The chief executive of the Property Casualty Insurers Association of America, Des Plaines, Ill., said he believes if the Democratic party expands its majorities in Congress next year and perhaps even win the White House, the insurance business will face the threat of an expanded federal presence that will unite the industry.

PCI President and CEO David Sampson, in an exclusive interview today at the National Underwriter headquarters office in Hoboken, N.J., said he believes the effect of complete Democratic control in Washington would be a “much more intrusive” presence from “the whole weight of the federal bureaucracy.”

Such an “existential threat,” he said, would spur industry associations to work more closely together despite their differences on certain policy issues, such as the need for an optional federal charter.

PCI, he said, is focused on insurance regulatory reform and improvement, either through state or federal action, and is currently concerned about existing Congressional and executive branch efforts PCI believes would mean redundant scrutiny and regulation of the industry.

He mentioned a provision creating an investigatory post in the Senate bill extending the National Flood Insurance Program, and language in the Treasury’s proposal for an optional federal charter.

Mr. Sampson–who took over at PCI 10 months ago after leaving a Bush Administration post as deputy secretary of the U.S. Commerce Department–said Treasury may not have realized the implications of their OFC draft, which PCI attorneys believe could, as written, subject insurers to dual federal-state regulation, and thus negate the “optional” part of an OFC.

Under the Treasury blueprint, even for those with a state charter, federal authorities would appear to reserve a right to regulate part of the insurer’s operation, he said.

While noting that the OFC language used in the blueprint raised “a real red flag,” he said the Treasury proposal “is not well fleshed out at this point,” suggesting the possibility of dual regulation might be unintentional. Insurers will seek clarification as the proposal progresses, he said, calling the possibility of dual control the “worst of all worlds.”

Meanwhile, in the Senate flood bill, there is provision for an “ombudsman” within the Federal Emergency Management Agency, whose job it will be to monitor insurers that administer flood policies, making sure they do not classify any wind damage claims as flooding so that the NFIP would have to pay. The House bill does not include such a provision.

Mr. Sampson said flood claims are already subject to five levels of arbitration, mediation and review, and that addition of “this special investigator” would be a case of “classic redundancy,” creating a position where insurers would be asked for material because an official was looking for something to do.

He said PCI was happy that insurance industry lobbying had managed to kill a provision providing the new post with subpoena power, and was also glad that efforts to expand NFIP to cover windstorms was defeated.

PCI, in a meeting with executive branch officials and Treasury, learned from Barry Jackson, the presidential assistant for strategic initiatives, that the Treasury blueprint for financial services is merely a concept suggested by Treasury Secretary Henry Paulson for debate, and not an official administration position at the moment.

In addition, even under the blueprint, an OFC for insurers is not an immediate recommendation, but designed to be put in place down the line, Mr. Sampson related.

The first step under the blueprint, he noted, would be establishment of a federal information office to coordinate federal policy on insurance–particularly on trade issues, such as collateral requirements for foreign reinsurers.

He said PCI has not taken a stance on Treasury’s OFC proposal, but wants to shape debate on “what is good regulation–not necessarily where it is located.”

Mr. Sampson voiced his impression that the National Association of Insurance Commissioners, Kansas City, Mo., has not demonstrated great ability to move regulatory reform forward and get states to implement the model laws it drafts.

Since taking his post, Mr. Sampson said he has met one-on-one with about 10 state insurance commissioners, and has pushed for more urgency on reform.

The PCI executive said the property-casualty industry’s trade organizations, while they do not always speak with one voice, have been able to come together and work well on issues such as the Terrorism Risk Insurance Act and the flood bill.

In the future, he said they would be motivated to work together to fend off attempts to ban insurer use of credits scores in underwriting, and efforts to have the federal government act as a reinsurer for state catastrophe funds. (For more on this point, see Editor In Chief Sam Friedman’s blog at .)

With Congress keeping its session short in this election year, Mr. Sampson said he sees little appetite by lawmakers in the near term to take on p-c issues other than reauthorization of the flood insurance program.

If there is a move toward an OFC, he said he would guess it might be limited to life insurers, but said it is not clear how the federal government would replicate the insurance expertise that now resides with the states. He also wondered if there was a desire to have the federal government get involved with the handling of policyholder disputes.

Daniel Hays is a senior editor with National Underwriter’s Property & Casualty edition.