Despite the recent health scare involving Sen. Tim Johnson, D-S.D., the balance of power in the U.S. Senate is not one heart attack or car accident away from shifting 180 degrees, Capitol Hill observers contend.

Indeed, even if Sen. Johnson–recovering from surgery to stop bleeding in his brain–is unable to serve out his Senate term and is replaced by the state's Republican Governor Michael Rounds (a former insurance agent), leaving the Senate technically deadlocked at 50-50, the practical impact would be somewhat muted by Senate rules.

Although Republicans would take an effective majority using the vice president as a tie-breaker on the Senate floor, committees would remain in Democratic control. Once the committee chairs are officially set this month, those positions will be kept until the next Congress convenes in 2009.

That said, the property-casualty insurance industry has a full agenda for the year ahead no matter who is in charge, with a number of major issues on the table.

Perhaps the most important issue for the industry–from a timing standpoint as well as a policy position–is obtaining an extension of the federal backstop under the Terrorism Risk Insurance Act, or perhaps even the establishment of a permanent mechanism to help insurers provide such coverage.

Both Rep. Barney Frank, D-Mass., and Sen. Chris Dodd, D-Conn., have expressed support for establishing a permanent form of the TRIA program (or at least a longer–perhaps five-year–extension), as well as a vow to resolve the issue sooner rather than later. “Frankly, if TRIA fails to get done, shame on us,” said Joel Wood, senior vice president of government affairs for the Council of Insurance Agents and Brokers.

“We now have as broad a swath of business and policymakers in agreement on the fundamental need for extended federal involvement to assure the marketplace is accessible and affordable,” he said.

“We have two key chairmen who think that we should look at this in an extended way, as opposed to merely kicking the ball down the road, as [former Financial Services Committee Chairman] Mike Oxley once said,” he noted. “We have a universal acknowledgement that [nuclear, biological, chemical and radiation] risks absolutely cannot be underwritten in the private marketplace. And we have a growing awareness that ours is not a private, free marketplace to begin with.”

Rep. Frank has also expressed support for expanding the program to include more lines of coverage. While those representing the insurance industry aren't necessarily opposed to broadening the TRIA backstop, they put more of a premium on ensuring the current program will still be in place when the clock strikes midnight on Jan. 1, 2008.

“We just want to make sure there's some backstop,” said Charles Symington, senior vice president of government affairs and federal relations for the Independent Insurance Agents and Brokers of America. “The earlier, the better. We can't wait until the last minute.”

Ben McKay, director of federal affairs for the Property Casualty Insurers Association of America, echoed that sentiment, saying the statements being made by lawmakers on TRIA “show that Congress is focused in the right place.”

Mr. McKay also has little concern that the change in power over to Democrats in Congress would affect the issue, noting that terrorism risk had been an important part of the agenda under Republicans as well. “This is one of those issues that crosses the aisle,” he said. “It's an economic issue that also touches on terrorism.”

Mr. McKay raised the specter that the push to increase the lines of coverage under TRIA's umbrella could become a problem, noting that “passage of TRIA is not a foregone conclusion,” as things seldom are in Congress.

“There's going to be a lot of competing interests” that will be looking to work themselves into the program's protection, he explained. The bigger the program gets, he warned, the more difficult it could become to win lawmakers' approval.

Carl Parks, senior vice president of government affairs for the National Association of Mutual Insurance Companies, said an important goal for his group is to ensure that small and midsize insurers can still afford to participate in TRIA. The work on an extension–expected to begin as early as January–is “a very good opportunity to get a long-term solution.”

Ultimately, “Congress will work out the details,” according to an American Insurance Association representative, Dennis Kelly. “What's important is that we have something long-term in place as soon as possible.”

Also time-sensitive are the issues surrounding the National Flood Insurance Program. Although 2006's mild storm season means it won't run out of money to pay claims until the summer of 2007, AIA's Mr. McKay said it is vital for lawmakers to ensure that those who still have 2005 hurricane-related claims are paid in full.

While it's likely that Congress will pass a bill to ensure claims are paid, Mr. McKay said the industry needs to look at “what will come with that–reform,” and whether legislation will be the same bills introduced last year, or if changes will be made.

