U.S. Senator Chris Dodd may have been out of his element when he spent a year on the campaign trail running for the presidency in 2007 and early 2008. But whatever his shortcomings, word that he will remain in charge of the committee handling insurance is good news indeed for the industry.

The Connecticut Democrat spent perhaps $5 million–some of it raised from companies and trade groups that have business before the Senate Banking Committee he heads–thus he came back to Washington with his tail between his legs, without garnering a single delegate for his labors.

He may also have used poor judgment when he took a mortgage loan from a special program provided to Washington insiders and others from Countrywide Financial, the now-humbled mortgage originator.

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

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

Therefore, Sen. Dodd's decision after the election to retain the chairmanship of the Senate Banking Committee, so he may help slog through a restructuring of financial services regulation that will likely take up all of next year, was appropriate and certainly good news for insurers.

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

Consolidation, heavy losses from 9/11, asbestos, environmental and malpractice claims, and strong competition from banks and securities firms have taken a mounting toll on Connecticut's insurance companies.

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

However, with the Connecticut insurance industry deeply affected by the fallout from the current financial tsunami, Sen. Dodd did not hesitate to prove that all politics are local.

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

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

It appears federal regulation–certainly for p-c carriers–is no slam dunk. But problems among insurers–especially the astonishing need to bail out American International Group, at a public liability that has now risen to $150 billion, as well as efforts by more carriers to get a piece of the Troubled Asset Relief Program (even if it means buying a thrift to qualify)–certainly provide a strong public mandate for far greater federal oversight.

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

Sen. Dodd has been there, done that, and, in a term he uses frequently, knows how to flourish in the “weeds”–in the staff meetings, negotiations with fellow committee members, on the floor as a manager of legislation, and in something that has been missing during the period of Republican ascendancy, but may be revived: reconciliation panels.

Anything goes in these closed door meetings, where legislation takes its final shape. Sen. Dodd has the experience, energy and goodwill needed to ensure that in crafting bills that will affect insurance regulation going forward for 10 years or more, the industry's voices are heard.

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Sen. Dodd Staying Put Is Good News For Insurers

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