After a historic election win in which the Democrats have captured the White House and increased their control of Congress (gaining at least seven seats in the Senate and 21 in the House) and following on the heels of dramatic financial turmoil, the 111th Congress is poised to meet the challenge with a mandate for change. The political realities have shifted and present significant opportunities and challenges for the insurance industry. While change is sweeping Washington, veteran leadership will be at the helm of the Senate Banking and House Financial Services committees.
Senator Christopher Dodd (D-CT) put an end to early speculation that he would seek the chairmanship of the Foreign Relations or Health, Education, Labor & Pensions committees by announcing his intent to remain Chairman of the Banking Committee. Ranking Member Richard Shelby (R-AL) will also return to the Banking Committee.
Chairman Dodd expects the 111th Congress to hit the ground running, and has wasted no time in outlining his immediate priorities. Since the election, the Chairman has worked to ensure that the Emergency Economic Stabilization Act is implemented properly. Dodd listed several core principles that will guide his approach to modernizing the financial regulatory system and tackling other challenges during the 111th Congress:
- Inspire regulators to act as strong cops on the beat and enforcing their mandates;
- Eliminate regulatory arbitrage by removing incentives for regulators to weaken protections to capture new business;
- Improve communications and information sharing among regulators and ensure that regulators are informed of risks taken by the institutions they supervise and act to control them to limit systemic risk;
- Increase transparency so regulators and market participants alike know the risks;
- Implement a flexible and modernized financial regulatory scheme that addresses current problems while providing a framework that strengthens global competitiveness; and
- Accept that consumer protection and economic growth are inextricably linked.
It is unclear what direction potential changes to the financial regulatory system would take, though Chairman Dodd has stated that there could be a single regulator or there could be "multiple agencies." Although insurance has not been mentioned specifically, except for the passage of Terrorism Risk Insurance Act (TRIA) extension, it may be that insurance is now viewed as part of financial services overall.
On the House side, Chairman Barney Frank (D-MA) returns to lead the House Financial Services Committee alongside Ranking Member Spencer Bachus (R-AL). Chairman Frank has been heavily involved in negotiations regarding the auto-industry bailout and the Troubled Assets Relief Program, but it is safe to assume that the insurance industry remains a key concern for the Financial Services Committee in the 111th Congress. Chairman Dodd's remarks serve as confirmation that change is coming to the financial regulatory scheme. What impact this has on the Optional Federal Charter debate and insurance regulatory reform in general remains to be seen.