As Congress moves toward the end of its 2015 session, and most state legislative sessions have concluded, NAPSLO continues to closely monitor a number of legislative issues that impact the surplus lines industry.
Keri Kish, NAPSLO director of government relations, says that NAPSLO continues to rely on its Regulatory Principles and Guiding Principles on Uniformity to direct the Association’s advocacy efforts. “The Legislative Committee and the NAPSLO Board of Directors adopted these principles as a roadmap in regulatory and legislative work,” Kish says. “Both documents help set priorities for our advocacy and monitoring of state and federal legislation.”
Working with legislators and regulators to preserve the intent and mandates of the Nonadmitted and Reinsurance Reform Act (NRRA) continues to be an area of emphasis for NAPSLO. According to Scott Culler, NAPSLO legislative committee co-chair and regional president, Markel Wholesale, NAPSLO saw three major NRRA state uniformity victories this year. Kansas, Louisiana and North Dakota all passed legislation to implement the 100% home state taxation approach.
“We are really pleased that these three states are joining the 38 other states that calculate surplus lines tax at the home state’s tax rate on 100% of the premium and retain 100% of the tax in the home state,” Culler says. “We continue to believe that this uniformity is the only viable solution and most efficient approach for our industry. We’re especially grateful for the hard work by the Louisiana Surplus Line Association to help with this legislation in Louisiana, which authorized the commissioner to withdraw from NIMA.”
The NRRA celebrated its fifth anniversary in July, along with the Dodd Frank Act (DFA). Kish says that while no significant attempts have occurred to repeal the DFA in its entirety, NAPSLO continues to remind members of Congress that the NRRA is a success story and must be kept intact in the future, should there be an effort to repeal portions of the DFA. “We are seeing improved modernization and simplification of the regulation and taxation of the surplus lines transaction,” Kish says. “We will continue to talk about these successes in Washington and work to protect the NRRA.”
Culler says that the NRRA was a major focus for NAPSLO during its May Legislative Fly-In event in Washington D.C. “We had 32 NAPSLO members and staff in D.C. to meet with key legislators and their senior staff. We were able to use that time to talk with them about the success of the NRRA and ask for their continued support of it,” Culler says.
Kish says NAPSLO strongly believes that tax sharing adds unnecessary administrative burden and increased compliance costs to the industry and insureds, which far exceed the amount of taxes to be reallocated among the participating states. NAPSLO’s analysis of tax sharing and letters to state insurance commissioners are available on the Legislative Advocacy page of the NAPSLO website.
NAPSLO members also thanked members of Congress for their passage of the National Association of Registered Agents and Brokers (NARAB II) during their 2015 Fly-In meetings. NARAB became law on Jan. 12, 2015. Kish said that the insurance industry lobbied many years for NARAB in an effort to provide the national framework for uniformity in agent and broker licensing.
Lana Parks, NAPSLO legislative committee co-chair and president, The Parks Group, says that although the NARAB legislation indicates the President will appoint members of the Board within 90 days from the day it was signed into law, no names have been sent to the Senate for confirmation at this time.
Once established, the Board will consist of eight regulators and five industry members, with three of the industry members representing the P&C industry. “We will remain focused on ensuring the voice and perspective of surplus lines licensees is represented during the implementation of NARAB and development of NARAB’s national licensing standards,” Parks says.
She also says that revisions to the definition of private flood insurance remain at the forefront of NAPSLO’s legislative advocacy efforts. “We are pleased that the recently filed Flood Insurance Modernization and Market Parity Act provides clarity to lenders that they may accept private flood solutions from the surplus lines market,” Parks says. “This isn’t a change, but it is just an important clarification. Surplus lines insurers have traditionally served as a supplement to the NFIP, and NAPSLO has worked to help alleviate confusion that was introduced with the Biggert-Waters Act of 2012. We have offered NRRA-compliant language as part of this proposed legislation. It has strong support from both the insurance and banking industry so we’re hopeful it will be passed by Congress.”
According to Culler, the reauthorization of the Terrorism Risk Insurance Act (TRIA) was another important issue for NAPSLO members this year. The U.S. Senate approved legislation to reauthorize TRIA when it authorized NARAB II in January. TRIA was allowed to expire in late-2014, but the six-year extension was retroactive and enacted a similar program with just a few changes. Those included:
Federal share reduces from 85% to 80% (by 1% per year)
Program trigger increases from $100 million to $200M (by $20 million per year)
Industry’s aggregate retention increases from current $27.5 billion to $37.5 billion (by $2 billion per year) and treasury’s recoupment rate increases from 133% to 140% .
“NAPSLO continues to monitor the work of the U.S. Department of Treasury, the NAIC and individual states for guidance and resources to assist NAPSLO members in implementing the changes,” Culler says.
In addition to its advocacy work on federal legislative and regulatory issues, NAPSLO continues to enhance its monitoring of state issues. With the 2014 addition of John Meetz as State Relations Manager, Kish and Meetz are able to dedicate additional attention to the myriad state legislative sessions and closely monitor issues impacting surplus lines to be aware of any unintended consequences.
Kish said that many state legislatures underwent a great deal of turnover during November 2014 elections and most opened with a focus on budget issues. “A number of states also introduced insurance-related bills during their sessions. There are new laws and regulations proposed nearly daily during state sessions. We watch these very closely and report out to members on any issues, but members can track these as well by signing up for our Statenet Tracking System alerts,” Kish said. “You can customize the reports by state and there is no charge to NAPSLO members to sign-up, which members can do from the NAPSLO website.”
Parks said that she believes the advocacy provided by NAPSLO, often in partnership with other industry trade associations, is one of the most valuable benefits of NAPSLO membership. “The issues that our industry faces at both the federal and state levels are very complex. We have an exceptionally good team of people, including NAPSLO staff, our Washington D.C. consultants and a really dedicated Legislative Committee, working to stay abreast of what’s happening day-in and day-out that impacts our businesses,” Parks said. “The value of that expertise and communication is enormous.”
For more information about any of NAPSLO’s Legislative and PAC initiatives, visit the Legislative pages of the NAPSLO website.