Taxes and a fleet of new state insurance regulators are the most significant issues on the minds of insurance industry executives in the wake of the GOP wins in the House and statehouses.
The biggest changes will take place on the House Ways and Means Committee, where Rep. Dave Camp, R-Mich., will likely become chairman, taking the helm from Rep. Sander M. Levin, D-Mich., who replaced Rep. Charles Rangel, D-N.Y., in March.
Rep. Spencer Bachus, R-Ala., is expected to lead the House Financial Services Committee, taking the reins from Rep Barney Frank D-Mass., and Rep. Scott Garrett, R-N.J., is likely to succeed Rep. Paul Kanjorski, D-Pa., a the helm of that panel's Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises. Mr. Kanjorski lost in his re-election bid.
Members of the insurance industry are expecting efforts to repeal parts of the Dodd-Frank financial services reform package, but acknowledge that President Barack Obama can still veto any changes to the legislation — even if they got through the Democratic-controlled Senate. Carriers had feared that they would be covered under language that would require derivative transactions — which hedge variable annuities — to go through a clearinghouse or exchange.
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What life carriers are really eyeballing is the tax agenda for next year.
“We have a huge deficit situation, and the Bush tax cuts will expire in December,” said John Little, chief operating officer and senior vice president of federal affairs at the Insured Retirement Institute. “We have to focus on any possible changes to the taxation [on the inside growth] of insurance products.”
Those wondering about the likelihood of a tax on the inside build-up of insurance products need to watch for the Dec. 1 reporting deadline for President Obama's Deficit Commission. Mr. Camp happens to be on that commission.
“If that group can muster 14 [out of 18] votes for the deficit reduction plan, then the insurance industry will see if it proposes anything for the tax treatment,” said James M. Delaplane Jr., a partner at Davis & Harman LLP. But he warned that legislators have so far been careful not to be too specific on how exactly to narrow the deficit, and that changes in insurance taxes have been historically bipartisan.
Two of Congress' experts on the life insurance industry fell by the wayside on Election Day when Mr. Kanjorski and Rep. Earl Pomeroy, D-N.D., lost their races. Mr. Pomeroy, a former state insurance commissioner who heads the Ways and Means Subcommittee on
Social Security, had championed legislation seeking tax breaks for annuity payouts. “There are few people in Washington who actually know insurance,” said Whit Cornman, spokesman for the American Council of Life Insurers. “When someone like Pomeroy is out of office, that presents a new challenge for us to re-educate more people and reach out to legislators to bring them up to speed.”
On the regulation side, some 37 governors' seats were up for grabs this year, paving the way for anywhere between one-third and one half of appointed insurance commissioners to be replaced over the next few months. That could lead to a shake-up in a number of states, including Pennsylvania, where Republican Tom Corbett was elected to replace term-limited Gov. Ed Rendell.
In 2007, Mr. Rendell appointed Joel Ario as Pennsylvania's insurance commissioner. Mr. Ario left office in August to join the Obama administration as director of the Office of Insurance Exchanges and was replaced by Robert L. Pratter, the executive deputy general counsel.
“While the current governor appointed Ario, who's perceived to be an activist insurance commissioner, we would anticipate that a Republican would likely not appoint someone with that background,” said Steven B. Davis, partner and co-chairman of insurance at Stradley Ronon Stevens & Young.
Last night, four elections for insurance regulators took place. In Kansas, incumbent Sandy Praeger ran unopposed. In California, Democrat Dave Jones beat Republican Mike Villines. Republican John Doak defeated incumbent insurance commissioner Kim Holland in Oklahoma. Finally, Republican Ralph T. Hudgens beat Democrat Mary Squires for the insurance regulator post in Georgia.
