The educational component of WSIA’s continued work on behalf of the surplus lines industry is a key part of the organization’s value position, and in the year to come several key issues will remain top-of-mind for members who strive to further the mission of E&S professionals.
WSIA continues to work with states to fully implement the NRRA in a uniform manner as envisioned by the NRRA. NIMA continues to move through the wind-down phase of its dissolution. The Surplus Lines Clearinghouse is accepting multistate return premium, additional payments and cancellation of endorsements through its anticipated wind-down by Sept. 30.
“The NRRA is the most important piece of legislation to impact the surplus lines industry in decades,” said Tim Chaix, WSIA Legislative Co-Chair and Vice President, R.E. Chaix & Associates Insurance Brokers Inc. in Irvine, Calif. “As a broker, I really felt the impact of the NRRA, especially in placing multistate risks. It has become much simpler to calculate and remit taxes. We are very close to having all states collect and retain surplus lines taxes based on their own surplus lines premium tax rate, regardless of where the risks reside.”
Only five states’ statutes, including Florida, Hawaii, Massachusetts, New Hampshire and Vermont still require surplus lines brokers to calculate and submit the surplus lines premium tax based on the state’s rate where the risks reside for a multistate policy. “I would like to see all five states tax 100% of a multistate policy based on their own state rate, but I believe we will get at least one or two of these five states to change this year — which I think will be a huge step towards uniformity in this category,” Chaix added.
From the company perspective, “the NRRA has significantly simplified how we operate as an eligible surplus lines insurer in states, 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 in implementing the NRRA definition of an eligible surplus lines insurer, he added, which allows Markel to effectively and efficiently participate in those states.
“While it has been a significant improvement, we are still working towards uniformity in this criterion,” said Culler. “We would very much like to eliminate mandatory requirements that are outside of the provisions of the NRRA, and continue to ask for this reform when we have the opportunity.”
“We are pleased with the implementation of the NRRA in the states and the significant progress we have made towards uniformity,” said Lana Parks, Legislative Committee co-chair and President of The Parks Group Inc. in Arlington, Texas. “We are very close to having all states collect and retain surplus lines taxes based on their own surplus lines premium tax rate, regardless of where the risk resides.”
Meanwhile, WSIA and the Council of Insurance Agents & Brokers (CIAB) are working in coalition to seek NRRA reform in Florida, Hawaii, Massachusetts, New Hampshire and Vermont to eliminate taxing multistate risks at other states’ rates. WSIA is continuing to work to achieve legislative reform in Florida in a number of areas and organized a coalition 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 lock step and working together to get these pieces of legislation passed,” said Keri Kish, WSIA’s Director of Government Relations.
The Flood Insurance Market Parity and Modernization Act/
Reauthorization of National Flood Insurance Program
NFIP reauthorization must be addressed before the end of September, an issue made all the more urgent by the catastrophic damage delivered by Hurricane Harvey in Houston and the destruction in Florida wrought by Hurricane Irma. WSIA continues to strongly support passage of the Flood Insurance Market Parity and Modernization Act (H.R. 1422/S. 563). This bill is referred to as Ross-Castor in the House and Heller-Tester in the Senate.
“For the last two congressional sessions, we have strongly supported the Flood Insurance Market Parity and Modernization Act, which will clarify the definition of private flood insurance and preserve our market’s ability to offer private flood insurance solutions and alternatives to consumers,” said Culler. “We have worked diligently in coalition with banking and insurance industry members to pass this legislation and are very hopeful that over the next few weeks of debate on the reauthorization of the NFIP, that our bill will be passed along with it.
“We are supportive of the legislation moving as part of the reauthorization, either short or long term, as well as on its own,” Culler continued. “Regardless, we know that this legislation is critical for our market to continue to serve as the safety valve of the industry for private flood insurance as well as helping achieve the policy that Congress committed to with the passage of Biggert-Waters in 2012, which intended to increase the reliance on the private market for the purchase of flood insurance.”
