WASHINGTON—If you want to know the risk management and insurance legislative agenda for 2010, take a look at what's left over from 2009, industry observers say.

Financial services regulatory reform passed the House of Representatives, but still must be taken up by the Senate Banking, Housing and Urban Affairs Committee. The chairman of that committee—Sen. Christopher Dodd, D-Conn.—is taking a considerably different approach to financial services reform than that of his counterpart in the House—Financial Services Committee Chairman Barney Frank, D-Mass., particularly in regard to the Federal Reserve Board. Both, however, support establishing a federal insurance office within the Treasury Department as well as streamlining regulation of surplus lines insurers.

In addition to ironing out differences in financial services regulatory reform and assuming the Senate passes its own legislation, lawmakers will have to continue to deal with reform of the National Flood Insurance Program that has been kept alive through a series of short-term extensions.

In addition, lawmakers have to consider their own political futures as they approach the 2010 midyear elections. If history repeats itself, Republicans probably will diminish Democrats' majorities, most notably in the House.

Unfinished business

And the electoral outlook became even murkier last week when Sen. Dodd announced that he would not seek re-election, thus guaranteeing a new chairman and agenda no matter which party controls the Senate.

But “first of all, we're going to have a carry-over from 2009,” said Charles M. Chamness, president and CEO of the National Assn. of Mutual Insurance Cos. in Indianapolis. “We'll be working with Congress and the administration to finish up the '09 agenda. For our industry, that starts with the financial services regulatory reform package.”

“Much of RIMS' legislative agenda is incorporated into the House and Senate regulatory modernization bills,” said Deborah M. Luthi, vp for the New York-based Risk & Insurance Management Society Inc. and director-enterprise risk management at Matheson Inc. in Sacramento, Calif.

“The House of Representatives passed its version last month,” Ms. Luthi said. “Because we are still waiting for the Senate Banking Committee to move its legislative package…that places much of RIMS' 2009 agenda in play” in 2010.

“In respect to the regulatory reform, it's more of the same and, quite frankly, in respect to the National Flood Insurance Program, it's more of the same. We'll have to extend that again,” said Benjamin McKay, senior vp-federal government relations for the Property Casualty Insurers Assn. of America in Washington. “Then it will be fending off attacks on underwriting in general. I suspect that going into an election year, some of those issues are sort of juicy for headlines.”

“We are certainly expecting to continue to work on a financial services reform bill,” said Leigh Ann Pusey, president and CEO of the American Insurance Assn. in Washington. “I think key for the insurance industry is to educate the lawmakers on the nature of the business in terms of the risk profile of property/casualty insurers. Our primary focus will be on the systemic risk and resolution authority. Other priorities include (the Obama administration's proposed) Consumer Financial Protection Agency, the office of national insurance and corporate governance issues.”

“We will obviously finish up (regulatory) reform and we are fairly pleased with the progress we made on that and the fact the federal insurance office is not a federal regulator,” said NAMIC's Mr. Chamness. “It's a dangerous environment, so we have to work to being sure whether it's the final stages of (regulatory) reform or the health insurance deliberations that we don't get swept up in something that hurts our industry or hurts the consumer.”

Joel Wood, senior vp-government affairs for the Council of Insurance Agents & Brokers in Washington, agreed that there could be some fallout from health care reform efforts.

“Much of the year might be consumed with trying to incrementally repair whatever might occur there,” Mr. Wood said. “I believe there inevitably will be unintended consequences that will impact employers.”

Regarding the reform of regulating financial services, “we would like to achieve more of what the House did, keeping any negative consequences of financial re-regulation away from our members and passing the surplus lines legislation at long last,” Mr. Wood said.

State reforms

RIMS also is watching state actions, said Ms. Luthi.

“We have spent the better part of 2009 working on the New York state producer compensation regulation and we expect the first thing out of the box in 2010 to be the final enacted version,” Ms. Luthi said. “RIMS has been following the developments of this issue very closely for some time, and we are still hopeful improvements will be made to the regulation. Once the regulation becomes final, we will be watching very closely to see if certain brokers are permitted to resume the practice of receiving contingent fees. That has been one of our fears throughout this process, because we feel that if contingent fees are allowed, then we will end up with the same problems we faced several years ago.”

The CIAB also is keeping an eye on New York.

“Probably the most consequential matter that has not received a lot of publicity is the New York circular letter on contract certainty,” Mr. Wood said. “Basically, it's all about the World Trade Center, so the New York (Insurance) Department is attempting to impose a much higher standard for battening down policy terms, but we're urging them to do it in a manner that is not disruptive and does not create new rights of action. When New York sneezes, the rest of the country gets a cold.”

Looking to the midterm congressional elections, many observers expect significant Republican gains. The only question is how significant they will be.

“I'm going to go out on a limb and predict a flip of 30 to 35 seats in the House and a net of two to three Senate seats for Republicans,” said Mr. Wood.

“The change in control could occur if Republicans won every competitive election and there were further Democratic retirements,” said NAMIC's Mr. Chamness. “However, it's unlikely.”

“If the trends are right now in the polls, Republicans stand to gain a significant number of seats (in the House) and, I think, become more competitive in the Senate,” said AIA's Ms. Pusey. “I think the bottom line translates to tighter margins in both bodies and the possibility of flip in control.”