Signs increasingly point to a strong Democratic year at the polls, tea leaves that are creating great angst in a very conservative insurance industry that has grown comfortable with Republicans being in a dominating position since 1995.

Sen. Barack Obama, D-Ill., according to the polls, is growing stronger by the day after a surge by Sen. John McCain, R-Ariz., in early September that has fallen far beyond the flat line.

The Obama surge, clearly aided by an economy facing challenges comparable to those of the 1930s, has created great coattails for Democrats in both the House and Senate, the polls say. In fact, the House Republican leadership 10 days ago privately told their caucus they would be satisfied with a loss of 20 seats or so.

And, Democrats challenging for Senate seats are growing stronger in such states as Oregon, North Carolina, Kentucky, Minnesota, and even Georgia, to name several states, according to the polls.

Given this trend, I would suggest to the industry that there is no need to invest in elaborate bomb shelters in order to ride out the storm, nor sell their homes and businesses in anticipation of the need to flee to Tahiti or even more exotic locations.

For one thing, the Republicans haven’t been that good for the insurance industry. Just take a look at your portfolios. Second, the tax cuts pushed through the Congress in 2001 and 2003 made the products sold by the insurance industry far less attractive to consumers, either in the middle class or in the upper strata. Massive changes in estate tax laws have sowed several years of uncertainty, which is unlikely to be lifted until next year–at the earliest.

Indeed, the wave of consolidation in the life insurance industry was prompted by the need to cut costs and focus operations. And, the industry over the last several years was forced to re-tailor many offerings, especially in the annuities area, to make them more attractive–and less profitable.

And, it wasn’t the Democrats, either in 2002 nor in 2007, who insisted that group life insurance would not be covered under the Terrorism Risk Insurance Act. Indeed, life insurance company CEOs called Sen. Chris Dodd, D-Conn., repeatedly as he negotiated with the White House on the TRIA legislation in November 2002, until he called a halt to any more phone calls at 3 in the morning. Dodd was only able to gain the authority for the Treasury Department to include group life in TRIA, authority which it declined to accept.

And the insistence by Treasury that dividends on annuities sold by the life insurance industry not be accorded the same treatment as securities, even those in mutual funds, was handled in the most heavy-handed and undiplomatic manner.

Strong Democratic control of the Congress will likely include a new chairman of the Senate Banking Committee, Sen. Tim Johnson, D-S.D., a strong supporter of an optional federal charter around which the entire life industry has coalesced.

And, in the House, the current chairman of the Ways and Means Committee, Rep. Charlie Rangel, D-N.Y., was extremely effective in 2007 in fending off a Senate Finance Committee initiative to reduce the attractiveness of non-qualified deferred compensation plans, a key high-end insurance industry arrangement.

In general, it is unlikely that Democrats in control of Congress and the White House will get off on any liberal tangents that would place their hegemony in danger.

After being out of power since 1994, Democrats are still cognizant of what they had to go through to regain control of Congress in 2007, control gained by the hair of their chinny-chinny chins.

At the same time, Rep. Barney Frank, D-Mass., head of the House Financial Services Committee, has broad experience in creating consensus in both the House and Senate, and paying heed to the needs of industry.

Although intensely lambasted by right-wing commentators, both personally and professionally, Frank did an admirable job in steering controversial legislation through Congress in August that facilitated the rescue of Fannie Mae and Freddie Mac by the executive branch.

And, in drafting and negotiating the Troubled Asset Relief Program through a skeptical Congress, Frank and his staff were the primary liaison between the Senate, adamantly opposed House right-wing Republicans, and the Bush administration.

In the next Congress, the insurance industry is going to have to tiptoe through very fragile tulips. Specifically, these include $3 trillion in expiring tax breaks and a reordered regulatory landscape that will be on the front burner because of the need to bail out American International Group, as well as perhaps other troubled insurers.

So, in Frank, Rangel and Johnson, the insurance industry is likely to find cool experienced hands able to reach across the aisle with credibility and track records of legislative success. That is probably the most obvious result we are likely to see.

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“Given this trend [with polls showing widespread Democratic victories], I would suggest to the industry that there is no need to invest in elaborate bomb shelters in order to ride out the storm, nor sell their homes and businesses in anticipation of the need to flee to Tahiti or even more exotic locations.”