WASHINGTON—The election of a Democratic majority in either or both houses of Congress next week would have a mixed effect on insurance and risk management issues, according to Washington observers.

For example, efforts to extend the federal government's terrorism insurance backstop--currently slated to end on Dec. 31, 2007--could get a boost if party control of one or both houses changed, say observers. But federal tort reform initiatives would probably be derailed, and attempts to streamline insurance regulation, including allowing insurers to seek a federal rather than state charter, would face an unknown future.

And a prime benefits issue--expansion of health savings accounts--could run into severe turbulence if there's a Democratic House majority.

The federal terrorism insurance backstop has enjoyed bipartisan support in both houses ever since Congress gave its approval to the Terrorism Risk Insurance Act in 2002 and to the scaled back Terrorism Risk Insurance Extension Act in late 2005. But both the administration and the chairman of the Senate Banking Committee--Sen. Richard Shelby, R-Ala.--have been skeptical of the need for the program.

A Democratic majority in the Senate would likely mean that Sen. Christopher Dodd, D-Conn., would assume the chairmanship of the Banking Committee.

"On the Senate side, Chairman Shelby has traditionally been opposed to TRIA," said Paul Kangas, director-federal government relations in the Property Casualty Insurers Assn. of America's Washington office. "If Sen. Dodd were to take over, we may have a more favorable climate."

Tom Litjen, the PCI's vp-federal government relations, noted that Sen. Dodd "has been the primary sponsor of the Senate bills in the past--it would make a major difference in the Senate."

TRIA "has enjoyed significant bipartisan support," said Leigh Ann Pusey, senior vp-government affairs and chief operating officer of the American Insurance Assn. But she stressed that "there will be challenges--it doesn't mean it's a slam dunk" no matter which party controls either house of Congress. For example, a Democratic majority might want to add mandates to the federal program, such as requiring insurers to cover chemical, nuclear, biological and radiological attacks in addition to more conventional threats, she said.

"In the House, a change of leadership shouldn't impact the debate," said Mr. Kangas. Although Financial Services Committee Chairman Michael Oxley, R-Ohio, did not seek re-election, any of his likely successors as chairman, regardless of party affiliation, appear likely to continue support for the backstop.

A change in party control would, however, have quite an impact on federal tort reform initiatives.

Tort reform "would essentially be dead in the House," said PCI's Mr. Litjen.

Rep. John Conyers, D-Mich., a tort reform foe, would replace Rep. James Sensenbrenner, R-Wis., a tort reform advocate, as chairman of the House Judiciary Committee and thus control the panel's agenda.

"Particularly in the House, when you look at Rep. Conyers' record, he's shown no inclination to support any kind of reform agenda," said Sherman Joyce, president of the Washington-based American Tort Reform Assn. Mr. Joyce said that "the overall vote count in support of measures" might not change much in the next Congress on such measures as the Lawsuit Abuse Reduction Act or medical malpractice liability reform, which passed both the Judiciary Committee and the full House in the last Congress. But with a tort reform opponent heading the Judiciary Committee, "it's just getting things on the agenda that will be the challenge," Mr. Joyce said.

"Tort reform has always required bipartisan support," said Ms. Pusey. "It also requires leadership that schedules votes on the floor. So I think it will be more difficult under a Democrat-controlled Congress. We may be able to build some bipartisan support for a bill, but that's where party control makes a difference, too, which is in scheduling a bill and moving a bill."

The outlook for insurance regulatory reform is mixed.

"The fortunate thing for our industry is that our issues don't typically break along Democratic or Republican lines," said Joel Wood, senior vp-government affairs for the Council of Insurance Agents & Brokers. Mr. Wood said Rep. Barney Frank, D-Mass., who's likely to become chairman of the Financial Services Committee if party control changes, has "made it very clear" that with the exception of personal lines property/casualty insurance "he's very open to broader reform." Despite the differences in political philosophy between Reps. Frank and Richard Baker, R-La., a potential successor to Rep. Oxley, "I don't think that's necessarily a huge gulf in their outlook," said Mr. Wood.

"If there were a change in the Senate--and I don't believe there will be a change in the Senate--Sen. Dodd has been always been very attuned to the industry," said Mr. Wood. But he added that "Sen. Shelby has launched a very balanced inquiry into the state of insurance regulation."

AIA's Ms. Pusey said getting optional federal charter legislation passed will be difficult. The goal of an optional charter is not just creating the charter and a federal regulator, but also creating some free market reforms along the way, she said. "It was a challenge in the current Congress" that will continue "regardless of who controls Congress."

PCI's Mr. Litjen said he expects optional federal charter legislation to be introduced in the Senate, although his colleague, Mr. Kangas, said that a change in control of the House would mean that a "somewhat different bill" than the one offered last month by Rep. Ed Royce, R-Calif., would be on the table.

A measure streamlining regulation of reinsurers and surplus lines insurers that passed the House last month also could re-emerge, said Mr. Litjen. The surplus lines bill enjoyed broad support in the House "and we would expect it to be introduced and passed by the House. We are looking for sponsors in the Senate, and we will make a major push in the 110th Congress to bring that bill to completion," he said.

HSAs would be significantly impacted by a change in control, said Frank McArdle, a director in Hewitt Associates Inc.'s Washington office.

"In general, Democrats have been opposed to HSAs and HSA expansion," he said. "If the Democrats regain the majority in the House, we would expect it to be even more difficult than it has been to get HSA legislation approved unless somehow it were packaged with some other provisions that appeal to Democrats," he said.

"If the Democrats regain the House, we don't expect the lame duck session to be covering as much as it might have, because the Democrats, knowing that they will control the House in January and maybe have a stronger position in the Senate, may want to wait until they're in that stronger position officially before they take up too much," said Mr. McArdle.