In the next few days, voters will go to the polls to decide the political leadership over the next two years. Broadly speaking, as the political sphere becomes more polarized, these elections become more consequential for the insurance sector than they may have been in the recent past.

National elections
Regardless of any other dynamic, Republicans face an uphill battle in this election at the national level. For the House, in each of the past five midterm elections, the party of the President has lost between 9 and 63 seats with an average of around 30 seats lost, which compares to a current four-seat lead for Republicans. In the Senate, Republicans are defending 22 seats versus only 13 for the Democrats. Five of the Republican seats do not have an established incumbent running, all in “toss-up” or lean-Republican states, versus only three Democrat seats in relatively safe elections for their party.

We would expect the agenda for a Democratically run Congress to focus on some key areas:

Investigations into the Trump administration. These would look into agency leadership, awarding of contracts, and potential conflicts of interest and impact on almost every agency. Impeachment of Cabinet officials could be on the table.

AI/data center regulation. This matters for insurers because AI-related companies now make up a substantial percentage of the investment universe on both the bond and equity side as well as the operational aspect of their own AI tools and practices. The next Congress might focus on:

• Congressional investigations into the AI sector with subpoena power into model safety, algorithmic pricing, and environmental impact.
• Workforce protections—plans to aid displaced workers and related taxes on AI products or infrastructure are likely to see proposed legislation.
• Safety—banning deepfakes or nonconsensual sexual content in line with laws passed in Illinois could be popular.
• Restrictions on data centers, including national moratoria or limits on tax benefits, may see enhanced proposals.

Health care

• Revival and permanence of the pandemic-era enhanced ACA (Affordable Care Act) credits and reversal of Medicaid work requirements that were affected by the OBBBA (One Big Beautiful Bill Act) could see votes.
• Congressional investigations and hearings into hospital and health insurer practices—PBMs, in particular, could see reinvigorated bipartisan attacks.

Overarching all of this is Social Security, which is scheduled to deplete reserves in 2032, leading to an automatic cut to benefits of up to 26% without action. Current proposals have some combination of raising the payroll tax limit, means-testing benefits, or having a nonpartisan commission submit solvency proposals for an expedited vote. The probability of action on this issue is substantially higher than For the exclusive use of  in the past, given that those elected to the Senate in 2026 will have to face this issue on re-election.

Taking no action and attempting to avoid political responsibility is a high-risk strategy that could harm all incumbents. Leadership may try to get something completed during the lame duck session, but the calendar always makes this a tough proposition, especially for a high-interest topic.

One area where we do not expect much change is the core federal regulatory framework, absent a significant failure of an insurer that affects policyholders.

The presidential election in 2028 will complicate the policy discussion over the next few years. The field of candidates is wide open, and many will likely be seeking national attention as part of a potential candidacy. Normally, with divided leadership, the leadership of the party in control of Congress will seek to set up difficult votes for the other party and try to avoid any proposals or actions that give political fodder for the other side, but as candidates for 2028 might seek attention or to “outflank” each other in certain policy areas, proposals and even legislation could get more extreme.

One key item to watch—Congressional leadership votes after the election. If the progressive wing were to make significant progress on core leadership positions or full committee chair positions, this would be a significant indicator for the direction of policy discussion until the next election.

In terms of investments, risk assets historically have performed well during periods of divided government, but this often occurs when the markets are soft leading up into the election, as is often the case. There appears to be little political will to address ongoing deficits, which will have a direct impact on government bond yields. A divided government and posturing for 2028 may limit any true belt-tightening measures. AI/data center proposals, such as national data center moratoria, could cause additional investment volatility even with a certain Trump veto as investor concerns over the post-2028 forecasts could increase. Fights over ACA subsidies, greater discussion of Medicare-for-All, and more pointed investigations and hearings could cause volatility in the health care space as well.

Longer term, in four out of the past five presential elections, the party that picked up House seats went on to win the next presidential election, although any political forecast greater than a few months out is highly uncertain.