DANA POINT, Calif. — Next week's elections, especially who wins the presidency, could have a significant effect on property/ casualty insurers.
Economic growth, regulation and the fate of the government's terrorism insurance backstop all will be affected by the results, said David A. Sampson, president of the Property Casualty Insurers Association of America, in a recent interview.
“The most important thing our members are looking for is candidates who understand what has historically generated America's growth and economic opportunity,” Mr. Sampson said. “That is a private sector where government is involved in setting the rules of the road — the rule of law, protection of private property rights — as opposed to a government that sees itself as the prime mover in the marketplace.”
He said the insurance industry would like to see a return to more historic levels of economic growth and opportunity. Mr. Sampson said unemployment is still stubbornly high, while gross domestic product numbers “are repeatedly revised down.”
“People are going to be looking at which candidates have the most realistic approach to supporting economic growth driven by the private sector and which candidates are willing to take on some of those structural issues that are looming on the horizon,” he said. Mr. Sampson cited growing government debt levels, a federal deficit that “many would say is beyond the damage zone,” and entitlement reforms as concerns.
“The growth and vitality of the property/casualty industry is largely a factor of growth in the American economy,” Mr. Sampson said. “We have a stake in seeing a return to robust historical levels of economic growth and opportunities in the United States.”
He said insurers have specific concerns about specific federal initiatives. One of the biggest is the ongoing effect of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which is still being implemented, Mr. Sampson said.
Among other things, the act created a new Federal Insurance Office within the U.S. Department of the Treasury.
“What role is the newly created FIO going to play?” he asked.
The issues surrounding regulation continue to include concern about encroachment of underwriting freedoms and what Mr. Sampson called “momentum toward global regulatory convergence,” which could stack international regulatory standards on top of state-based regulation. There also is concern about bifurcation between solvency and market conduct regulation.
Mr. Sampson said corporate tax reform is going to be a major issue in the next Congress.
But one of the greatest concerns for the property/casualty insurance industry is the possibility that the federal terrorism insurance backstop created by the Terrorism Risk Insurance Act of 2002 will not be reauthorized.
The program was extended in 2005 and then for seven years in 2007, but is slated to sunset at the end of 2014.
“A lot of work has to be done as soon as the next Congress reconvenes for what in all likelihood will be a very challenging uphill battle for reauthorization,” he said.
The next Congress also is going to have to cut a deal on taxes and spending, according to participants in a PCI-sponsored discussion of the U.S. election and the regulatory landscape held in Washington earlier this month.
Doug Holtz-Eakin, former director of the Congressional Budget Office under President George W. Bush, said there will have to be a deal, but that it won't happen during any lame-duck congressional session after the elections.
“The natural reflex of Congress is to kick things down the road,” he said.
But he said there will have to be a deal by August, or certainly by December of next year, or the rating agencies will conclude that the United States can't deal with its fiscal problems.
Mr. Holtz-Eakin also addressed Dodd-Frank, noting that much remains to be done in the rule-making process for implementing the law.
“Implementation has become a real source of uncertainty,” he said.