OAMIC · Multifamily property owners Financial institutions . ... R-New York D Introduced H.R. 508...

February 19, 2014

OAMIC

Chuck Chamness

NAMIC President & CEO

cchamness@namic.org

Washington Outlook

Key Federal Issues

2014 Elections

NAMIC Awards

Presentation Overview

The best of times …

A legend in the house!

Washington Outlook

Second Term

Gun Control

Immigration Reform

Climate Change

Tax | Debt Ceiling | Deficit

President's Ambitious New Priorities

The Second-Term Jinx

G. W. Bush

Clinton

Reagan

Nixon | Ford

Kennedy | Johnson

Eisenhower

Presidents tend to run into trouble during their second terms

Iraq War

Lewinsky Scandal

Iran Contra Scandal

Watergate | Impeachment | Pardon

Vietnam War

Recession in 1958 and 1960

The novelty is wearing off, energy is waning, administration is running out of fresh ideas, and the A-team

from the first term has largely moved on.

In the past, recessions, scandals, and wars have plagued second-term presidents. This second term appears to

be no exception. In years 5 through 8, voters often become increasingly open to the idea of change.

What Dominated Early Second Term?

IRS Scandal James Rosen

Benghazi Syria Associated Press

NSA

Executive Branch

Declared gridlock unworkable

Goal became to marginalize and ignore Congress

Ruling through rules

New rules for coal plants

implementation of DFA

implementation of ACA

Who's Really in Charge?

The 112th Congress passed 220 laws, slightly down

from a Congressional average of 400.

Federal regulators have been passing/publishing

nearly 4,000 rules per year.

More than 180,000 rules are on the books.

Around 81,000 pages have been added each year.

Growing Regulatory Reach

The threat of Optional Federal Charter – THOSE WERE THE DAYS!

Federal Reserve applies to join International Association of Insurance Supervisors

IAIS proposes global capital standards

G-20 – FASB peer review

FIO Report on regulatory modernization

FSOC designates Prudential and AIG

Rep. Ed Royce attacking NAIC

FIO, FACI, CFPB, FSOC … EPA, HUD

FIO Report Released

• The report represents a stepping-off point for the discussion about next steps that

can be taken to improve the system of insurance regulation in the United States.

• The report urged the adoption of 27 recommendations (18 for the states 9 for the

federal government)

• We did see a marginally increased role for the FIO in specific areas recommended

• The report represents a continued narrowing of calls for federal insurance

regulation by the U.S. Treasury, but it contains the implicit view that Federal

involvement will automatically translate into increased regulatory efficiency and

efficacy

• Justification of the recommendations is improving uniformity and efficiency – a

message delivered only 23 months late

• In the end, it will all depending on what, if any, specific actions are proposed and

implemented

Disparate Impact

HUD's Discriminatory Effects Standard

November 2011 NPR REG

Went “final” last year • Established standards determining when a

housing practice with discriminatory effects

violates the Fair Housing Act

• Disparate Impact Standard – statistical disparities

for protected classes (race, religion, gender,

disability etc.)

• Would apply to "the provision and pricing of

homeowner’s insurance”

• Could threaten use of any underwriting factor

All the way back to 1999...

Disparate Impact Case Dismissed…Twice??

Magner v. Gallagher

Top DOJ and HUD officials negotiated a quid pro quo with St. Paul in order to get the

city to withdraw the case. In exchange, the DOJ would decline to intervene in an

unrelated False Claims Act suit against the city worth $180 million.

Mount Holly, N.J. v. Mount Holly Gardens Citizens in Action

Open question as to The Reinvestment Fund's (group headed by a former HUD

official) influence in township's decision. TRF will invest millions of dollars into the

development of Mt. Holly.

Rep. Darrell Issa

Continues to investigate questionable efforts to protect

the disparate impact standard.

Disparate Impact

NAMIC and AIA Legal Challenge

NAMIC and AIA decided to launch industry legal

challenge to the HUD rule in the District Court of the

District of Columbia on June 26, 2013.

Now our case is the primary vehicle to get this

issue back before the Supreme Court.

