Eight Is Enough: Top Legislative Priorities Industry Should Focus On For Fall

Here are the top eight legislative priorities that property and casualty insurance executives, and their lobbyists, should focus on if they hope to get anything enacted on Capitol Hill this year—or for the entire 112th Congress that ends next year.

1. Seek Long-Term NFIP Extension

A five-year extension of the National Flood Insurance Program (NFIP) would provide the industry with the certainty that businesses in general believe is critical to their decision-making.

And a provision in the House legislation opening the door for federal managers of the program to limit federal liability through purchase of reinsurance would provide ample justification for Congress to act promptly on a bipartisan bill.

Also, given that the current extension of the program runs out Sept. 30—and that the Senate has so far failed to even introduce legislation dealing with the issue—it is obvious that the industry should focus on this issue above all else.

Insurance agents are seeking to slip in language adding coverage for business-interruption and cost-of-living expenses. This provision is in the House bill and has withstood several assaults by members concerned about the potential cost of such coverage.

Given the focus on cost-cutting that permeates Congress, it may be wise to be careful in what you ask for. The Senate is especially focused on reducing potential government liability for the program—and too much effort to protect this provision could be costly.

2. Prepare For A New Tax

The congressional super-committee currently crafting a multitrillion-dollar budget-cutting proposal over 10 years is likely to seriously consider closing a loophole in tax law that allows foreign insurers to cede premiums to foreign affiliates.

This proposal divides the industry between domestic and foreign insurers—but even foreign insurers acknowledge that a tax committee under pressure to reduce the deficit is going to look favorably on closing this alleged loophole as part of a package of revenue-raisers.

3. Make Yourself Insignificant

Insurers are lobbying strongly to reduce to the lowest figure possible the number of insurers that are deemed systemically significant by the Financial Stability Oversight Council (FSOC).

Directly, and through members of Congress (many of whom are facing tough re-election campaigns), the industry has forced federal regulators to rethink the criteria they will use in determining whether an insurer is "SiFi" (a systemically important financial institution) and therefore subject to regulation by the Federal Reserve as well as state regulators. 

This designation could also create the need for a 3 percent increase in capital among those deemed systemically significant.

4. Support Changes In Secondary-Payment Rules

Legislation introduced in the House in March would clarify industry reporting requirements under an existing, controversial law that requires reimbursement to Medicare for payments made to people who are also paid later through workers' compensation or liability claims. 

The legislation is H.R. 1063. It may win support in Congress—if the industry successfully argues that the existing rules are more costly than beneficial. 

Even though the Centers for Medicare and Medicaid Services supports the current regulation, the Obama administration has promised to act to reduce regulatory burdens on businesses as a means of spurring job creation.

5. Stay Tuned Re: The MLR Exemption For Agents

Insurance agents are pushing for legislation that would exempt healthcare-premium commissions from the medical-loss-ratio (MLR) provision of the healthcare-reform law.

Such legislation has strong support in the House and in the Senate as well.

But, given the Senate process, strong public support for such legislation doesn't mean it will survive the many procedural hurdles that Senate members can use to block action.

6. Fight The Surplus-Lines Battle In The States

Some support exists for amending the Nonadmitted and Reinsurance Reform Act, which went into effect July 21, to give states more time to adopt a uniform allocation formula for surplus premiums.

But my reading of the tea leaves is that Congress is unlikely to step in; it wants the industry to fight this battle in the states. Few congressmen want to put their limited political capital on the line by seeking to intervene in this contentious issue.

7. Accept That An Optional Federal Charter Is Doomed

While some insurers are still pushing for an optional federal charter for insurers, there appears to be no realistic chance that legislation pushing this proposal will even be introduced in this Congress.

Such legislation faces strong opposition from a considerable portion of Congress—as well as the electorate—for less, not more federal government, and this proposal flies in the face of that strong opposition.

8. Relax Re: Limiting Scope Of Federal Insurance Office

Opponents of federal regulation are keeping a close eye on the activities of the new Federal Insurance Office (FIO) to ensure there is no so-called "mission creep" or efforts to expand its authority.

But, given the fact that FIO is just getting on its feet and appears to be moving aggressively to interface with the components of existing state governance, this may be paranoia.

FIO is currently headed by a former state regulator, Michael McRaith of Illinois, and just setting up the office to accomplish the goals already supported by the clear language of the legislation establishing it will take time.

Getting into position to advise the FSOC members on how insurance companies operate will take time, and FIO is just starting to staff up.