Threat of crackdown on U.S. insurers fades as political ‘Blue Wave’ sputters

In this news, we discuss the Threat of crackdown on U.S. insurers fades as political ‘Blue Wave’ sputters.

NEW YORK (Reuters) – Insurers appear to have dodged a renaissance of strict regulations and political upheaval after an anticipated democratic ‘blue wave’ that would have allowed progressives to push for sweeping reforms failed to materialize on Wednesday, industry leaders said.

The outcome of the U.S. presidential election was on the verge of a knife on Wednesday, with Republican President Donald Trump and Democratic challenger Joe Biden closely linked as officials in several states finished their vote counts. [nL1N2HQ0VQ] Congress appeared poised to remain divided, with Democrats keeping the House of Representatives and Republicans on track to retain control of the Senate.

Multimedia coverage of the US elections: here

This bodes well for the insurance industry, which feared that a Democratic sweep would allow progressives to revert to regulations introduced after the 2008-09 financial crisis and push for a disruptive healthcare overhaul.

Health insurance stocks surged on Wednesday, as fears of a dramatic change faded. The S&P 500 .SPLRCHMO managed care index rose 9.8% as investors and insurance trade groups applauded an expected Republican take on the Senate. [nL1N2HQ2LA]

“The Senate has traditionally been a drag in our country on populist impulses, and populist impulses can really create a lot of volatility,” said Nat Wienecke, an executive with the American Property Casualty Insurance Association.

Among the industry’s main policy concerns was a major overhaul of the Affordable Care Act, but with the split in Congress, “it’s going to be very difficult to do substantial health care reform,” said James Sung, Associate Director of Insurance Ratings at S&P Global. Ratings.

“We see this as a lower risk to the industry,” he said.

Yet insurers run a potential risk of social unrest if a contested election brings protesters to the streets.

“If you see another wave of civil unrest like we saw in the third quarter and second quarter, we’re probably talking about something that ends with billions of dollars in direct insured losses,” said Paul Newsome, analyst in insurance at Piper Sandler in Chicago.

Politically, the industry had also feared that a Biden administration would take back for life insurers the label of “systemically important” created in the aftermath of the crisis for large financial companies whose failure threatens the economy. .

It triggers strict federal oversight and was scrapped early on by Trump’s regulators, who argued it was not necessary after major U.S. insurers reduced their assets.

“It just stopped under the Trump administration, but it could be reversed at any time,” said Howard Mills, a former New York Department of Insurance superintendent and industry consultant, but it is unlikely. ‘A Republican Senate confirms progressives to agencies that assign the label.

Prudential Financial Inc. PRU.N abandoned the label in 2018, the last insurer to do so. American International Group Inc AIG.N, which nearly failed during the financial crisis, dropped the label in 2017 after selling companies, while MetLife Inc MET.N dropped the designation in 2016 after winning a lawsuit.

Many life insurers were also concerned that a Biden administration would revive the “fiduciary rule” passed by the Obama administration’s Department of Labor in 2016 to reduce conflicts of interest between financial advice providers. The rule was overturned in 2018 by a federal appeals court, in a major victory for financial groups under Trump.

Life insurers fought the rule, in part because of the controls it imposed on agents and additional scrutiny of certain annuity products. Some progressives have argued that it should be revived.

But on Tuesday, William Wheeler, chairman of Bermuda-based annuity provider Athene Holding Ltd. ATH.N, said on a earnings call he didn’t see it as a risk if Biden wins. He noted that the moderate top Democrats in Congress, whose analysts expect to have more influence within the party under a divided Congress, do not appear to support such a move.

Insurers also hope to play a role in any infrastructure spending plan. After the crisis, life insurers bought a third of the Build America bonds issued to raise capital for infrastructure, according to the United States Council of Life Insurers. The industry has “significant capital to deploy” for other infrastructure initiatives, Mills said, adding that a bill is likely to move forward regardless of the president.

Reporting by Alwyn Scott and Suzanne Barlyn in New York; Edited by Michelle Price and Matthew Lewis

Original © Thomson Reuters

Originally posted 2020-11-04 15:16:12.

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