WASHINGTON–Legislation reforming regulation of the surplus lines insurance market was introduced today in the Senate.
But the legislation, sponsored by Sens. Bill Nelson, D-Fla., and Mel Martinez, R-Fla., is seen by most industry officials as a placeholder, likely to be updated and reintroduced by Sen. Martinez and other members of the Senate Banking Committee.
The follow-up measure is expected to be introduced by a senior, unidentified member of the Senate Banking Committee by mid-April, according to congressional sources.
The new Senate bill, for example, does not contain language in similar legislation introduced in the House Feb. 15 that modifies the definition of a sophisticated purchaser. Sponsors of that bill are Reps. Dennis Moore, D-Kans., and Ginny Brown-Waite, R-Fla.
The Senate bill would establish the insured’s home state as the primary regulator for multistate surplus lines risks and would also charge that state with collecting and allocating any taxes involved.
For reinsurance, the bill would give sole regulatory authority for determining whether or not a particular insurer qualifies for credit for reinsurance to the ceding insurer’s home state.
Additionally, the measure would bar the extraterritorial application of state laws and allow ceding insurers and reinsurers to resolve disputes pursuant to contractual arbitration clauses.
Its language would also make it easier for sophisticated purchasers to access the nonadmitted market.
Meanwhile, the House bill has been amended to change the definition of a “qualified risk manager” at the request of members of the Risk and Insurance Management Society, according to Terry Fleming, director of risk management for Montgomery County, Md., and a member of the RIMS board.
It replaces language dealing with who is defined as a qualified risk manager capable of purchasing insurance in the surplus market to a sliding scale of education and experience, “which would accommodate most RIMS members,” Mr. Fleming said.
The language in legislation that passed the House overwhelmingly last year and is also in the Senate legislation introduced by Sens. Nelson and Martinez would have qualified less than 50 percent of RIMS members to have their company in the surplus lines market, he said.
Joel Wood, senior vice president of government affairs at the Council of Insurance Agents and Brokers, said he didn’t want to overplay the impact of the latest bill, but “there is relevance in that this legislation would improve access to surplus lines products, which is a critical part of the commercial marketplace.”
“We’re continuing to talk with other members of the Senate Banking Committee to roll out this legislation more fully in the coming months,” he said.