The educational component of WSIA’s continued work on behalf ofthe surplus lines industry is a key part of the organization’svalue position, and in the year to come several key issues willremain top-of-mind for members who strive to further the mission ofE&S professionals.

NRRA implementation

WSIA continues to work with states to fully implement the NRRAin a uniform manner as envisioned by the NRRA. NIMA continues tomove through the wind-down phase of its dissolution. The SurplusLines Clearinghouse is accepting multistate return premium,additional payments and cancellation of endorsements through itsanticipated wind-down by Sept. 30.

“The NRRA is the most important piece of legislation to impactthe surplus lines industry in decades,” said Tim Chaix, WSIALegislative Co-Chair and Vice President, R.E. Chaix &Associates Insurance Brokers Inc. in Irvine, Calif. “As a broker, Ireally felt the impact of the NRRA, especially in placingmultistate risks. It has become much simpler to calculate and remittaxes. We are very close to having all states collect and retainsurplus lines taxes based on their own surplus lines premium taxrate, regardless of where the risks reside.”

Only five states’ statutes, including Florida, Hawaii,Massachusetts, New Hampshire and Vermont still require surpluslines brokers to calculate and submit the surplus lines premium taxbased on the state’s rate where the risks reside for a multistatepolicy. “I would like to see all five states tax 100% of amultistate policy based on their own state rate, but I believe wewill get at least one or two of these five states to change thisyear — which I think will be a huge step towards uniformity in thiscategory,” Chaix added.

From the company perspective, “the NRRA has significantlysimplified how we operate as an eligible surplus lines insurer instates, and especially for multistate policies,” said Scott Culler,WSIA Legislative Committee co-chair and Senior Managing Director,Professional Liability at Markel Corp. Progress has been seen inimplementing the NRRA definition of an eligible surplus linesinsurer, he added, which allows Markel to effectively andefficiently participate in those states.

“While it has been a significant improvement, we are stillworking towards uniformity in this criterion,” said Culler. “Wewould very much like to eliminate mandatory requirements that areoutside of the provisions of the NRRA, and continue to ask for thisreform when we have the opportunity.”

“We are pleased with the implementation of the NRRA in thestates and the significant progress we have made towardsuniformity,” said Lana Parks, Legislative Committee co-chair andPresident of The Parks Group Inc. in Arlington, Texas. “We are veryclose to having all states collect and retain surplus lines taxesbased on their own surplus lines premium tax rate, regardless ofwhere the risk resides.”

Meanwhile, WSIA and the Councilof Insurance Agents & Brokers (CIAB) are working incoalition to seek NRRA reform in Florida, Hawaii, Massachusetts,New Hampshire and Vermont to eliminate taxing multistate risks atother states’ rates. WSIA is continuing to work to achievelegislative reform in Florida in a number of areas and organized acoalition of interested industry members, including WSIA, CIAB,FSLA and FAIA, to work together.

“One key thing to understand is this: CIAB and WSIA are in lockstep and working together to get these pieces of legislationpassed,” said Keri Kish, WSIA’s Director of GovernmentRelations.

The Flood Insurance Market Parity and ModernizationAct/
Reauthorization of National Flood Insurance Program

NFIP reauthorization must be addressed before the end ofSeptember, an issue made all the more urgent by the catastrophicdamage delivered by Hurricane Harvey in Houston and the destructionin Florida wrought by Hurricane Irma. WSIA continues to stronglysupport passage of the Flood Insurance Market Parity andModernization Act (H.R. 1422/S. 563). This bill is referred to asRoss-Castor in the House and Heller-Tester in the Senate.

“For the last two congressional sessions, we have stronglysupported the Flood Insurance Market Parity and Modernization Act,which will clarify the definition of private flood insurance andpreserve our market’s ability to offer private flood insurancesolutions and alternatives to consumers,” said Culler. “We haveworked diligently in coalition with banking and insurance industrymembers to pass this legislation and are very hopeful that over thenext few weeks of debate on the reauthorization of the NFIP, thatour bill will be passed along with it.

“We are supportive of the legislation moving as part of thereauthorization, either short or long term, as well as on its own,”Culler continued. “Regardless, we know that this legislation iscritical for our market to continue to serve as the safety valve ofthe industry for private flood insurance as well as helping achievethe policy that Congress committed to with the passage ofBiggert-Waters in 2012, which intended to increase the reliance onthe private market for the purchase of flood insurance.”