Banks providing a federally backed mortgage still aren’t clear or comfortable that a private insurance solution meets the compliance threshold for Flood policies that are coming through, said Kish. For consumers seeking flood cover in most cases, she added, “their only choice is the NFIP, if their bank isn’t comfortable with the language being used around what a ‘nonadmitted’ insurer is. Banks are equally excited about establishing this clarification as we are.”
The House NFIP reauthorization package (including Ross-Castor language in its entirety) is poised for consideration on the House floor. WSIA anticipates strong support for the package and its reforms as it heads to the Senate, with hopes that the House will also work on a short-term reauthorization that would likely include some of their basic reforms. As the Sept. 30 reauthorization deadline approaches, the House will likely also pass this short-term package and give the Senate the option to take up either the short-term or more comprehensive packages — both of which include Ross-Castor.
The Senate Banking Committee recently released a draft proposal that did not include some components. “We expect a markup to occur in the first weeks of September, but it is difficult to predict whether there will be floor time available to bring full NFIP legislation up for a vote prior to the Sept. 30 expiration,” said Kish. “As such, we anticipate the Senate may need to pass a short-term reauthorization of the NFIP, which we hope will include Heller-Tester as anticipated in the House’s short-term reauthorization bill, as well.”
The Foreign Account Tax Compliance Act (FATCA)
Since FATCA was passed, the P&C industry has asked for relief from FATCA reporting due to its unnecessary and burdensome application to our industry. H.R. 871 is pending and will eliminate unnecessary FATCA reporting for the Property & Casualty industry.
“FATCA is directed at foreign financial institutions and financial intermediaries and aims to prevent tax evasion by U.S. citizens, U.S. residents and corporations through the use of offshore accounts, but the application of the law cast a wide net, and includes groups like our industry that is not in a position to commit the type of tax evasion the law intended to curtail,” said Kish. “The CIAB continues to lead the industry coalition on this issue and WSIA is providing support.”
Parks said she is extremely hopeful “that we will either see this legislation passed in the near future or get some regulatory relief from the Treasury Department. I was really pleased that during a hearing with the Senate Banking Committee, Sen. Tim Scott (R-S.C.) told Treasury Secretary Steven Mnuchin that FATCA reporting requirements for P&C insurance companies operating internationally are onerous. The senator asked the Secretary if the new administration intended to review the issue, and the Secretary stated he was familiar with it and they would look into it. This is a great step in the right direction.”
Repeal and Reform of the Dodd Frank Act
WSIA’s top legislative priority is to promote and preserve the intent and clear mandates of the NRRA and resulting uniformity and efficiencies in surplus lines regulation. The NRRA was adopted as a provision in the Dodd-Frank Act (DFA), which the current Congress and president continue to work to significantly overhaul. “We are very 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 believe they too will protect the NRRA,” Kish noted. “Since the day NRRA was passed, we always take the time to stop by and thank those offices and let them know how impactful it has been. Every time we are with someone, we let them know how much we appreciate it.”
The National Association of Registered Agents and Brokers (NARAB)
Thus far, no action has been taken to implement NARAB by the new administration. Because it is the responsibility of the Federal Insurance Office (FIO) to make recommendations for appointments of the board of directors, it is likely this issue is on hold until a new FIO director is named. After that, Kish explained, all new nominees will be required to go through extensive background checks before the president will be able to nominate them. WSIA is seeking help from senators in quickly confirming any nominees to the board.
“We were disappointed that the nominations could not be confirmed before the end of the congressional session. We were so close to getting a quorum for the initial board of directors this past congressional session with 10 of the 13 directors being nominated,” said Parks. “We are awaiting nominations for the board and are confident that if they are made, quick action will be taken; however, unfortunately, we cannot begin to speculate on a timeline. We have had positive responses from the offices that we have spoken with and asked for their quick consideration.
“NARAB will be a huge benefit for agents and brokers once it is implemented,” Parks added.
Related: Creating a ‘resilience movement’