The White House has expressed concerns about some technicalprovisions of legislation that would re-establish the NationalAssociation of Registered Agents and Brokers (NARAB).

At the same time, Sen. Tom Coburn, R-Okla., has proposed anamendment to the legislation that would allow states to opt-out, aprovision that concerns industry officials.

“An opt-out sounds appealing but in reality is a poison pill,”said Joel Wood, senior vice president of government relations atthe Council of Insurance Agents and Brokers.

He said that under NARAB, states retain all of their corelicensing responsibilities, “it is simply an administrativemechanism for multi-state licensing.”

Wood added that, “As we've seen with the surplus lines lawspost-the Dodd-Frank financial services reform law, “it's importantfor all states to be a part of any such facility or it simplydoesn't work.”

Wood said that agents and brokers “appreciate Coburn's intentand honor it completely.” He lauded Coburn, who plans to stepdown at the end of the year because of illness, noting that, “He'sthoughtful and principled.” However, Wood said, “a change inthe construct of the legislation could call into question theentire legitimacy of the enterprise.”

He said the CIAB has “worked so long, for so hard, to achievethe enactment of this legislation.

“We hope and think we will move forward toward that goal thisweek,” Wood added. We're all so grateful, too, for theleadership of the Senate Banking Committee on both sides of theaisle, and for our lead champions, Sens. Jon Tester. D-Montana, andMike Johanns, R-Nebraska.

The bill is S. 1926, the Homeowner Flood Insurance AffordabilityAct of 2014 and National Association of Registered Agents andBrokers Reform Act of 2014.

The Senate brought the bill to the floor through rarely usedemergency procedures by an overwhelming 86-13 vote Monday night.Floor action could begin as early as Wednesday, industry officialssaid.

A trade group official explained that the legislation is modeledafter the National Association of Securities Dealers (NASD) andwill be a completely voluntary, self-regulating organization. “The big concession we've made is on governance – that a majorityof the governance has to come from state insurance commissioners,”the lobbyist said.

That provision is what captured the attention of the WhiteHouse. In a statement of administration position released on Mondaynight, the administration said that it “has constitutionalconcerns” with the requirement that the president reserve eight ofthe thirteen positions on the NARAB board of directors for stateinsurance commissioners, “which appears to significantly constrictthe pool of individuals from which the President would be able tomake those eight nominations.”

However, the statement of policy did not include a vetothreat.

The statement of administration position said this restriction“appears to impermissibly limit” the scope of the president'sappointment power. In the statement, the administration said itrecommends that this requirement be amended to expand the size ofthe pool of potential appointees.

The White House statement also voiced concern with anotherprovision, which provides a process for conducting criminal historyrecords checks on individuals applying to become members of NARAB“that is inconsistent with the normal process the FBI uses toconduct thousands of such background checks.”

The statement said that the administration believes the bill“can be made consistent with current law in order to assure thebenefits of an efficient and effective established process,” butdid not elaborate.

The provision, which passed the House overwhelmingly in October,has been added as a sweetener to controversial legislation thatwould delay for as long as four years rate hikes mandated for theNational Flood Insurance Program through a 2012 law.

“NARAB II is important legislation that will benefit consumersas much as it does agents,” said John Nichols, president of theNational Association of Insurance and Financial Advisors(NAIFA).

Nichols said that, “People shouldn't lose access to trustedinsurance advisors simply because they live in a different state.NARAB II will make it easier and more cost-effective to maintainclient relationships across state lines while ensuring thatinsurance regulation remains at the state level. NAIFA is pleasedthat the Senate is considering NARAB II as part of S. 1846 and urgeits passage.”

NARAB was added to the flood insurance rate rollback legislation10 days ago by Sen. Robert Menendez, D-N.J. The entire bill has thesupport of 30 senators from across the aisle, and is considered asa pocketbook issue by consumers and public officials in states fromHawaii to Vermont.

However, the insurance industry and fiscal hawks oppose delayingthe increases, and Menendez and other supporters of the bill addedthe NARAB provision as a sweetener to industry.

The combined bill was cleared for floor action on the 27th lateJan. 16th, by the Senate leadership after agreement was reached onwhat amendments will be allowed to be debated on the floor.

The Senate Banking Committee passed the version included in theflood bill in June, and the full House in October. It wouldestablish a mechanism for establishing true nonresident licensingreciprocity for insurance agents. NARAB, as envisioned by thelegislation would create a non-profit, independent board that wouldallow multistate licensing for insurance producers.

Under the bill, insurance agents will be able to apply for NARABmembership and become licensed to sell insurance in multiplestates, but states will maintain their full authority in regulatingthe business of insurance.

States would retain their regulatory jurisdiction over consumerprotection, market conduct and unfair trade practices, and wouldretain their rights over licensing, supervision, disciplining andthe setting of licensing fees for insurance producers, according toKen Crerar, president/CEO of the Council of Insurance Agents andBrokers in a statement issued when the bill was passed by theHouse.

A trade group official explained that the legislation is modeledafter the National Association of Securities Dealers (NASD) andwill be a completely voluntary, self-regulating organization. “The big concession we've made is on governance – that a majorityof the governance has to come from state insurance commissioners,”the lobbyist.

The basic premise of the legislation is that, “If you want tokeep getting nonresident licenses state by state, fine, you cankeep doing that,” the lobbyist.

“If you're only licensed in two or three jurisdictions, that'sprobably the easiest thing to do,” the lobbyist said

However, under the NARAB-II legislation, agents would have theability to submit themselves for “membership” in NARAB. “Thegoverning body will set qualifications for membership,” and thequalifications have to be based on the “highest standards” thatexist in any state law … which really isn't that high a barrier,the lobbyist said.

But that will mean continuing education, criminal backgroundchecks, fingerprinting, etc., he said NARAB, for example,could decide that if you hold a CPCU designation, then you areautomatically qualified for a p/c license. It will beintegrated with the National Insurance Producer Registry now run,sort of, by the NAIC.

“You get your NARAB designation, and then you check off all thestates where you want a nonresident license,” but you will have tobe licensed first in your home jurisdiction,” he said.

Under the provision, NARAB will collect all of the statelicensing fees and remit them to the states.

“States will have a short period of time to object to you beingallowed to sell in their state, so they get an initial look/see,but that's it,” he said. “They can't discriminate against aNARAB member. Basically, it is 'two-stop” shopping,” hesaid.

First, an agent has to be licensed in his home state, then getlicensed with NARAB and pay the fees, he said. “Under theprovision, there has to be self-funding, with no access to federalfunds or subsidies,” he said.

If the bill clears legislative hurdles in the Senate, passage islikely.

However, the bill may face major reworking in the House.

Opponents of the bill within the insurance industry are alreadyerecting roadblocks. For example, SmarterSafer.org – a coalition ofenvironmental groups, taxpayer advocates, insurers, and housing andmitigation organizations, said they have won the support of HouseSpeaker John Boehner, R-Ohio, in opposition to the bill. “Weapplaud Speaker Boehner for rejecting proposals to further delayflood insurance reforms and hope that he will instead exploremeasured changes that will put a troubled program on a path tofiscal viability,” SmarterSafer.org said in a statement.

The statement cited the CBO projection of the cost of delay. “The Congress has just passed a one-year delay of someprovisions in the omnibus bill. A four-year delay would makethe situation even worse. Clearly the Speaker understands thegravity of this situation and we look forward to working with theHouse on targeted changes,” the statement said.

As for NARAB-II, a property-casualty industry lobbyist said,“there is very little opposition to the NARAB provision.”