Washington

While battles over health care reform got most of the headlines here this month, Congress tackled a host of other issues of keen interest to property-casualty insurers and producers, including financial services regulatory reform, extension of the National Flood Insurance Program, the estate tax and crop insurance.

As Congress left town following its longest session since 1897, Sen. Christopher Dodd, D-Conn., chair of the Senate Banking Committee, and Sen. Richard Shelby, R-Ala., its ranking minority member, said they were making progress on drafting bipartisan financial services reform legislation, and hoped to "resolve the remaining issues before we reconvene in January."

Joel Wood, senior vice president of government relations at the Council of Insurance Agents and Brokers, said details remain sketchy as to the Senate's direction on financial services reform. He noted he has "no idea how the showdown over the Consumer Financial Protection Agency and systemic risk will ultimately play out, and I'm grateful that for the most part, our brokerage members have been able to steer clear of those issues."

"We'll keep our head down, encourage Sen. Dodd and Sen. Shelby to be aggressive on insurance reform, and do our best to make sure that the surplus lines provisions are finally enacted into law," he added.

The National Association of Professional Surplus Lines Offices said Sen. Dodd's statement is a positive step for surplus lines reform legislation, which would allocate supervision of reinsurance and surplus lines purchases to the buyer's home state–NAPSLO's top legislation priority.

"Following completion of the health care overhaul, financial services reform legislation will be the focus of Congress, and with the House of Representatives already approving surplus lines language as part of its financial services reform bill, we expect the Senate to follow suit," said NAPSLO Executive Director Richard Bouhan.

"This is an area we have been working on for several years, and believe that the opportunity to get surplus lines reform language signed into law is finally here," Mr. Bouhan added.

Charles Symington, senior vice president of government affairs at the Independent Insurance Agents and Brokers of America, said "of paramount importance to the IIABA [in the Senate bill] is ensuring that any financial services regulatory reform legislation recognizes the insurance market has been well-regulated at the state level."

IIABA is also "working diligently to protect independent agents and brokers from needless, additional oversight," he added.

FLOOD COVERAGE

In another key development, the National Flood Insurance Program–whose original authorization ran out last Sept. 30–was extended until Feb. 28. That marked the fourth time Congress has temporarily extended NFIP since its original authorization expired, as resolution of the program's long-term future keeps getting delayed by more pressing legislative issues.

Ben McKay, senior vice president of federal affairs for the Property Casualty Insurers Association of America, said it's time to resolve NFIP's status for a longer time period. "We applaud the Senate for keeping the National Flood Insurance Program in place," he said, while adding that NFIP "must be extended through 2010."

"The NFIP is a vital federal government program that provides protection against the risk of ruin for millions of homeowners in the U.S.," he said. "The program is in desperate need of reform, as it is billions of dollars in debt. PCI encourages the reform and long-term reauthorization of this crucial program."

ESTATE TAX

Meanwhile, for the first time since 1899, the estate tax expired at year-end–a critical issue for family-owned insurance agencies.

However, members of Congress have vowed to move promptly to restore the tax at 2009 levels–a $3.5 million exemption and a 45 percent maximum tax rate–as soon into the new year as possible.

But the bickering that led to an inability to extend existing policy even for a short period leaves uncertain when a long-term solution will become law.

IIABA's Mr. Symington said that with the estate tax in limbo and the 2001 and 2003 tax cuts scheduled to expire on Dec. 31, 2010, "we will continue to educate Congress on the impact of tax policy on small businesses across the country."

He said the IIABA "supports significantly modifying the estate tax by decreasing the tax rate and/or increasing the exemption amount to provide permanent relief to family-owned small businesses across the country."

CROP CUTS

Earlier in December, the Obama administration proposed cuts in the crop insurance program, sending alarms among both underwriters and agents.

Under a proposal unveiled last month, the Agriculture Department told the industry it wants new cutbacks in the program that, in addition to other recent action, would collectively reduce government involvement in the program over the last three years by 27 percent, effective in October.

"We definitely cannot live, without a doubt, with what they have suggested," said Robert Parkerson, president of National Crop Insurance Services.

NCIS is a liaison to the Agriculture Department's Risk Management Agency for the 16 companies that provide crop insurance. It helps develop policies, claims procedures, research on new plants and new genetic seed processing for the industry.

"If this isn't resolved, we have a tremendous problem on our hands, and so do the nation's farmers," Mr. Parkerson said.