Elections Matter: Transfer of Power Impacts Insurance Policy
While much of Tuesday, Nov. 5, was spent wondering who would win the White House, there were several other elections with outcomes that are poised to impact the insurance world. Among such elections were contests for congressional seats and state insurance commissioners. Eleven states elect their commissioners; the rest are governor-appointed.
In Washington State, Patty Kuderer (D) defeated Phil Fortunato (R), who pinned the blame for complex and costly insurance regulations on Democratic insurance regulatory policy in the state. In the run-up to the election, Kuderer promised to “hold insurance companies accountable for their actions.” Incumbent North Carolina Insurance Commissioner Mike Causey (R) won another term, defeating Natasha Marcus (D). In Delaware, incumbent Trinidad Navarro (D) defeated Ralph Taylor (R). Jon Godfread (R) ran unopposed in North Dakota. Godfread is also taking the mantle as president of the National Association of Insurance Commissioners, with Connecticut’s Andrew Mais’ term expiring. The reason we watch these races is because elected commissioners tend to be more populist, whereas governor-appointed commissioners are more often technocrats rather than politicians.
With the Senate’s new Republican majority and the failed re-election bid of Ohio Sen. Sherrod Brown (D), its powerful Banking, Housing and Urban Affairs Committee will be reshaped. Other changes to the committee include Jon Tester (D-Mont.) losing his bid for re-election, J.D. Vance (R-Ohio) becoming vice president, and Bob Menendez (D-N.J.) vacating his Senate seat.
One positive for insurers in a new Republican administration could have a lighter regulatory touch. For instance, requests for climate-related data made by Budget committee Chairman Sheldon Whitehouse (D-R.I.) and Brown have been burdensome and of questionable value. We may see fewer such data calls from congressional committees and from the Federal Insurance Office, a tiny entity within the Treasury Department.
The few corners of the insurance market with federal involvement could see change with the new administration. For example, flood insurance and crop insurance are sold by the National Flood Insurance Program (NFIP) and the Federal Crop Insurance Program, respectively. Although both entities generate enormous financial losses, material change to either of the programs is unlikely—notwithstanding Project 2025 (disavowed by team Trump), which advocated for dissolution of the NFIP.
Life insurers may also experience less burdensome regulation at the federal level. Implementation of the Department of Labor (DOL) rule on fiduciary standards has been suspended and will likely remain so under a new DOL head. Unclear, however, is who is in the running for DOL leadership.
A lighter regulatory touch will likely weaken concerns about offloading life-insurance company liabilities to Bermuda-based life reinsurers who are backed by private equity. There will be less scrutiny in a more “regulation-light” environment (par for a Republican course). To be sure, Brown has also looked into the involvement of life and annuity insurers and offshore life reinsurance counterparties.
Inflation will impact property and casualty insurers as well as life insurers. Elevated tariffs expected from the upcoming Trump administration will likely be highly inflationary, cheapening the value of insurers’ bulk reserves (aka incurred but not reported). Due to the inverse relationship between interest rates and fixed income value, further interest rate decreases would be paired with higher bond portfolio values.
As we consider how a second Trump administration will impact the insurance industry, it is useful to remember how the industry fared during the first. There was little done to impact insurance in those four years (2017- 2020). It is also important to distinguish rhetoric from reality. Referring to himself in the third person, Trump infamously tweeted in September, “Your Automobile Insurance is up 73% — VOTE FOR TRUMP, I’LL CUT THAT NUMBER IN HALF!” Insurance industry denizens recognize such promises as bluster; we know that state insurance regulators approve or fail to approve rate changes, not executive fiat. But words matter—which means the industry must continue to educate the public, Congress, and the White House on how and why insurance works.