Senate Banking Committee officials continue to assure the insurance industry that reforming and modernizing regulation of the surplus lines market remains at the "head of the line" for insurance legislation Congress will consider this year.
In fact, a Senate Banking Committee hearing on insurance Tuesday, July 29, might provide a springboard for enactment of legislation this year.
That's because it is the only insurance issue expected to be discussed at the hearing on which there is relative consensus within the industry and among regulators, and may be the only insurance issue "still in play" for enactment this year, according to industry lobbyists and congressional staffers.
The bill is S. 929, the Nonadmitted and Reinsurance Reform Act, which passed the House of Representatives overwhelmingly in 2007.
Every participant of the second panel at the hearing--representatives of the Council of Insurance Agents and Brokers, the National Association of Professional Surplus Lines Offices, Ltd., the Independent Insurance Agents and Brokers of America and the Reinsurance Association of America--have all voiced strong support for the measure, despite a broad range of differences on other regulatory reform measures.
Other issues are unlikely to fare as well. According to industry officials, the hearing is likely to represent the venting of the well-marked divides over federal-versus-state battle that has raged for years.
Numerous sources on the Hill and within industry say that the hearings may well set the stage for the enactment of reforms in the next Congress that might either buck up state insurance regulation or undermine it, depending on one's perspective.
Witnesses at the hearing, convened by Chairman Chris Dodd, will include state regulators, a consumer representative, and the principal trade associations representing companies and producers.
Besides the CIAB, NAPSLO, the IIABA and the RAA, representatives of the National Association of Insurance Commissioners, the American Insurance Association, the American Council of Life Insurers and the Consumer Federation of America will testify.
Several insurance bills have been introduced in the Senate in the current Congress, including legislation that would create an optional federal charter, but the only action so far in the Senate has been on legislation reauthorizing and reforming the National Flood Insurance Program.
That program must be reauthorized by Sept. 30, the end of the current government fiscal year.
Congress did enact late last year legislation extending the Terrorism Risk Insurance Act.
By contrast, besides flood insurance legislation, the House Financial Services Committee recently reported out (approved and sent to the floor) legislation creating an Office of Insurance Information within the Treasury Department, as well as bills recreating the National Association of Registered Agents and Brokers and expanding the Risk Retention Act to include property as well as casualty insurance.
Several observers said that the Tuesday hearing will be at "30,000 feet" and not lead automatically to any particular legislative enactment. Little consensus is expected on the OFC from witnesses who have well-established views on opposite extremes of the industry.
Indeed, industry officials say that the politics of the surplus lines component of the Nonadmitted and Reinsurance Reform Act is "evolving favorably," with more and more stakeholder support, even among state regulators.
"The Nonadmitted and Reinsurance Reform Act is the only regulatory reform proposal that has not only passed the House--twice, but it also has the broadest support from all stakeholders, said Joel Wood, senior vice president and head of government relations for CIAB.
Regarding the surplus lines provisions, the bill says essentially that with respect to multistate transactions, the only rules governing access to surplus lines products are the rules of the state in which the coverage is placed.
Mr. Wood said that National Association of Insurance Commissioners' officials have indicated their basic support for the concept of the surplus lines reforms out of the apparent belief that enactment would provide incentives to the states to adopt an interstate compact to govern such transactions.
"NAIC officials likewise have indicated they do not support the reinsurance title of the bill," Mr. Wood said.
"Without significant opposition to the surplus lines title, we are focusing most of our efforts to get airtime in the committee and on the floor. Obviously, a presidential election year and the housing crisis make this a difficult goal, but not an insurmountable one," Mr. Wood said.
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