National Underwriter's Washington Bureau Chief Arthur D. Postal speaks with NAPSLO Executive Director Brady Kelley about the state of the surplus-lines market, the association's response to the implementation of NRRA, and what the future will hold for NIMA, among other topics.

Q: Do you believe the surplus lines business is growing?

A: A.M. Best's “2012 Special Report on U.S. Surplus Lines” illustrates consistent surplus-lines premium from 2010 to 2011, with anticipated growth in 2012. It appears the market is shifting a bit, although nothing dramatic has occurred to date. Many of our members anticipate surplus-lines writings will grow in the coming several years, but this will be dependent upon the overall insurance market cycle.

Some of our members have reported evidence of price strengthening, but it seems to vary by line of business and region, and there is no certainty it is the result of a dramatic change.

Q: Are members satisfied with the implementation of NRRA, the Nonadmitted & Reinsurance Reform Act?

A: The NRRA ushered in a national framework for the regulation and taxation of the surplus-lines industry, representing a dramatic improvement from the multi-state tax, licensing and compliance issues that plagued the industry for decades. NAPSLO members are encouraged by the NRRA's home-state provisions and progress toward eliminating multiple filings and separate regulatory requirements for multi-state insurance risks.

Take, for example, a multi-state insurance policy with risks in 20 states pre-NRRA. This multi-state transaction was governed separately by 20 states with inconsistent rules for the filing of policy information, the allocation of multi-state premium and related taxes, and the eligibility of the underlying surplus-lines insurance carrier, among others. Surplus lines brokers were required to submit separate tax filings and payments in each of the 20 states. The NRRA's home state authority eliminates these multiple filings and separate regulatory requirements for multi-state insurance risks.

NAPSLO members are most satisfied with the NRRA's tax provisions, with nearly 80 percent of nationwide premium in 44 states retaining 100 percent of the tax as the home state.

Q: Do you think further legislation is needed to clarify the intent of the legislation?

A: While all but two jurisdictions have implemented some NRRA-enabling legislation, there is work to be done to improve the legislation in certain states.

For example, our work continues to promote the uniform implementation of the NRRA's insurer-eligibility provisions. Working in coalition with many insurance trade associations, NAPSLO met with regulatory officials and submitted a letter to the NAIC regarding our concerns with the inconsistent implementation of the NRRA's insurer-eligibility standards. We are working with the NAIC's Surplus Lines Task Force and the other trade associations to promote uniformity nationwide.

Q: What do you think the future holds for the Nonadmitted Insurance Multistate Agreement, known as NIMA?

A: For some time, NAPSLO has been concerned with the cost/benefit of the NIMA tax-sharing approach, given our projections of tax dollars to be reallocated among the jurisdictions participating. NAPSLO will continue its work toward 100-percent uniformity with home-state taxation.

Q: Is the passage of NARAB II NAPSLO's next federal goal?

A: Yes. NAPSLO's Legislative Committee and Board of Directors recently agreed to support federal legislation to reform the National Association of Registered Agents and Brokers (NARAB). NARAB II will establish NARAB as a national agent/broker licensing entity to provide for one-stop insurance agent and broker licensing for agents operating outside of their home state, while preserving important state regulatory authority and consumer protections. It also supports providing a more competitive insurance market and improves state insurance regulation to the benefit of consumers.

Q: What other issues are of current concern to you?

A: There is still tremendous opportunity to improve the uniformity in forms, filing requirements, dates and procedures to create the more efficient and simplified regulation intended by the NRRA. Even beyond the uniformity achieved with the home-state approach, the states have the opportunity to demonstrate their ability to modernize and work collaboratively to further reduce the complexity and cost of unique compliance rules and requirements across state lines. NAPSLO continues to promote and work to preserve the uniformity and efficiencies intended by the NRRA.

Q: How are NAPSLO's membership initiatives performing?

A: We have welcomed many new members to NAPSLO this year. Our Membership Committee has approved 45 new members since last fall, increasing our overall numbers slightly from the stable numbers maintained over the past five years. Our Annual Conventions have been outstanding. We enjoyed a record-breaking 3,428 registrations for our 2011 Annual Convention in San Diego and, according to Best's Review, ranked second by number of attendees among their report of 2011 insurance events. We currently anticipate more than 3,400 attendees at our 2012 Annual Convention in Atlanta, which is shaping up to be another excellent event.

Special Reports /

NIMA, NRRA and NARAB II: Q&A With NAPSLO&rsquo;s Brady Kelley

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NIMA, NRRA and NARAB II: Q&A With NAPSLO’s Brady Kelley