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

Q: Do you believe the surplus lines business isgrowing?

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 shiftinga bit, although nothing dramatic has occurred to date. Many of ourmembers anticipate surplus-lines writings will grow in the comingseveral years, but this will be dependent upon the overallinsurance market cycle.

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

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

A: The NRRA ushered in a national framework for the regulationand taxation of the surplus-lines industry, representing a dramaticimprovement from the multi-state tax, licensing and complianceissues that plagued the industry for decades. NAPSLO members areencouraged by the NRRA's home-state provisions and progress towardeliminating multiple filings and separate regulatory requirementsfor multi-state insurance risks.

Take, for example, a multi-state insurance policy with risks in20 states pre-NRRA. This multi-state transaction was governedseparately by 20 states with inconsistent rules for the filing ofpolicy information, the allocation of multi-state premium andrelated taxes, and the eligibility of the underlying surplus-linesinsurance carrier, among others. Surplus lines brokers wererequired to submit separate tax filings and payments in each of the20 states. The NRRA's home state authority eliminates thesemultiple filings and separate regulatory requirements formulti-state insurance risks.

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

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

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

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

Q: What do you think the future holds for theNonadmitted Insurance Multistate Agreement, known asNIMA?

A: For some time, NAPSLO has been concerned with thecost/benefit of the NIMA tax-sharing approach, given ourprojections of tax dollars to be reallocated among thejurisdictions participating. NAPSLO will continue its work toward100-percent uniformity with home-state taxation.

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

A: Yes. NAPSLO's Legislative Committee and Board of Directorsrecently agreed to support federal legislation to reform theNational Association of Registered Agents and Brokers (NARAB).NARAB II will establish NARAB as a national agent/broker licensingentity to provide for one-stop insurance agent and broker licensingfor agents operating outside of their home state, while preservingimportant state regulatory authority and consumer protections. Italso supports providing a more competitive insurance market andimproves state insurance regulation to the benefit ofconsumers.

Q: What other issues are of current concern toyou?

A: There is still tremendous opportunity to improve theuniformity in forms, filing requirements, dates and procedures tocreate the more efficient and simplified regulation intended by theNRRA. Even beyond the uniformity achieved with the home-stateapproach, the states have the opportunity to demonstrate theirability to modernize and work collaboratively to further reduce thecomplexity and cost of unique compliance rules and requirementsacross state lines. NAPSLO continues to promote and work topreserve the uniformity and efficiencies intended by theNRRA.

Q: How are NAPSLO's membership initiativesperforming?

A: We have welcomed many new members to NAPSLO this year. OurMembership Committee has approved 45 new members since last fall,increasing our overall numbers slightly from the stable numbersmaintained over the past five years. Our Annual Conventions havebeen outstanding. We enjoyed a record-breaking 3,428 registrationsfor our 2011 Annual Convention in San Diego and, according toBest's Review, ranked second by number of attendees among theirreport of 2011 insurance events. We currently anticipate more than3,400 attendees at our 2012 Annual Convention in Atlanta, which isshaping up to be another excellent event.