One of the most famous quotes of baseball legend Yogi Berra was his adage: "It ain't over till it's over." No wiser or more appropriate words could be used to describe the situation we're now in regarding the new financial services reforms–the assemblage of which will likely be with us until well after the ink of President Barack Obama's signature dries.

For starters, one thing that wasn't very clear (or at least wasn't well publicized) during the near two-year debate over the bill was the vast amount of work that would be required before the law can actually take effect.

With reams of rule-makings and studies to be done and more than 200 regulations to be drafted, not only is time an element but so, too, is the core intent of the 2,300-page, Dodd-Frank Act, named for the bill's champions. Depending on how regulators interpret the law, the insurance industry may or may not fare so well in the long run.

Added to the uncertainty is a mix of elements that might come to impact the tone, tenor and scope of the law in the longer term. These include:

o The outcome of the fall midterm elections.

o Whether House Republicans are successful in their efforts to repeal the law (a drive that began even before the Senate passed the reform bill).

o The reappearance of the optional federal charter debate–something that's expected as the new Congress gets seated in early 2011.

With the industry divided on many topics–such as state vs. federal regulation, collateral obligations for non-admitted reinsurers, etc.–the final form of financial services reform will likely be to the benefit of some and to the detriment of others.

Stepping away from the crystal ball however, as things currently stand, the bill in its present iteration leaves insurers virtually unscathed. This is due to the hard work the insurance industry put into working with lawmakers to keep potentially harmful elements out of the law.

For the most part, many are pleased, considering the following:

o The Federal Insurance Office as it stands is much less stringent than previous versions. The office will provide Congress and the administration with pertinent information and expertise on the insurance sector while also serving as a negotiator in international matters dealing with insurance.

The National Association of Insurance Commissioners expressed satisfaction with the final iteration of the FIO, as it is "narrowly designed to carry out its mission while not unnecessarily undermining strong state regulation."

o From a pure industry perspective, insurers escaped the possibility of paying into a $150 billion resolution authority for winding down failed firms and also will not be subject to chipping into a $19 billion assessment fund that would be used to pay for the legislation.

o Some are also applauding the fact that the insurance industry will not be among those financial services companies that will be subject to a ban on proprietary trading and limits on hedge fund investments.

o Also, as with the construct of the FIO, it appears state insurance commissioners will remain in charge of consumer protection and company insolvencies.

o Meanwhile, professionals in the surplus lines realm are pleased with language in the bill that helps to create regulatory uniformity in the non-admitted and reinsurance markets.

o The Financial Services Oversight Council to be created under the law will include a state regulator.

But for all the good tidings that are out there, rumblings, as mentioned above, are beginning to bubble up as thoughts of unintended consequences come to the fore.

The key here is the uncertainty that exists. Even Senate Banking Committee Chair Christopher Dodd, D-Conn., who championed the bill along with House Financial Services Committee Chair Barney Frank, D-Mass., has admitted to the ambiguity of what is now known as the Dodd-Frank Act. "No one will know until this is actually in place how it works," the Washington Post quoted him as saying.

Like Sen. Dodd, many are wondering how the law will actually work in practice.

At a recent meeting of the National Conference of Insurance Legislators in Boston, key executives from the NAIC came to discuss the financial reform bill.

NAIC Chief Executive Officer Terri Vaughan said while her organization remains cautiously optimistic about the eventual outcome of the legislation, there is some concern regarding the development of the FIO, the prospective scope of its authority and the culture it will foster.

New York State Sen. Jim Seward, R/C/I-Oneonta, added that he saw the FIO language as being benign and something that could easily "fill any vacuum" that may currently exist in the existing insurance regulatory realm.

Since 24 incumbent governors in the upcoming 2010 gubernatorial elections are either not seeking reelection or will be term-limited out of office, Sen. Seward said he expects the face of state executive branches to change dramatically, possibly impacting how the financial reforms play out.

Rep. Frank, who appeared at NCOIL as a special guest speaker, announced there will be a "major push" in the 112th Congress to consider optional federal charter legislation. He urged state legislators to broach the OFC topic to their members of Congress early.

While life insurance and international insurance regulatory matters seem a good fit for OFC, Rep. Frank–a former Massachusetts state lawmaker–said he has no wish to again have a role in overseeing items such as auto insurance.

Rep. Frank's advice to be at the table early seems to make sense. The outcome of the financial reform bill makes it clear that the insurance industry's vigilance in being at the table paid off.

At this point, most are trying to remain cautiously optimistic that things will work out going forward. But we can't ignore the concerns surfacing about the FIO and other aspects of the bill.

Add to this the prospect of certain elements of the recent health care reform law (insurance exchanges, for example) somehow morphing with the financial reform law, and you see the potential for federal regulatory infiltration–which would be the worst of all possible worlds.

Yes, there will be change, and no, we cannot avoid it, but the insurance industry needs to remain on guard and aware. With regard to financial services regulatory reform and the efforts to shape it, one thing is certain. It ain't over.

Howard Mills is director and chief advisor with the Insurance Industry Group of Deloitte LLP in New York. He may be reached at howmills@deloitte.com.

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Fin'l Services Reform To-Dos Likely To Linger

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