashington would be a "much more intrusive" presence from "thewhole weight of the federal bureaucracy."

Such an "existential threat," he said, would spur industryassociations to work more closely together despite theirdifferences on certain policy issues, such as the need for anoptional federal charter.

PCI, he said, is focused on insurance regulatory reform andimprovement, either through state or federal action, and iscurrently concerned about existing Congressional and executivebranch efforts PCI believes would mean redundant scrutiny andregulation of the industry.

He mentioned a provision creating an investigatory post in theSenate bill extending the National Flood Insurance Program, andlanguage in the Treasury's proposal for an optional federalcharter.

Mr. Sampson--who took over at PCI 10 months ago after leaving aBush Administration post as deputy secretary of the U.S. CommerceDepartment--said Treasury may not have realized the implications oftheir OFC draft, which PCI attorneys believe could, as written,subject insurers to dual federal-state regulation, and thus negatethe "optional" part of an OFC.

Under the Treasury blueprint, even for those with a statecharter, federal authorities would appear to reserve a right toregulate part of the insurer's operation, he said.

While noting that the OFC language used in the blueprint raised"a real red flag," he said the Treasury proposal "is not wellfleshed out at this point," suggesting the possibility of dualregulation might be unintentional. Insurers will seek clarificationas the proposal progresses, he said, calling the possibility ofdual control the "worst of all worlds."

Meanwhile, in the Senate flood bill, there is provision for an"ombudsman" within the Federal Emergency Management Agency, whosejob it will be to monitor insurers that administer flood policies,making sure they do not classify any wind damage claims as floodingso that the NFIP would have to pay. The House bill does not includesuch a provision.

Mr. Sampson said flood claims are already subject to five levelsof arbitration, mediation and review, and that addition of "thisspecial investigator" would be a case of "classic redundancy,"creating a position where insurers would be asked for materialbecause an official was looking for something to do.

He said PCI was happy that insurance industry lobbying hadmanaged to kill a provision providing the new post with subpoenapower, and was also glad that efforts to expand NFIP to coverwindstorms was defeated.

PCI, in a meeting with executive branch officials and Treasury,learned from Barry Jackson, the presidential assistant forstrategic initiatives, that the Treasury blueprint for financialservices is merely a concept suggested by Treasury Secretary HenryPaulson for debate, and not an official administration position atthe moment.

In addition, even under the blueprint, an OFC for insurers isnot an immediate recommendation, but designed to be put in placedown the line, Mr. Sampson related.

The first step under the blueprint, he noted, would beestablishment of a federal information office to coordinate federalpolicy on insurance--particularly on trade issues, such ascollateral requirements for foreign reinsurers.

He said PCI has not taken a stance on Treasury's OFC proposal,but wants to shape debate on "what is good regulation--notnecessarily where it is located."

Mr. Sampson voiced his impression that the National Associationof Insurance Commissioners has not demonstrated great ability tomove regulatory reform forward and get states to implement themodel laws it drafts.

Since taking his post, Mr. Sampson said he has met one-on-onewith about 10 state insurance commissioners, and has pushed formore urgency on reform.

The PCI executive said the property-casualty industry's tradeorganizations, while they do not always speak with one voice, havebeen able to come together and work well on issues such as theTerrorism Risk Insurance Act and the flood bill.

In the future, he said they would be motivated to work togetherto fend off attempts to ban insurer use of credits scores inunderwriting, and efforts to have the federal government act as areinsurer for state catastrophe funds. (For more on this point, seeEditor In Chief Sam Friedman's blog atwww.property-casualty.com.)

With Congress keeping its session short in this election year,Mr. Sampson said he sees little appetite by lawmakers in the nearterm to take on p-c issues other than reauthorization of the floodinsurance program.

If there is a move toward an OFC, he said he would guess itmight be limited to life insurers, but said it is not clear how thefederal government would replicate the insurance expertise that nowresides with the states. He also wondered if there was a desire tohave the federal government get involved with the handling ofpolicyholder disputes.