NU Online News Service, Jan. 26, 2:52 p.m. EST

Trade groups representing state legislators are asking Congress to extend for one year—until July 12, 2012—the effective date for state implementation of the surplus lines reform and modernization law.

The letter was sent by the leadership of the National Conference of Insurance Legislators (NCOIL); the Council of State Governments (CSG), and the National Conference of State Legislatures (NCSL).

The delay is needed "to allow states to fully accomplish" the goals of the law, the Nonadmitted and Reinsurance Reform Act (NRRA), and also to "prevent state loss of critical insurance premium tax dollars," the letter said.

Rep. George Keiser, R-North Dakota, NCOIL president; Rep. Bob Godfrey, D-Conn., CSG chairman; and Sen. Delores Kelley, D-Md., chairperson of the NCSL's Communications, Financial Services and Interstate Commerce (CFI) Committee, all signed the letter.

The letter explained that state lawmakers are very concerned that the NRRA will soon prohibit any state that is not the home state of an insured from requiring premium tax payment for non-admitted insurance.

"With some state legislatures in session for less than two months—and many other pressing items, including health care reform, on our agendas—some states may be hard-pressed to join the surplus lines compact in the first few months of the New Year," the letter said.

The letter added, "Unless the NRRA effective date is extended, such non-compacting states could stand to lose premium tax revenue that they have come to depend on in July."

The letter noted that the three trade groups have coalesced around an interstate compact to address NRRA surplus lines insurance taxation and regulatory provisions and that several states have already started drafting bills that would implement the interstate compact.

These states are Alabama, Indiana, Kentucky, New Mexico, Rhode Island, and Texas, the letter said.

The letter also noted that the compact crafted by the three trade groups and approved their leadership is also supported by the surplus/excess lines industries and key property and casualty and insurance producer associations.

However, the compact plan supported by the state legislative groups and many in the industry has not received support from the National Association of Insurance Commissioners (NAIC), which has proposed its own plan, the Nonadmitted Insurance Multi-State Agreement (NIMA).

The letter said that the trade groups sending the letter "understand that the NRRA—which received broad bipartisan support and was approved on the non-controversial House suspension calendar in 2009—was intended to provide a comprehensive, uniform solution to the current treatment of surplus lines insurance."

The letter also noted that Rep. Scott Garrett, R-N.J., chairman of the Capital Markets Subcommittee of the House Financial Services Committee, recently reaffirmed on the House floor "that while premium tax simplification is important, it is but one element of the NRRA."

Ken Crerar, president of the Council of Insurance Agents and Brokers (the Council), disagreed that a delay in the law's implementation is necessary. He said, "The surplus lines provisions have been debated in Congress for eight years. They were passed five times by the House of Representatives, and were in every iteration of the Dodd-Frank regulatory legislation, with much input from states."

He said the Council supports the state legislator groups' compact proposal, which he said has been around for some time, and he added that there is "nothing in the implementation of the new law that will prevent or should delay states determining whether to join a compact.

"We would never purport to speak on behalf of members of Congress, but have great difficulty in understanding what would be the appeal of kicking this can down the road yet another year, particularly when there is such a gulf between the position of NCOIL and the NAIC," Mr. Crerar concluded.

Special Reports /

State Legislative Groups Ask For Surplus Lines Implementation Delay

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