As far as the proposed regulations pertain to the operation of insurance companies, the summaries I’ve seen conclude that RAFSA (in its current form) should be relatively benign for the insurance industry.
But the Act’s governance provisions, with the related demands on investor communications, may create risks for insurance companies.
For example, the Act is likely to pass with a majority voting standard for directors. In an environment where it is getting tougher to find qualified board members, this may be of particular concern for smaller property casualty insurers.
According to SNL data, insiders own less than 20% of the outstanding shares at 31 of the 52 insurance companies with a market cap below $1.0 billion. The remaining shares split between institutions — which are increasingly likely to take an activist role if they are unhappy with company performance — and individuals — for whom voting patterns have steadily weakened in recent years.
I believe companies can minimize the potential risk by engaging all shareholders through a comprehensive and integrated communications program. As a first step, make sure your communications are reaching all of your investor constituencies, using channels and formats that meet their specifics needs, rather than assuming that a one-size-fits-all approach will keep your company in front of every shareholder.
This is just one challenge of the Act (others also are interesting). Summer is a great time to get a head start of these types of investor communications challenges, because the calendar is just a bit lighter. Waiting until next spring may be a risk.