I was always skeptical whether a Republican-led Congress–so averse to Big Government in Washington, so supportive of states' rights–would ever take power away from local insurance departments and hand it to yet another bloated bureaucracy run by Uncle Sam.

With Democrats ruling the roost, perhaps a federal regulatory bill might gain some traction. Did the Democrats ever see an industry they didn't want the feds to oversee???

The question is what kind of regulation would satisfy Democrats–the pick-your-poison approach of optional federal charter advocates, the even more casual federal benchmark strategy laid out by SMART…or will they go hog wild and establish a heavy-handed, mandatory oversight system the industry would come to regret?

Then there is the issue of whether we need to establish a national catastrophe fund to stabilize hurricane- and earthquake-prone states–and their insurers. Again, Republicans are usually against Big Government intruding upon the free market, and fearful of saddling Uncle Sam with open-ended liabilities.

But Democrats are usually more open to federal solutions to local problems. And with Congress already laying out billions to bail out those harmed in recent hurricanes, they are more likely to upgrade our national catastrophe coverage system by creating a comprehensive fund–perhaps even in conjunction with a permanent terrorism reinsurance backstop.

Insurers might be asked to dump their precious flood exclusion and perhaps take all comers on terrorism risks to earn passage. But if allowed to charge the premiums necessary to support such coverage expansions, it might be worth it. (Of course, that's a huge “if” for insurers, who must constantly battle state regulators over “fair” pricing.)

On the other hand, Democrats in Congress could start poking their noses into the use of credit scores in pricing insurance, or even explore allegations of insurer profiteering in open hearings that could embarrass the industry.

They might even challenge the industry's ultimate sacred cow–its antitrust exemption under the McCarran-Ferguson Act, or at least look to scale it back. But that goes with the territory when you are dealing with consumer-minded Democrats.

The point is insurers could indeed work with this new crowd if they remain reasonable, flexible and pragmatic–and if Democrats meet them halfway.

If you have any observations, predictions, hopes or fears about Democratic rule to share, feel free to e-mail me at [email protected], or post your comments on my blog at www.property-casualty.com.