"It is rare to get something done in Congress," she said,ranking the passage of NRRA with HIPAA (the Health InsurancePortability and Accountability Act), Gramm-Leach-Bliley, and TRIA(the Terrorism Risk Insurance Act)--the other three historic lawspassed during the 20-year time period.

NAPSLO hired B&D Consulting in 2005, Ms. Berthoud said,going on to detail the following evolution that included four yearsof House action--Congressional hearings, then moving through thejudiciary committee and up to the House floor where it passed threetimes, and then several Senate hearings of NAPSLO's legislativeprincipals until becoming the law of the land. NAPSLO and itsindustry's partners were successful in passing NRRA throughCongress four times--three times as a standalone bill in the House,and ultimately by both houses as part of the federal financialservices reform legislation that has become the Dodd-Frank law.

In contrast to the speed that Ms. Berthoud observed, for veteranparticipants in the effort, like NAPSLO Executive Director RichardBouhan, the process probably seemed like an eternity. Well beforeB&D joined the team working to rationalize a confusing systemof taxation rules for multi-state surplus lines risks, and evenbefore NAPSLO first brought the problem to the attention of federallawmakers in late 2003, Mr. Bouhan painstakingly tried to explainthe nightmare to state regulators, state lawmakers and anyone elsewho would listen. A crusade that spanned two decades is evidencedby words he wrote in an article published in NationalUnderwriter midway along the way.

"It was Benjamin Franklin who said, 'In this world there isnothing certain but death and taxes.' And, if the surplus linesindustry cannot find a way to efficiently pay surplus lines premiumtaxes, that failure may eventually cause the death of the surpluslines business," he warned in the 1999 article. Brokers who tried"to pay every cent of surplus lines premium" faced double-taxationand sometimes fines as a result of those efforts, he wrote,concluding with comments about a project of the NationalAssociation of Insurance Commissioners known as NITCH, or theNonadmitted Insurance Tax Clearinghouse.

While NITCH was the closest that state regulators came to asolution at the time, the project failed, he reported, noting thatit merely produced a proposal to create software to tell brokerswhat they already knew--that it was impossible to comply with theconflicting E&S premium tax laws.

"NITCH offered a technological solution to what is a legal,statutory or political problem," he wrote.

Fast-forward to July 29 2008, and Mr. Bouhan was testifyingbefore the Senate Banking Committee in Washington, using words thatechoed those he wrote a decade earlier. The tax remittance systemis "dysfunctional and chaotic," he said. "The states are just notcapable of coming together to create a universal system of taxallocation and remittance....they can all accept. NAPSLO hasconcluded that the only solution is federal legislation."

It was at the end of that hearing that NAPSLO LegislativeCommittee Co-Chair Tom Mulligan became truly optimistic that NRRA'spassage would ultimately become a reality. Sen. Christopher Dodd,D-Conn., said point blank at the end of that hearing that thecommittee was "going to do something with this" or words to thateffect, seeing no opposition to the measure.

"That was our first clear sign. We knew this was going to beincluded in whatever the Senate did," Mr. Mulligan said.

TAKING IT TO THE FEDS
Despite the frustration behind Mr. Bouhan's words in 1999, it wasnot the failed efforts to get action in the states that led NAPSLOto contact the staff of the House Financial Services Committee inlate 2003, but instead rumblings that Congress was examining a billto overhaul the entire state insurance regulatory process.

NAPSLO wanted to make sure that the surplus lines industry "hada voice in this process," Mr. Mulligan said, recalling activitythat actually predated the start of his six-year stint as NAPSLOLegislative committee co-chair.

In February 2004, NAPSLO President Jim Griffith, thenLegislative Co-Chairs Andrew Frazier and John Wood, and Mr. Bouhanmet with Robert Gordon, senior counsel of the HFSC to discuss the"national standards" legislation that would become known as theState Modernization and Regulatory Transparency, or SMART Act.

After the meeting, NAPSLO wrote to Mr. Gordon to convey the fourprinciples it envisioned as part of federal standards legislation:freedom of rate and form regulation; automatic export forsophisticated purchasers; uniform licensing; and uniform premiumtax payments.

