The U.S. House of Representatives passed legislation that would apply single-state regulation and uniform standards to the nonadmitted insurance and reinsurance marketplace.
H.R. 5637, The Non-Admitted and Reinsurance Reform Act of 2006, was approved Wednesday evening by a vote of 417-0.
“This is an important milestone toward ultimately improving the operation and regulation of the surplus lines market,” said National Association of Professional Surplus Lines Offices President William Newton.
“This bill’s common-sense, pragmatic approach is just what we need to get the ball rolling on real reform of insurance regulation,” said Independent Insurance Agents and Brokers of America CEO Robert A. Rusbuldt. “We believe it not only eliminates duplication in surplus lines regulation, but that it can also serve as a shining example of how responsible insurance reform can occur — by using targeted federal legislation to address areas of concern while retaining the strengths of the current regulatory system.”
For the surplus lines industry, H.R. 5637 establishes national standards for how states regulate the surplus lines market and reinsurance and creates a uniform system of surplus lines premium tax allocation and remittance, one-state compliance on multi-state surplus lines risks, and direct access to the surplus lines market for sophisticated commercial purchasers.
“We are pleased to see that many of the critical items that NAPSLO first raised in meetings with House members and staff were part of the final bill approved by the House,” Newton said.
For reinsurance, H.R. 5637 would give the ceding insurer’s state of domicile sole authority to govern reinsurance contracts and determine whether or not a particular reinsurance contract qualifies for credit for reinsurance. It would also prohibit states from applying their laws in an extra-territorial manner and provide uniform regulation of reinsurer solvency based upon National Association of Insurance Commissioner accreditation standards.
The legislation was introduced by Reps. Ginny Brown-Waite (R-Fla.) and Dennis Moore (D-Kan.) on June 19. On July 26, the bill was convened for a full committee markup at which H.R. 5637 was approved.
H.R. 5637 is a slimmed-down version of the proposed State Modernization and Regulatory Transparency Act (SMART), which deals with regulation of all lines of insurance and faced a lengthy legislative process. Waite and Moore pulled out pieces of the SMART legislation that target non-admitted insurance and reinsurance, in an effort to speed the legislation’s path through Congress.
“Insurance consumers are indebted to Reps. Ginny Brown-Waite (Fla.) and Dennis Moore (Kan.) who introduced the bill in June,” said NAPSLO Executive Director Richard Bouhan. “If enacted into law, this legislation will help ease the insurance crisis in states still suffering from the impact of natural disasters.”
“HR 5637 is an important first step in the effort to reform a state-based regulatory system that is becoming increasingly burdensome for insurers across the country,” said Ben McKay, Property Casualty Insurers Association of America senior vice president, Government Affairs. “We encourage the Senate to address this important bill as soon as possible.”
The bill has not been introduced in the Senate but NAPSLO expressed optimism that a Senate sponsor of the bill will be found soon and that the Senate will also consider the bill.
“We are hopeful that a sponsor will be found and that the Senate will consider the bill this year,” said Maria Berthoud of B&D Consulting, who serves as NAPSLO’s Washington, D.C. representative. “We believe the bill includes a number of items that will improve the way the insurance industry operates and will also benefit consumers.”
“This is a great bill for the industry, for agents and brokers, and for consumers, and we hope to see it move forward from here as soon as possible,” said Charles E. Symington Jr., IIABA senior vice president for government affairs and federal relations.
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