Banks providing a federally backed mortgage still aren’t clearor comfortable that a private insurance solution meets thecompliance threshold for Flood policies that are coming through,said Kish. For consumers seeking flood cover in most cases, sheadded, “their only choice is the NFIP, if their bank isn’tcomfortable with the language being used around what a‘nonadmitted’ insurer is. Banks are equally excited aboutestablishing this clarification as we are.”

The House NFIP reauthorization package (including Ross-Castorlanguage in its entirety) is poised for consideration on the Housefloor. WSIA anticipates strong support for the package and itsreforms as it heads to the Senate, with hopes that the House willalso work on a short-term reauthorization that would likely includesome of their basic reforms. As the Sept. 30 reauthorizationdeadline approaches, the House will likely also pass thisshort-term package and give the Senate the option to take up eitherthe short-term or more comprehensive packages — both of whichinclude Ross-Castor.

The Senate Banking Committee recently released a draft proposalthat did not include some components. “We expect a markup to occurin the first weeks of September, but it is difficult to predictwhether there will be floor time available to bring full NFIPlegislation up for a vote prior to the Sept. 30 expiration,” saidKish. “As such, we anticipate the Senate may need to pass ashort-term reauthorization of the NFIP, which we hope will includeHeller-Tester as anticipated in the House’s short-termreauthorization bill, as well.”

Related: Can a debt-burdened flood program take on HurricaneHarvey?

The Foreign Account Tax Compliance Act (FATCA)

Since FATCA was passed, the P&C industry has asked forrelief from FATCA reporting due to its unnecessary and burdensomeapplication to our industry. H.R. 871 is pending and will eliminateunnecessary FATCA reporting for the Property & Casualtyindustry.

“FATCA is directed at foreign financial institutions andfinancial intermediaries and aims to prevent tax evasion by U.S.citizens, U.S. residents and corporations through the use ofoffshore accounts, but the application of the law cast a wide net,and includes groups like our industry that is not in a position tocommit the type of tax evasion the law intended to curtail,” saidKish. “The CIAB continues to lead the industry coalition on thisissue and WSIA is providing support.”

Parks said she is extremely hopeful “that we will either seethis legislation passed in the near future or get some regulatoryrelief from the Treasury Department. I was really pleased thatduring a hearing with the Senate Banking Committee, Sen. Tim Scott(R-S.C.) told Treasury Secretary Steven Mnuchin that FATCAreporting requirements for P&C insurance companies operatinginternationally are onerous. The senator asked the Secretary if thenew administration intended to review the issue, and the Secretarystated he was familiar with it and they would look into it. This isa great step in the right direction.”

Repeal and Reform of the Dodd Frank Act

WSIA’s top legislative priority is to promote and preserve theintent and clear mandates of the NRRA and resulting uniformity andefficiencies in surplus lines regulation. The NRRA was adopted as aprovision in the Dodd-Frank Act (DFA), which the current Congressand president continue to work to significantly overhaul. “We arevery pleased that the CHOICE Act, passed in the House on June 8,does not impact the NRRA and if the Senate takes it up, we believethey too will protect the NRRA,” Kish noted. “Since the day NRRAwas passed, we always take the time to stop by and thank thoseoffices and let them know how impactful it has been. Everytime we are with someone, we let them know how much we appreciateit.”

The National Association of Registered Agents andBrokers (NARAB)

Thus far, no action has been taken to implement NARAB by the newadministration. Because it is the responsibility of the FederalInsurance Office (FIO) to make recommendations for appointments ofthe board of directors, it is likely this issue is on hold until anew FIO director is named. After that, Kish explained, all newnominees will be required to go through extensive background checksbefore the president will be able to nominate them. WSIA is seekinghelp from senators in quickly confirming any nominees to theboard.

“We were disappointed that the nominations could not beconfirmed before the end of the congressional session. We were soclose to getting a quorum for the initial board of directors thispast congressional session with 10 of the 13 directors beingnominated,” said Parks. “We are awaiting nominations for the boardand are confident that if they are made, quick action will betaken; however, unfortunately, we cannot begin to speculate on atimeline. We have had positive responses from the offices that wehave spoken with and asked for their quick consideration.

“NARAB will be a huge benefit for agents and brokers once it isimplemented,” Parks added.

Related: Creating a ‘resilience movement’