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July 04, 2004 - With Congress coming back from its July 4 recess, and
several major insurance issues pending in a politically charged
environment, this is a good time to analyze the prospects for some
specific industry concerns.
As always, I will analyze the issues based on two dimensions:
"probability of motion" and "probability of movement."
"Probability of motion" means discussion drafts, hearings, roundtables,
press conferences and all the other public activities that surround
legislation. Think of it in terms of the phrase "going through the
motions."
"Probability of movement" means that some legislative panel, perhaps
even the entire Congress, takes an up-or-down vote on an actual bill.
Class-Action Reform.
Probability of Motion: Very high.
Probability of Movement: Moderate.
Analysis: Paul Simon of Simon and Garfunkel fame once wrote a song that
said "There must be 50 ways to leave your lover." There must be at least
twice as many ways to stop legislation in the Senate.
Toward the end of last year, class-action reform was the hot issue which
the conventional wisdom said would surely be passed by the Senate early
in 2004.
A bipartisan agreement had just been reached on a watered down reform
bill that assured 61 votes in favor of passage, enough to prevent a
filibuster. The legislation, S. 2062, contains a complicated formula for
determining when federal courts could assert jurisdiction over major
class-action lawsuits.
While S. 2062 does not go as far as many reform advocates would like, it
is a step forward, and the prospect of enacting any reform bill over the
objections of the trial bar is viewed as no small achievement.
But all the momentum from the bipartisan agreement quickly dissipated.
Opponents of S. 2062 attached non-germane amendments to it which
prevented the Senate leadership from bringing it to the floor.
After a lot of wrangling and months of delay, an agreement appeared to
emerge that would allow the leadership to bring up a clean bill. This
was supposed to happen before the July 4 recess. Then, the leadership
announced that S. 2062 would be delayed again and would not come up
until after the recess.
Again, a lot of reform advocates seem optimistic that this time S. 2062
will go, but I remain skeptical. I think we are too far along in the
political season for something like class-action reform.
No matter how much bipartisan support S. 2062 has garnered, passage will
be touted as a victory for President Bush, who ran in 2000 partly on a
tort reform agenda. I have a lot of trouble believing that Democrats,
including those who signed on to the bill, will hand the president a
major legislative victory when we are so close to a toss-up election.
Maybe it will happen, and I wouldn't bet my house against it. But I
would bet whatever chump change I have in my pocket right now that S.
2062 will not make it to the finish line.
TRIA Reauthorization.
Probability of motion: Very high.
Probability of movement: Moderate.
Analysis: Legislation to extend the Terrorism Risk Insurance Act was
introduced in the House of Representatives recently on very short
notice. Indeed, the press got very little advance notice of the event
and a press conference conducted by the sponsors of the legislation drew
more lobbyists than reporters.
The legislation, H.R. 4634, has the same flaws as the existing TRIA
legislation. In particular, it forces insurance companies to offer
terrorism insurance to all comers, with no protections against adverse
selection.
In addition, it forces insurers to assume a substantial portion of a
risk that they cannot predict or properly price.
H.R. 4634 drew strong support from insurance buyers, but insurance
companies issued very carefully worded statements appreciating the
introduction of the legislation but withholding comment on the
specifics.
There will likely be some action in the House Financial Services
Committee on H.R. 4634, perhaps a hearing or even a vote in a
subcommittee. But prospects in the Senate are uncertain.
A recent article in the Capitol Hill publication Roll Call quoted
unnamed sources as saying that Democrats were going to punish the
insurance industry for supporting the Republican challenger to Sen. Tom
Daschle in the tight South Dakota senate race by delaying TRIA
extension.
This may not reflect the ideals of representative government that we all
learned in Civics 101, but it probably represents the reality. My guess
is that TRIA will wait until next year.
Regulatory Reform.
Probability of Motion: High.
Probability of Movement: Low.
Analysis: I'm hearing that the House Financial Services Committee staff
is working hard on putting together a discussion draft of regulatory
reform that would keep regulation with the states.
It is a daunting task, since Committee Chairman Mike Oxley, R-Ohio, has
outlined a vision for reform that raises constitutional questions about
enforcement and oversight.
While details are hard to come by, the smart money is saying that the
legislation will not mandate pure market-based rating but instead will
allow states to adopt flexible rating bands. This is less than the
industry would like, but it is better than prior approval rating.
The hope is to get a discussion draft finished within the next couple of
weeks. Then, the Capital Markets subcommittee would likely conduct a
hearing and perhaps even vote out a bill.
But that will be the end of it for this Congress. |