NU Online News Service, Jan. 26, 2:52 p.m.EST

Trade groups representing state legislators are asking Congressto extend for one year—until July 12, 2012—the effective date forstate implementation of the surplus lines reform and modernizationlaw.

The letter was sent by the leadership of the National Conferenceof Insurance Legislators (NCOIL); the Council of State Governments(CSG), and the National Conference of State Legislatures(NCSL).

The delay is needed "to allow states to fully accomplish" thegoals of the law, the Nonadmitted and Reinsurance Reform Act(NRRA), and also to "prevent state loss of critical insurancepremium tax dollars," the letter said.

Rep. George Keiser, R-North Dakota, NCOIL president; Rep. BobGodfrey, D-Conn., CSG chairman; and Sen. Delores Kelley, D-Md.,chairperson of the NCSL's Communications, Financial Services andInterstate Commerce (CFI) Committee, all signed the letter.

The letter explained that state lawmakers are very concernedthat the NRRA will soon prohibit any state that is not the homestate of an insured from requiring premium tax payment fornon-admitted insurance.

"With some state legislatures in session for less than twomonths—and many other pressing items, including health care reform,on our agendas—some states may be hard-pressed to join the surpluslines compact in the first few months of the New Year," the lettersaid.

The letter added, "Unless the NRRA effective date is extended,such non-compacting states could stand to lose premium tax revenuethat they have come to depend on in July." 

The letter noted that the three trade groups have coalescedaround an interstate compact to address NRRA surplus linesinsurance taxation and regulatory provisions and that severalstates have already started drafting bills that would implement theinterstate compact.

These states are Alabama, Indiana, Kentucky, New Mexico, RhodeIsland, and Texas, the letter said. 

The letter also noted that the compact crafted by the threetrade groups and approved their leadership is also supported by thesurplus/excess lines industries and key property and casualty andinsurance producer associations.  

However, the compact plan supported by the state legislativegroups and many in the industry has not received support from the National Associationof Insurance Commissioners (NAIC), which has proposed its ownplan, the Nonadmitted Insurance Multi-State Agreement (NIMA).

The letter said that the trade groups sending the letter"understand that the NRRA—which received broad bipartisan supportand was approved on the non-controversial House suspension calendarin 2009—was intended to provide a comprehensive, uniform solutionto the current treatment of surplus lines insurance."

The letter also noted that Rep. Scott Garrett, R-N.J., chairmanof the Capital Markets Subcommittee of the House Financial ServicesCommittee, recently reaffirmed on the House floor "that whilepremium tax simplification is important, it is but one element ofthe NRRA."

Ken Crerar, president of the Council of Insurance Agents andBrokers (the Council), disagreed that a delay in the law'simplementation is necessary. He said, "Thesurplus lines provisions have been debated in Congress for eightyears. They were passed five times by the House ofRepresentatives, and were in every iteration of the Dodd-Frankregulatory legislation, with much input from states."

He said the Council supports the state legislator groups'compact proposal, which he said has been around for some time, andhe added that there is "nothing in the implementation ofthe new law that will prevent or should delay states determiningwhether to join a compact. 

"We would never purport to speak on behalf of members ofCongress, but have great difficulty in understanding what would bethe appeal of kicking this can down the road yet another year,particularly when there is such a gulf between the position ofNCOIL and the NAIC," Mr. Crerar concluded.