In a recent press conference, Sen. Dodd said that for his chamber, he hoped to reintroduce legislation already approved by the committee last year and pass it through to the full Senate with only a brief hearing to bring new members of the panel up to speed. That legislation was designed to increase participation in the program and require more homeowners to pay fair market rates for their coverage.

IIABA's Mr. Symington also expects “a lot of activity this year” as Congress looks to reform the NFIP, which he said “is in dire need” of repair.

Somewhere between the NFIP and the TRIA legislation are issues involving natural disaster risk in the aftermath of Hurricane Katrina, as property insurers move out of high-risk areas along the coasts. The situation “is truly of crisis proportion,” Mr. Symington said, noting that it is “getting harder and harder” for consumers in Gulf Coast states to find coverage.

Although a number of proposals for establishing a mechanism for natural disaster risks were proposed in the last Congress, Mr. Symington pointed to a bill introduced by Rep. Debbie Wasserman Schultz, D-Fla., and Sen. Bill Nelson, D-Fla., that would create a commission to study the issue and make recommendations.

“This is a great first step,” he said, adding that the bill would reduce the controversy surrounding the issue because it only calls for examining what can be done, rather than jumping to conclusions.

Perhaps the largest issue for the insurance industry is regulatory reform and the possible establishment of an optional federal charter–which is also among the least likely to get through Congress, lobbyists contend.

“There's still a lot of work to do,” Mr. Kelly said, which the AIA expected. Although AIA supports the establishment of an OFC, it's unlikely anything would be passed this year, he added, characterizing the work for 2007 as “a case of moving the debate downfield.”

Others representing the insurance industry are hoping to keep the OFC from progressing any further. For example, the IIABA remains “strongly opposed” to an OFC, Mr. Symington said, and instead “supports targeted reforms to modernize the state regulatory system.”

Chief among those initiatives in 2006 was a bill reforming the regulation of multistate surplus lines risks and reinsurance that was approved in the House 417-0, although it failed to gain traction in the Senate.

Mr. McKay said there's “no reason to believe” the surplus lines bill would not win House approval again this year, but added that it “remains to be seen” if other areas of insurance could get similar legislation.

Although his group supports the proposed OFC, CIAB's Mr. Wood also put passage of the surplus lines and reinsurance bill on his “wish list” for 2007.

“We just ran out of time in the Senate,” he said of the 2006 version of the bill. “Along the way, thanks to the bipartisan leadership of the House Financial Services Committee, we worked through the weeds and got everyone important–including even the regulators–to agree that this was a bill worth enacting.”

The bill, he said, “will save tens of millions of dollars, it will cut bureaucratic red tape, and it will make the surplus lines marketplace more accessible to consumers, and thus improve pricing and availability. It's a total win-win, and it's our highest legislative priority.”

Sen. Dodd has said he is interested in examining insurance regulation, as have Rep. Frank and other members of the House Financial Services Committee–including Rep. Paul Kanjorksi, D-Pa., who will chair the insurance subcommittee.

This interest, opponents of the OFC note, should make supporters think twice about what they are seeking.

“Some of the large insurance companies pushing for an optional federal charter should be careful what they ask for,” Mr. Symington warned, noting that the version of OFC legislation they want might not be the same as any bill that comes out of the legislative process. “Sure, there will be optional federal charter bills introduced, but it is yet to be determined what they will look like,” he noted.

Mr. McKay said “there are a lot of issues on the table” in OFC discussions–among them the possibility of a community reinvestment requirement, or a mandate to offer an “all-perils” policy.

Len Brevik, executive vice president of the National Association of Professional Insurance Agents, said that while his group welcomes the debate on insurance regulatory reform in Congress, PIA actively supports the current state-based system and believes that Congress should not impose itself on insurance regulation.

“It's about the mega-banks and the mega-insurance companies versus Main Street,” he said, contending that OFC supporters are more focused on boosting their profits than providing customer service.

Opposing federal regulation will be the focus of a grassroots effort by PIA members that Mr. Brevik said will involve thousands of letters and phone calls to members of Congress.