The results of the election will generate substantive change in who makes the decisions affecting the insurance industry in Washington. Here is a look at the key people certain to be impacted by the change.

Timothy Geithner, Treasury secretary. Geithner has made it clear he will not serve a second term as Treasury secretary. Initial speculation was that he will be replaced by Jacob Lew, currently President Obama’s chief of staff. Geithner is a key player in Washington on insurance issues. He was chairman of the New York Fed when it was forced to provide federal assistance to American International Group (AIG) in September 2008, and took the heat as the government was first required to provide more aid than the initial $85 billion to AIG, and then for not stopping AIG executives from getting huge compensation despite their flawed decisions. He helped draft the initial versions of the Dodd-Frank financial services reform law, helped steer it through Congress, and now heads, amongst other jobs, the Financial Stability Oversight Council, which could designate such non-banks as AIG as systemically significant and therefore subject them to federal regulation as earlier as December. Other likely candidates are MetLife and Prudential Insurance.

He also took the heat, hearing such talk as “You should resign!” and “I have no confidence in you” from Republican members of House committees seeking to distance themselves from taking campaign contributions from AIG in its prime. The government still owns 16 percent of AIG, and could decide to sell its remaining stake by the end of the year, at the moment, at a profit. Potential replacements cited by SNR Denton are Erskine Bowles, Gene Sperling, and Lael Brainard, currently Under Secretary of the Treasury for International Affairs. Earlier this year, she was forced to field tough questions on insurance regulatory issues from hostile House Financial Services Committee members.

Image: U.S. Treasury Secretary Timothy Geithneron Monday July 30, 2012. (AP Photo/dapd/ Philipp Guelland)

Michael McRaith, director of the Federal Office of Insurance. The former Illinois insurance commissioner is likely to stay. He was the key drafter of a report on how insurance regulation should be modernized going forward mandated under the Dodd-Frank financial services reform law. The report has likely been in the can for six months and its release is probably imminent. He has strong bipartisan support in Congress, as well as support from the industry and state regulators. He has made a strong point of involving state regulators in his job. One of his most important tasks going forward will be on international capital standards and in negotiating international trade agreements that strengthen the role of U.S. insurers in international markets.

Image: Michael McRaith, left, and New York Superintendent of Insurance Howard Mills, right, listens. Insurance regulators from four states, including representatives from others, meet to devise a national catastrophe insurance program in the wake of a devastating hurricane season, increasing terrorism threats and earthquake fears. (AP Photo/Paul Sakuma)

Rep. Jeb Hensarling, R-Texas, will succeed Rep. Spencer Bachus, R-Ala., as chairman of the House Financial Services Committee because of party term-limits. One of the reasons Hensarling will get the job is because he is a prodigious fund-raiser and a prime supporter of insurance interests in Congress. He is a former aide to Sen. Phil Gramm, R-Texas, and helped write the Gramm-Leach-Bliley Act, which the insurance industry sought as a means of keeping banks out of their business. He will work to limit federal regulation of insurance, but will be unable to roll back the current federal initiatives, such as consolidated regulation of insurance companies which own thrifts, as well as designation of non-banks such as insurers as systemically significant. The first of the latter designations is likely to occur as early as next month.

Image: Rep. Jeb Hensarling, R-Texas.(AP Photo/J. Scott Applewhite)

Rep. Maxine Waters, D-Calif. With the decision of Rep. Barney Frank, D-Mass., to retire, she will join Hensarling as part of a new leadership team for the House Financial Services Committee, a critical venue for insurance interests. They are already being described as the “odd couple.” Waters is an avowed liberal firebrand and her interests are likely to be focused in the insurance area on credit scoring and consumer protection standards. 

Image: Rep. Maxine Waters, D-Calif. speaks on Capitol Hill in Washington. (AP Photo/Susan Walsh, File)

Rep. Judy Biggert, R-Ill.  Biggert was defeated for re-election in Illinois, and she will be missed. Joel Wood, senior vice president of congressional affairs of the Council of Insurance Agents and Brokers, called her defeat, “extremely disappointing to the insurance industry.” As chairman of the Subcommittee on Insurance, Housing and Community Opportunity of the House Financial Services Committee, she worked across the aisle and with the Senate to ensure passage of legislation providing for a 5-year extension of the National Flood Insurance Program after a 5-year tortuous legislative path. She was also a strong ally of the industry in opposition to federal regulation, and supported MetLife in its battles with the Federal Reserve Board. Wood called her a “thoughtful, moderate ally of the industry.” It is unclear who will succeed her.

