Reg. Re-org, NFIP, Tax Issues Top Industry 2009 Leg. List

The property-casualty insurance trade groups will be challenging the new Congress to deal with a host of industry issues when it starts work next Tuesday, none more important than the industry's future regulatory scheme.

But the first issue out of the gate will be reauthorization of the National Flood Insurance Program, whose authorization expires March 6.

Besides flood and regulatory reorganization, other industry issues on Congress' agenda include demands by domestic insurers to close a loophole they charge gives insurers based offshore a tax advantage.

Moreover, the Federal Trade Commission added to the issues Christmas week. Under pressure from some members of the House Financial Services Committee, it signaled a more aggressive attitude in examining whether credit scoring discriminates against lower income consumers.

It did so by subpoenaing the records of nine insurers offering homeowner's insurance. The agency wants to scrutinize those records to indicate whether use of credit scoring discriminates against certain ethnic groups, or against lower-income people in general.

Regarding flood insurance, Charles Symington, senior vice president of government affairs for the Independent Insurance Agents and Brokers of America, said, "With the looming expiration of the NFIP, March 6, the IIABA will advocate for both extending and reforming the program."

He added, "While we would prefer a long-term extension and substantial reform, Job No. 1 is ensuring that the program does not expire, leaving many thousands of policyholders without flood coverage."

But reauthorization of the NFIP is just the headline, because wrapped up within that issue is whether Congress wants to tackle the whole issue of catastrophe mitigation.

The American Insurance Association, for example, said it will advance a proactive coastal legislative and regulatory agenda to enhance the ability of the private sector to manage flood and other catastrophic risk.

Leigh Ann Pusey, incoming president of the AIA, said the organization, like the rest of the industry, believes that adding wind coverage to the federal flood insurance program, as proposed in the version of legislation passed by the House, that the Senate declined to act on, is not needed.

"There is adequate wind coverage capacity in every state through either the traditional private market, or state residual markets backed by private insurers," Ms. Pusey said.

As did Ms. Pusey, officials of the National Association of Mutual Insurance Companies noted that creating economic incentives for strong building codes and other mitigation efforts is one of their priorities.

But the universal concern is how the industry will be regulated going forward.

"Regulatory restructuring will be the dominant legislative issue in 2009," said David Sampson, president and CEO of the Property Casualty Insurers Association of America.

"That issue has the potential to affect the way the p-c industry does business for decades to come," Mr. Sampson said. "If we don't get this right, then all of the other victories that we may experience at the state or federal level will be significantly marginalized."

He said this will be a PCI priority in the new Congress and with the new administration. "Our goal is to work with them to address the systemic risk issues and provide informed, data-driven analysis to them.

Mr. Sampson added, "We want to help them address the issues that really exist and not try to fix something that isn't broken."

Mr. Symington agreed. "Our No. 1 issue heading into next year is the financial service regulatory restructuring that is expected as a result of the financial markets crisis."

Specifically, he said, the IIABA "will continue to oppose direct federal regulation of insurance, whether it be optional or mandatory. "We believe that it is a monumental mistake for certain organizations in the insurance marketplace to continue to push for an optional federal charter in this changed political climate."

The opposite view is being voiced by Ms. Pusey, who will become president and CEO of the American Insurance Association in February. The AIA supports an OFC.

"With insurance being an essential component within the broader financial services arena, we fully expect regulatory reform and the possibility of federal oversight of insurance to be part of the discussion in the incoming Congress," said Ms. Pusey, who has overseen AIA federal legislative activity since 1995.

Reinsurance Association of America officials said they will continue to support creation of an OFC, as well as legislation that won some support in Congress that would create an Office of Insurance Information within the Treasury Department--legislation that even some opponents of federal insurance regulation support.

While officials of the National Association of Professional Surplus Lines Offices, Ltd. said future regulation is an issue, their priority is ensuring that legislation is passed streamlining the premium tax payments process of multiline surplus lines risk as well simplifying compliance requirements on the placement of these risks.

Jimi Grande, vice president, Federal and Political Affairs for the National Association of Mutual Insurance Companies, said his group continues its opposition to federal regulation and that NAMIC will work to ensure property-casualty insurers "are not swept up in any overreaching legislation that could produce devastating repercussions for years to come."