Congress can enact legislation this year reforming regulation ofthe surplus lines and reinsurance industries, but support islacking for creation of a federal backstop for state catastrophefunds, a senior member of the Senate Banking Committee told ameeting of brokers and reinsurers here.

Sen. Mel Martinez, R-Fla., said he is "encouraged" that theSenate will take up S. 929, the Nonadmitted and Reinsurance ReformAct of 2007. The House version of the bill, H.R. 1065, passedoverwhelmingly on June 25.

Sen. Martinez laid out prospects for the industry'scongressional agenda during a speech at the 2008 InsuranceLegislative Summit, sponsored by the Council of Insurance Agentsand Brokers in association with the Reinsurance Association ofAmerica.

He said a hearing--which he called a critical first step--islikely to be held on the surplus lines and reinsurance reform billin mid-spring, with committee and floor action likelythereafter.

He noted that there is no "entrenched opposition" to the bill inthe Senate, and that the key to passage this year is moving actionon the legislation to the top of the committee's agenda.

However, he said key holdups to passage are congressional"apathy and lack of understanding" of the nature of thebill--something, he suggested, that education of Senate members byindustry officials could overcome.

Sen. Martinez also noted he is working with Sen. Jack Reed,D-R.I., to update the Senate bill to match the House version.

That's because the Senate bill, S. 929, does not includelanguage added to the House legislation as it made its way throughthat body last year, revising the criteria needed to qualify to bea risk manager. The bill offers greater access to the surplus linesmarket for large commercial buyers by overriding statediligent-search requirements.

Sen. Reed, who is also a member of the Banking Committee, isexpected to be the co-sponsor with Sen. Martinez of updated surpluslines legislation that includes the revised language, which wassought by the Risk and Insurance Management Society.

The Senate surplus lines legislation was introduced last Marchby Sen. Martinez and Sen. Bill Nelson, D-Fla., as part of a packageof bills designed to deal with the backlash of big increases in thecost of insurance for Florida homeowners in the wake of a number ofhurricanes hitting the Gulf and Atlantic coasts in 2005 and2006.

None of the bills--with the exception of the legislation thatwould set federal standards for surplus lines and reinsuranceregulation that states would have to follow--have gained tractionin the Senate.

Indeed, Sen. Martinez gave a grim prognosis about the prospectsin the Senate for H.R. 3355, the Homeowners' Defense Act of 2007,which passed the House on Nov. 8. There is no companion bill in theSenate.

That legislation would create a federal backstop for qualifyingstate-sponsored insurance programs that provide natural catastrophecoverage for homeowners.

"There is a strong lack of concern about" a national catastrophefund in the Senate, according to Sen. Martinez, who cited"differences of opinion" about its value voiced by senators fromnon-coastal states.

The lack of a national consensus on the need for a federalcatastrophe fund means "the likelihood of that occurring soon isnot great," he added.

The national catastrophe fund bill passed by the House--authoredby Reps. Ron Klein and Tim Mahoney, both Florida Demorats--was amajor topic of discussion during the recent Florida presidentialprimary.

While the Democrats' top two candidates--Sen. Hillary Clinton ofNew York and Sen. Barack Obama of Illinois--have expressed supportfor the concept of a national catastrophe fund, as did Republicancandidate Rudy Giuliani (before his defeat in Florida prompted hisexit from the race), Sen. John McCain, the presumptive Republicannominee and winner in Florida, adamantly opposes it.

In comments during the Florida primary, Sen. McCain said that afederal catastrophe insurance fund would create a duplicativebureaucracy. He called for a more regional approach and vowed toimprove disaster response by the Federal Emergency ManagementAgency.

Ironically, both Sen. Martinez and Republican Gov. Charlie Cristare vocal supporters of Sen. McCain, despite his opposition to thenational cat fund idea.