Image: Sen. Richard Durbin, D-Ill., center, flanked Rep. Judy Biggert, R-Ill., right, and Rep. Melissa Bean, D-Ill. discusses the next steps on the proposed Canadian National purchase of the Elgin, Joliet & Eastern Railway, Tuesday, Dec. 9, 2008 on Capitol Hill in Washington. (AP Photo/Lauren Victoria Burke)

Rep. David Camp, R-Mich., Sander Levin, D-Mich., chairman and ranking minority member of the House Ways and Means Committee. The fiscal cliff looms on January 1, and President Obama made clear Friday that any compromise would have to include higher taxes levied on wealthier Americans. That places the life insurance industry in the cross-hairs. The primary issue in the short term is estate tax policy but also likely to be on the table for a long-term solution to be negotiated next year includes inside buildup, Corporate-Owned-Life-Insurance and Bank-Owned-Life-Insurance (COLI), general federal tax rates, non-qualified deferred compensation plans and the dividend-received deductions on variable annuity contracts. The likelihood is that any deal will include a one-year extension of the Bush tax cuts, perhaps a compromise that would have estate tax policies revert back to 2009 levels, and an increase in the federal borrowing limit. Camp is a moderate, as is Levin, and the two work together well. They also are knowledgeable about life insurance issues, and, since tax policy must be initiated in the House, industry focus will be on persuading them on the importance of life insurance. As stated by officials of the American Council of Life Insurance, “As with every new Congress, there is a renewed need for us to inform and educate members about the vital role our industry plays in securing the financial and retirement security of 75 million American families. For example, we will make the point about the role we can play in the lives of future retirees.”

Image:House House Ways and Means Committee Chairman Rep. David Camp, R-Mich., left, and the committee’s Ranking member, Rep. Sander Levin, D-Mich., arrive on Capitol Hill in Washington, Wednesday, Oct. 5, 2011, for the committee’s hearing on the three trade bills. (AP Photo/Harry Hamburg)

Sen. John Tester, D-Mont. Tester won re-election, with strong insurance industry support, in a very red state. He was a key supporter of critical insurance industry issues, such as the legislation extending the National Flood Insurance Program. He has also taken the lead on insurance regulatory issues, such as uniform agent/broker licensure standards, a priority of the National Association of Insurance and Financial Advisors. He could be a key ally on the Senate Banking Committee for passage of an extension of the Terrorism Risk Insurance Act, the No. 1 legislative priority of the insurance industry.

Image: In this Oct. 23, 2012, photo, Sen. Jon Tester, D-Mt., rallies supporters in Helena, Mont. Rep. Denny Rehberg, R-Mt., has been turning to out-of-state surrogates to help him rally his base in the election’s closing days.  (AP Photo/Matt Gouras)

Daniel Tarullo, a member of the Board of Governors of the Federal Reserve System, who specializes in solvency issues of financial institutions. Tarullo has sat in on Financial Stability Oversight Council meetings where such issues as designation of non-banks such as insurers as systemically significant are discussed, and is a key player on international capital issues. Insurers designated as systemically significant or deemed subject to consolidated federal regulation because they operate thrift holding companies would come under his sway. With President Obama’s re-election, these initiatives will be sustained. They may be delayed, as recognized by the decision of the federal banking regulators Friday to postpone implementation of the Basel capital standards indefinitely, but they will be sustained. Tarullo is also a key link between the Fed banks who will actually oversee insurers which operate thrifts and the Fed Board on this issue.

Image: Reserve System member Daniel Tarullo testifies on Capitol Hill, in Washington Wednesday, June 6, 2012, before the Senate Banking Committee hearing on “Implementing Wall Street Reform: Enhancing bank supervision and reducing systemic risk”. (AP Photo/Manuel Balce Ceneta)

Sen. Elizabeth Warren, D-Mass. Warren’s election ensures that a strong consumer advocate will have a prominent place at the Washington table. She was the prime architect of the decision to pull the consumer affairs and compliance group out of the Federal Reserve and create an agency with independent funding, the Consumer Financial Protection Bureau (CFPB) as part of the Dodd-Frank Act. She left Washington when it became clear Republicans would never confirm her as director of the agency, and attracted nationwide funding for her senatorial campaign. While the insurance industry won a carve-out that protected most products from scrutiny by the new agency, both the property and casualty and life industries acknowledge they are on an island, and, as one industry official says, “shudders at potential mission creep.” For example, states have explicit authority to regulate the use of financial advisor certifications and designations in the sale of investment products, but that has not stopped the CFPB from asking whether it should act to regulate their use and impose “best practices” in the sale of investment products to seniors. And, the agency received more than 700 comment letters, many from institutions that provide aid to seniors, supporting their use.

Currently, the financial services industry is waging a behind-the-scenes battle to keep her off the Senate Banking Committee, according to a variety of sources. They fear she could use that venue as a bully pulpit aimed at pressuring states to be more vigilant in enforcing consumer protection laws—or generate support for laws that would give federal agencies a greater role in policing the sale of insurance products. One idea is to pressure the Democratic Senate leadership to give her a plum post on the Senate Finance Committee, a committee usually stocked with people with many years of service.