"It was a bit of a surprise to NAPSLO shortly thereafter whenthe SMART Act went away, and Congress picked a few provisions[that] they viewed as the low-hanging fruit, or the provisions thatthey viewed as non-controversial," carving out a standalone bill onsurplus lines and reinsurance issues, said Mr. Gordon.

That was "the first deer across the meadow," he said. "We neverreally thought that it would be such a high-profile issue."

Ms. Berthoud agreed that this was a major step toward the goalline, explaining that it would have been much more difficult tomove a bill with the 13 titles that SMART Act originallycontained.

"The rest is on record," Mr. Mulligan said, referring to thefact that NRRA passed in Congress four times--three times in as astandalone bill in the House, and ultimately as part of the federalfinancial services reform legislation in both houses.

ON RECORD
Libby Baney supplied a record of Congressional activity leading upto the signing on July 21, adding one additional action taken byRep. Dennis Moore, D-Kan., one day later. On July 22, Rep. Moore,"who had been actively involved in the legislation over hislifetime, and who had been one of the key sponsors this year" put astatement into the Congressional record emphasizing Congress'intent for:

• Brokers to remit all tax on an E&S transaction to the homestate

• Each state to adopt nationwide uniform procedures, such as aninterstate compact,

• Regulatory requirements to be imposed only by the insured's homestate.

Ms. Baney named Rep. Moore (D-Kan.) and Rep. Scott Garrett,(R-N.J.), as well as Sen. Evan Bayh, (D-Ind.), as three of many key"NRRA Congressional champions, who pushed NRRA forward."

The B&D consultants noted that grass roots efforts of NAPSLOmembers to educate member of Congress about the surplus lineindustry were critical in garnering such champions.

Three NAPSLO members lived in Rep. Garrett's district at onepoint, Ms. Berthoud said, referring to Mr. Mulligan, Bill Malone,and Mary Ellen Rozzell.

"Some of the messages that resonated in Congress were thoseabout how surplus lines allows innovative technology to come tomarket that otherwise might not be insured," Ms. Baney said--howE&S insurance "greases the wheels of commerce." For example,Sen. Bayh's state has a number of medical device companies,research organizations and universities, she said.

NAPSLO "Legislative Days" were an important part of the effort.Ms. Berthoud explained that the once-a-year fly-in of more than adozen NAPSLO senior executives from the Legislative Committee wouldmix the executives with key members of committees and their staffs."They brought a real-world perspective," she said.

"It is not the most well-known or easily explained portion ofinsurance industry," said Legislative Committee Co-Chair HankHaldeman. "In the early days, it was really explainingfundamentals: Why is there surplus lines? What role does it play inthe industry?"

"It has been an education process, much more than a negotiationprocess," he said, noting that the No. 1 question the lawmakersasked was why the problematic circumstances surrounding multi-statetax and regulatory problems existed.

The NAPSLO representatives and lobbyists said there were twomore ingredients in the recipe for NRRA success--a coalition ofindustry groups speaking with one voice and timing.

"In Washington, it's nice to get things done in numbers ratherthan trying to run up the Hill by yourself," Ms. Berthoud said,referring to the fact that a broad-based coalition of industrytrade groups formed in 2006--known as the Surplus Lines andReinsurance Coalition, which was chaired by NAPSLO--presented aunited front on all of the issues that NRRA addressed.

As for the final ingredient, Ms. Baney said this was the "rightpolicy at the right time"--coming when members of Congress werelooking to remedy the financial system, deal with Wall Street andput forth consumer benefits.

United
We Stand

NAPSLO executives and lobbyists say NRRA couldn't have passedwithout a united industry front. Members of the Surplus Lines &Reinsurance Coalition who worked together on the effort were:

• NAPSLO
• RIMS
• IIABA
• RAA
• PCI
• AAMGA
• CIAB
• Dewey & LeBoeuf
• ACLI
• AIA
• NAMIC
• Swiss Re
• Nationwide
• Aon
• Chubb
• Generali