We resume our discussion on NRRA, left off from the June 2011 issue. Surplus line brokers found a newborn left on their doorstep on July 21, 2011, the day when the Nonadmitted and Reinsurance Reform Act (NRRA) took effect.
Despite a 12-month gestation from the day NRRA was signed into law as part of the Dodd-Frank financial industry reforms to its effective date, the states failed to use the grace period to reach uniform agreement on any of the proposed interstate compacts to allocate surplus line tax revenues, leaving brokers with a crazy quilt of state "conforming" laws and filing forms to decipher and track.
In a statement to the House Subcommittee on Insurance, Housing and Community Opportunity, the Independent Insurance Agents & Brokers of America (IIABA) cautioned that NRRA's intent could be thwarted by inconsistent rules and procedures set by states. The IIABA position paper, delivered to Congress just 1 week after NRRA took effect, commented, "The NRRA was intended to streamline and simplify the surplus lines regulatory system. It would be a very peculiar outcome and an unintended consequence of Congress's action if the NRRA's enactment ultimately prompted state officials to develop an even more complex and cumbersome regulatory structure for the agents, brokers, and purchasers of surplus lines insurance."
Along with NRRA, there was another insurance add-on to Dodd-Frank: the creation of a Federal Insurance Office. Michael T. McRaith, who spoke on a panel of experts for the opening general session of the Professional Liability Underwriting Society's International 2006 Conference on "the increasing impact of U.S. federal law in defining professional liability risks, and potentially in regulating the insurance industry," was appointed this year to head the FIO.
The five-speaker panel, moderated by TV journalist Forrest Sawyer, was anything but unanimous in its views. While there was undeniable federal influence in D&O liability insurance exposures in the post-Enron era, the prospect of Uncle Sam directly regulating the insurance industry received mixed reviews. For his part, Director McRaith stood strongly in favor of continued insurance regulation at the state level, while some panelists favored bringing down the barriers to a unified system of surplus line approval, either through concerted effort by the states or by federal preemption.