The record-breaking gridlock in the 113th US Congress is enough to cause any American sniff his or her nose at the suggestion that tomorrow's election will produce visible results. Yet with a number of critical insurance-related legislation up for debate, including reauthorization of the Terrorism Risk Insurance program and the thus far ill-fated NARAB II legislation, the 2014 mid-terms could play a lasting role in the future of the US insurance industry.
Thus far, it seems industry supporters of the Senate's version of TRIA reauthorization have reason to worry.
Speaking at the Property Casualty Insurers Association of America Annual Meeting in Scottsdale, Ariz. last week, prominent political scientist Larry Sabato—director of the University of Virginia's Center for Politics—told listeners he anticipates Republicans will pick up between six to 12 seats in the House and likely regain control of the Senate.
"Republicans will gain seats, it's just a matter of how many," said Sabato, who accurately predicted 98% of 2006 mid-term races. "This is the classic 'six-year itch' in which Americans aren't particularly happy with the incumbent president's party and take it out at the ballot box."
The Republican-controlled House will grow more only more red after Nov. 4, and as for the hotly contested Senate, Sabata anticipates a "70% chance Republicans will take a narrow majority in the Senate."
Races to watch include Georgia and Louisiana, where hotly contested elections will likely go into a runoff election, and Iowa where Democrat Bruce Braley is contending with Republican Joni Ernst, who made waves with her political ad demonstrating her background castrating hogs while growing up in the state's farm country. Colorado is also up for grabs, though Sabato gives a "tiny edge" to republican challenger Cory Gardner.
So what does all of this mean for the insurance industry? In the short-term, a Republican Senate means Rep. Jeb Hensarling's vision of TRIA's future—which requires higher trigger amounts and renews the program for a shorter period of time—is a more likely reality.
"Some of what will be done [on TRIA] depends on the outcome of the election," Larry Mirel, a partner with Nelson Brown & Co., told Insurance Business America in an earlier interview. "I think if Republicans take the Senate and the House becomes more conservative, Chairman Hensarling will be in an even stronger position to get his way than he is now."
Hensarling's eventual aspiration is to scale back the federal government's involvement in conventional terrorism risk, leaving private insurers to accept that risk and instead assume a backstop only for chemical, nuclear, biological or radiological terrorism.
"That would have the effect essentially of making the federal backstop practically irrelevent for convenstional terrorist attacks," Mirel noted.
In general, Sabato anticipates "more gridlock than ever" in Congress, with a President Barack Obama more focused on international trips and executive and veto powers.