Image: Massachusetts Senator-elect Elizabeth Warren (D-Mass.) gives two thumbs up as she arrives to greet commuters and thank Massachusetts residents, Wednesday, Nov. 7, 2012, in Boston. Warren defeated incumbent Republican Sen. Scott Brown. (AP Photo/Bizuayehu Tesfaye)

Mary Schapiro, chairman of the Securities and Exchange Commission. It has been rumored for months that Schapiro would likely step down after the election even though her term doesn’t expire until 2014. The financial crisis imposed great pressure on Schapiro to tighten scrutiny of the industry and the Dodd-Frank Act provided many tools for her to do so. But, Republicans, buttressed by unprecedented amounts of Wall Street money, have put up every legal, administrative and political barrier they can muster to thwart those efforts. The pressure has also come from Democrats, who need Wall Street’s pockets to fund their re-election campaigns. For example, the nation’s top five banks, Goldman Sachs, Morgan Stanley, Banck of America, J.P. Morgan and Credit Suisse, all put all of their campaign donations in the hands of Mitt Romney. From the insurance industry, it comes in the form of pressure not to impose a uniform fiduciary standard on sale of investment products.

Image:In this Dec. 6, 2011 file photo, SEC Chair Mary Schapiro testifies on Capitol Hill in Washington, before the Senate Banking Committee hearing on the implementation of the Wall Street reform act. (AP Photo/Evan Vucci, File)

Labor Secretary Hilda Solis and Phyliss C. Borzi, assistant secretary and director of the Employment Benefits Security Administration. Solis has not announced any plans to resign, but President Obama did tell reporters the day after his re-election to expect “significant cabinet changes.” SNR Denton lawyers suggested that proposed candidates to replace Solis include Seth Harris, deputy secretary in the Clinton administration; Maria Echaveste, a deputy chief of staff in the Clinton administration;Olena Berg Lacy, assistant Department Of Labor secretary for pensions and welfare benefits in the Clinton administration, and Arlene Holt Baker, executive vice president of the AFL-CIO. Solis and Borzi may have thought it appropriate to extend the fiduciary standard to IRAs and 401(k) accounts, but it created a political nightmare for Democrats facing re-election against Republicans flushed with cash from deep-pocketed Wall Street-types. The opposition forced Solis and Borzi to rethink the proposal last September and come out with a new one by March. The new proposal never resurfaced, and opposition became magnified as election-time grew nearer. In March, 55 House Republicans joined 30 House Democrats in requesting that the Department Of Labor and Employee Benefits Security Administration significantly narrow the definition of “fiduciary.” The pressure became so bad that a highly-respected regulatory lawyer observed unprompted at a legal conference that, “Even [Rep.] Barney Frank, D-Mass.] threw Solis and Borzi under the bus on that one.”

Their argument is that federal retirement laws, first enacted in 1977, must be updated to protect workers and retirees who are now responsible for their own nest eggs through defined-contribution plans such as 401(k)s and IRAs. Republicans on the House Financial Services Committee in February sent another letter saying any revised rule should “carefully and effectively” target well-defined and documented problems in the retirement planning advice business, and that it “clearly recognizes” that IRA accounts are significantly different from employer-sponsored plans because “the IRA investors have nearly a limitless choice among service providers and investment products.” And, on election night, the Financial Services Institute issued a letter reiterating its opposition to the proposal, alleging that it would “eliminate financial advisors’” ability to be compensated through commissions on retirement advice they provide to IRA holders and participants in ERISA Covered Plans.

Image:Secretary of Labor Hilda Solis speaks before a Nevada Democratic caucus Saturday, Jan. 21, 2012, in North Las Vegas, Nev. (AP Photo/Isaac Brekken)

 

Kathleen Sebelius. This former Kansas insurance commissioner and governor has suffered untold miseries defending a law Republicans found it necessary to get people to hate even though such groups as the American Enterprise Institute acknowledge it is based on Republican principles.

However, with the defeat of Mitt Romney and his vow to “repeal and replace” the law no longer a threat, everyone, whether on the wrong or right side of the debate is scrambling to implement it. In comments late Thursday, House Speak John Boehner stated clearly that it is the law of the land. Industry officials say they see no pressure from the Obama administration to replace her, but her own plans are unclear.

However, SNR Denton, a law firm, projects that possible candidates to replace Sebelius if she leaves include Nancy-Ann DeParle, currently deputy White House chief of staff for health issues, or Lois Quam, executive director of the Global Health Initiative at the State Department. Another possible candidate cited by SNR Denton is Deval Patrick, Massachusetts governor.

But, staying creates its own pressure. Sebelius will face the fact that only about 15 states and the District of Columbia have established the system for the key exchange transition. Currently, the exchanges are set to go into operation in January 2014. Late Friday, the administration extended the deadline from November 16 to December 14 to file blueprints showing how they would operate the marketplaces. So far, about 13 states are well on their way to setting up their own exchanges. States can also choose to develop their exchange in partnership with the federal government. As many as 30 could go that route. Texas, South Dakota, South Carolina, Alaska and Florida have stated that they will not participate. But now, Louisiana and Maine, which earlier seemed to opposition, said they were reconsidering. Amongst the states with Republican governors still unsure what to do are Arizona, Idaho, New Jersey, Virginia and Tennessee.

Image:  In this May 15, 2012 file photo, Health and Human Services Secretary Kathleen Sebeliusspeaks in Bethesda, Md. Sebelius is paying homage to religious freedom and the separation of church and state in a graduation speech at Georgetown University, after Catholic church authorities lambasted the school’s invitation for her to speak. (AP Photo/Jose Luis Magana, File)