House Passes Surplus Lines Reform Legislation

September 9, 2009

The House of Representatives passed HR 2571, the Non-Admitted and Reinsurance Reform Act of 2009 on Wednesday.

The bill, authored by Reps. Dennis Moore, D-Kan., and Scott Garrett, R-N.J, will simplify the tax remittance and compliance responsibilities surplus lines brokers must discharge, says the National Association of Surplus Lines Offices (NAPLSO). The legislation also will bring efficiency and cost reduction of regulatory compliance in placements with multi-state exposures, according to NAPSLO.

“This is the third time the House has passed this legislation. We are hoping the third time is the charm and the bill will be signed into law,” said NAPSLO Executive Director Richard Bouhan.

More than 25 percent of commercial insurance in the United States is placed in the surplus lines market, also known as the nonadmitted insurance marketplace. Replacing the existing complicated quilt of state regulations with a uniform approach under which the rules of the insureds’ home state apply in the case of multistate placements is a tremendous advantage in providing Americans quality insurance products, according to The Council of Insurance Agents & Brokers.

“Adopting this reform legislation is a practical solution to longtime marketplace problems,” said Council President Ken A. Crerar. “The result will be lower costs to insurance consumers and greater access to affordable products.”

The bill now moves to the Senate (S 1363), where it was introduced on June 25 by Sens. Evan Bayh, D-Ind., Mel Martinez, R-Fla., Mike Crapo, R-Idaho, and Bill Nelson, D-Fla.

“We are hopeful the Senate will take up the legislation either as the individual bill (S 1363) or as part of an overall insurance regulatory reform bill,” says Mike Ardis, communications director for NAPLSO. Ardis says it’s more likely that the legislation would be incorporated into a larger Senate bill however.

The House passed similar versions of the NRRA in the last two sessions of Congress. The Senate considered a similar bill in 2008 but it took no action prior to the end of the 110th Congress, requiring that the bill be reintroduced in the 111th Congress.

“We are encouraged by our discussions and look forward to the Senate passing the bill soon,” said Maria Berthoud, partner, B&D Consulting, a Washington, D.C. firm working with NAPLSO. “A number of proposals are being considered by the Senate and we believe the NRRA will be included as part of these reforms. Senator leaders know how important this bill is and recognize that it has broad industry support and the unanimous endorsement of the House.”

This bill, if enacted, will create greater legal and regulatory certainty for surplus lines consumers, which will benefit insurers, businesses and the economy, added David A. Sampson, Property Casualty Insurers Association of America president and CEO. “It will also improve reinsurance regulation, which will ultimately benefit the entire marketplace.”

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