Key Legislative Issues

Terrorism Reinsurance

Build Strong Coalition

NFIP

Tax Reform

Terrorism Risk Insurance Program

Immediate Market Reaction Post-9/11

The lack of terrorism coverage impacted

$15.5 billion in commercial real estate

transactions at the cost of 300,000

construction jobs

TRIA passed in 2002 and was

reauthorized in 2005 and 2007

TRIA is for commercial

property/casualty insurance and acts as

reinsurance in event of certified

terrorists event

Terrorism Risk Insurance Program

Coverage for Acts of Terrorism

Private sector contributes up to $27.5 billion

20% deductible

15% co-pay

$100 million event trigger

TRIA only costs the government a small sum

unless there's a terrorist attack

Terrorism Risk Insurance Program

Wide-reaching policyholder base

Businesses

Ports

Hospitals

Museums

Casinos

Public utilities

Stadiums

Municipalities

Manufacturers

Universities

Commercial property owners

Multifamily property owners

Financial institutions

And many others…

Terrorism Risk Insurance Program

Reauthorization in the 113th Congress

The current TRIA program is authorized through

December 31, 2014

Lapse in program would immediately cause technical default of

commercial loans and the devaluing of over $1 trillion in

commercial mortgage-backed securities

Rep. Michael Grimm

R-New York

Introduced H.R. 508 on February 5, 2013

5-year reauthorization

Terrorism Risk Insurance Program

Reauthorization

Rep. Benny Thompson

D-Mississippi

Ranking member of Homeland

Security Committee

Introduced H.R. 1945 on May 9, 2013

10-year reauthorization

Rep. Michael Capuano

D-Mass.

Ranking member of Insurance

Subcommittee

Introduced H.R. 2146 on May 23, 2013

10-year reauthorization

135 cosponsors from 29 states and the District of Columbia

Natural Catastrophes and Congress

Biggert Waters Flood Insurance Reform

and Modernization Act of 2012

Five-year reauthorization

Rate reforms

Updated flood plan maps and other improvements

NAMIC lead lobbying effort to ensure final

passage through the “Flood the Hill” Campaign

Natural Catastrophes and Congress

Attempts to Rollback Biggert-Waters Reforms

S. 1846/H.R. 3370 – The Flood Insurance Affordability Act

Delays rate increases for grandfathered and newly mapped properties for four

years beyond the authorization of the current bill.

Effectively guts all positive reforms made to ensure long-term fiscal stability of the

NFIP.

Natural Catastrophes and Congress

Insurance Efforts to Defend Biggert-Waters

Roll back bill is an overreaction to constituent concerns

about affordability.

Any changes to Biggert-Waters should address only

legitimate affordability concerns.

Delaying rate increases for another four years will

increase debt to program and make it harder to

reauthorization in the future.

Strong building codes are good for homeowners,

good for businesses, and good for tax payers.

Homes and businesses can and should be built to resist the ravages of a variety of

natural catastrophes.

The LSU Hurricane Center estimated modern

building codes would have spared 80%

of Hurricane Katrina wind damages

and saved $8 billion.

A 2005 NIBS study concluded that for every

$1 spent on pre-disaster mitigation,

disaster relief assistance is reduced by $4.

Safer Building Codes

Safer Building Codes

IBHS Research Center Richburg, South Carolina

www.ibhs.org

Safer Building Codes

NAMIC formed and leads the BuildStrong Coalition

… and many more

Encourage better behavior by

states and consumers

Safe Building Code Incentive Act

Safer Building Codes

Safe Building Code Incentive Act

Signature priority for NAMIC-led coalition

Provides federal initiatives to state that

enforce model building codes

Goal of enacting public policy based on

research of IIBHS and others supporting

stronger, safer homes and buildings

Safer Building Codes

NAMIC is leading the push for safer building

Formed and is leading the diverse Build Strong Coalition

Developed support for an received introduction of signature priority for

The Safe Building Code Incentive Act (SBCIA)

Testified at two Congressional hearings as experts on safer

building codes promoting the SBCIA

50 co-sponsors in 112th Congress

Conference at the IBHS Research Center in the fall of 2014

Rod Mathews, State Farm Insurance

Companies

Testifying before the House Transportation

and Infrastructure Subcommittee

The Tax Reform Debate

Scope of Reform Undecided

Individual, corporate and/or international decisions to be made.

Biggest hurdle is reductions in corporate taxation leads to

increases in individual rates.

