Reauthorization of the Terrorism Risk Insurance Act in some form will be the top priority of the property and casualty insurance industry. Industry hopes that legislation extending the program beyond its current Dec. 31, 2014 sunset would be in place by the end of this year were dashed by strong opposition from conservatives in and out of Congress who argue that that the program is becoming just another entitlement.

Congress was told that insurance contracts are annual deals, renewal efforts for policies going into 2015 were underway, and that delay would create great uncertainty, but the effort failed.

Now, the House Financial Services Committee has agreed to review the issue starting in March. Its leadership has demanded that government liability be reduced and the industry have "more skin in the game," but the panel has agreed that it will support renewal in some form. 

Support in the Senate is bipartisan and, before they left for home late this month, several senators asked the Senate Banking Committee to move quickly on the issue in 2014.

To Delay or Not Delay: NFIP Rate Increases

(AP Photo/Alex Brandon)

A National Flood Insurance Program with a stronger balance sheet seemed in the cards when Congress passed legislation in July 2012 phasing in actuarial rates over four years. However, the bill has generated fierce opposition from homeowners across the country, as well as from the politically powerful real estate industry.

Up to now, Congress, by action and inaction, seems to have indicated it doesn't want to get involved unless it is as a last resort.

But the Senate did agree Thursday to take up legislation early next year that would delay or modify most parts of the 2012 legislation.

However, there is also an alternative proposal is likely to get strong consideration. It would be more targeted because of concerns, especially among Republicans, that the Senate bill headed to the floor effectively junks the 2012 legislation.

Another avenue for delaying the NFIP rate increases is through a court case seeking an injunction against all rate hikes unless the Federal Emergency Management Agency justifies the action as affordable. The Federal District Court in Gulfport, Miss. could rule before the end of the year.

This is creating a major headache for the 84 Write-Your-Own personal lines insurance carriers. They say that any action to delay the rate hikes would have a profound effect because it would take months for FEMA to interpret the new legislation and provide guidance to WYOs, raising questions as to what would happen to the premiums that were adjusted in October to comply with the 2012 law.

WYOs also want to know who will compensate them or their vendors for the millions of dollars in costs associated with re-rating millions of policies and then undoing and redoing them.

Tax Treatment of Offshore Insurers

(AP Photo)

Action by the Senate Finance Committee proposing changes in tax laws governing the treatment afforded to offshore insurers doing business in the U.S. in November may be just a first step toward shifting the burden on the ceding of premiums in reinsurance transactions in favor of domestic carriers.

The proposal in principal has support in a key House committee that is also considering ways of simplifying U.S. tax policy, adding greater weight to an idea that has been around in one or another for perhaps a decade.

Offshore insurers have their supporters in Congress as well, and control of the Senate could shift to the Republicans in the fall election, which may tip the scales in the offshore insurers' favor. However, action by the Senate Finance panel could be a signal that Congress is serious about dealing with this issue, to the consternation of offshore insurers.

Obamacare

President Barack Obama speaks during an election night party in Chicago. (AP Photo/Matt Rourke)

Getting "Obamacare" off the front pages is Job No. 1 for the Obama administration, and especially Health and Human Services Secretary Kathleen Sebelius.

The rocky rollout of the federal healthcare exchange has the potential to be the Waterloo for President Barack Obama. Getting the balky website to work would put the president's domestic agenda back on track. It would also provide the certainty health-insurance carriers and agents so crave as the lynchpin for sale of their products.

Federal Vs. State Regulation

Janet Yellen

The comfortable ride that Janet Yellen received through the Senate confirmation process as the first woman chairman of the Federal Reserve Board should send a strong signal to the insurance industry that Congress finds acceptable "having another pair of eyes"—especially one with the quantitative expertise of the Fed—looking over the shoulders of state regulators.

While state regulators will visit Washington regularly to get reassurance about their primary role in insurance oversight, the Yellen process reflects the equilibrium that now exists in Washington over insurance regulation. That equilibrium is of federal agencies providing political cover to elected officials feeling heat from anxious insurance carriers and agents deeply concerned about a federal takeover of insurance regulation.

That will not stop members of Congress from constantly bringing up the issue however; there will be regular hearings as nervous members continue to reassure industry officials and state regulators that they are on their side.

At the same time, there is currently only limited political support for federal oversight of insurance, and those who do support it are not going to raise their hand if the question is asked.

The Yellen confirmation process, though, shows that the return to the old days of a cordon sanitaire between the federal government and state-insurance regulation is over. Measured federal involvement through a process laid out through the Dodd-Frank Act is not going to be disturbed, and the Fed's setting up a system to measure insurance industry financial performance will be encouraged and supported.