Political Climate

An election year with Senate control at stake. No one wants to

take a vote that hurts constituents.

Challenges to Comprehensive Reform

The Tax Reform Outlook

The House Ways and Means Committee will advance tax reform legislation in the

first half of the year.

The likely early change in leadership is a setback to tax reform in the Senate.

Congress will continue to talk endlessly about the need for tax reform, but actually

approving it means assigning winners and losers while

working together with partisan opponents.

Generally expect to see activity on taxes during the

year, but it is unlikely that comprehensive reform

will be enacted.

What to Expect

2014 Elections

Politics is not a Spectator Sport!

Insurers must be engaged in shaping the legislature and regulatory landscape.

2014 Elections

Current Senate Breakdown

55* Democrats 45 Republicans

Number of Senate seats in the 113th Congress

By Party

*Includes two independents, Angus King, I-Maine, and Bernie Sanders, I-Vt., who caucus with the Democrats.

The GOP will once again be on offense and have playing field advantage.

Source: The Cook Political Report

2014 Elections

Democrats Have More Open Seats at Risk

5

Democrats

Open Senate Seats

By Party

Source: The Cook Political Report

3

Republicans

Harkin (IA) D+1

Levin (MI) D+4

Baucus (MT) R+7

Johnson (SD) R+10

Rockefeller (WV) R+13

Chambliss (GA) R+6

Johanns (NE) R=12

Coburm (OK)

2014 Elections

LEANING

GOP

McConnell, R-Ky.; West Virginia Open (Rockefeller, D)

Democrat

Iowa Open (Harkin,D)

Senate Races*

FAVORED

GOP Open

South Dakota (Johnson)

Georgia (Chamblis)

Democrat

Shaheen, D-N.H.

TOSS-UP/TILT

GOP

Montana Open (Bacaus,D); Pryor, D-Ark.

Democrat

Begich, D-AK.; Hagan, D-N.C.

PURE TOSS-UP

Landrieu, D-La.

*Races from Stu Rothenberg

2014 Elections

Current House Breakdown

201 Democrats 234* Republicans

Number of House seats in the 113th Congress

By Party

*Includes one currently vacant Republican-held district (Bonner, AL-01).

Democrats need a 17-seat gain to win control.

Source: The Cook Political Report

2014 Elections

Only 67 Competitive or Potentially Competitive

Democrats Must Run the Table to Win Back the House

Number of House Seats in the 113th Congress

By Party

Democrats must win every solid Democrat, likely Democrat, lean Democrat, Toss-Up and lean

Republican district, and four likely Republican districts to take back the House.

205 163 14 15 11 11 11 16

218

2016 Elections The Presidential Race Will Begin in One Year

Try to carefully position themselves

Attempt to be helpful to candidates in 2014

Implode one at a time

The playing field is crowded so candidates will:

Class of 2013

Professional Farm

Mutual Managers

Received PFMM award

prior to OAMIC Convention

German Farmers Mutual Insurance Company

Jim Wellman

Woodville Mutual Insurance Company

Andrew Younker

Class of 2013

Farm Mutual

Directors Certification

Eastern Ohio Mutual Fire & Tornado Insurance Company

Marlene Bond

Grinnell Mutual Reinsurance Company

Randall Dammeyer

Norton Mutual Fire Association

Jim Carpenter

Norton Mutual Fire Association

Edward Gresser

Patrons Buckeye Mutual Insurance Company

Patrick Craig

Perry County Mutual Fire Insurance Company

Daniel McConnell

Perry County Mutual Fire Insurance Company

Mike Oliver

Pike Mutual Insurance Company

Lou Distefano

Woodville Mutual Insurance Company

John Bergman

Woodville Mutual Insurance Company

Jeffrey Goetz

Woodville Mutual Insurance Company

Galen Koepke

Woodville Mutual Insurance Company

Lewis Renollet

Received FMDC award

prior to OAMIC Convention

Sandy & Beaver Valley Farmers Mutual Insurance Company

Ned Ellis

Jerry Connor

Jim Sanor

Ohio's CCP dates:

April 28-29, 2014 in D.C

Don’t Forget!

Thank You

Chuck Chamness

NAMIC President & CEO

cchamness@namic.org