NAPSLO Releases Regulatory Principles
At the annual meeting of the National Association for Professional Surplus Lines Offices, Ltd. last month, the association released a set of regulatory principles adopted by its board.
The nine principles are:
I. Freedom of Regulation of Surplus Lines Rates and Forms. Noting that freedom from regulation of rates and forms is what sets the surplus lines segment apart, NAPSLO believes that freedom should be defended "at all times in all states, even for seemingly minor infringements."
II. The Principle of Export. This means that surplus lines transactions involve state-regulated surplus lines brokers exporting business to nonadmitted insurers that are not regulated by the state.
III. Primacy of Surplus Lines. State-based residual market mechanisms should not be given risk placement preference before surplus lines.
IV. Uniform and Reciprocal Licensing of Surplus Lines Brokers Between the States. NAPSLOs goal is a uniform and reciprocal 50-state system.
V. Standardization of Taxation of Multistate Surplus Lines Risks. NAPSLOs goal is a simple and conflict-free single payment system for remitting surplus lines taxes on multistate risks.
VI. Guaranty Funds. NAPSLO is opposed to surplus lines guaranty funds.
VII. Commercial DeregulationAutomatic Export. Transactions involving exempt policyholders should automatically quality for export to the surplus lines market, without a diligent search.
VIII & IX. State Regulation and Federal Regulation. NAPSLO favors the continuation of a state-based regulatory system, but believes the state system must become more uniform and efficient.
During a panel discussion at the annual meeting, NAPSLO executives revealed two recent victories with respect to Principle I.
In New Jersey, the governor signed a bill that eliminated the requirement that surplus lines insurers file forms for approval. Charles McCloskey Jr., the president of the N.J. Surplus Lines Association and vice president at Metcom Excess, a managing general agency in Cliffside Park, told National Underwriter New Jersey had been the only state where forms approval was required. The victory, he said, came after a two-year joint effort involving NJSLA and the Independent Insurance Agents of New Jersey.
In New York, a regulation relating to the earning of terrorism insurance coverage premiums was allowed to expire in September. The regulation had been seen as an attack on freedom of rate and form by E&S brokers because of a regulatory amendment that prohibited them from dealing with insurers that did not consent to writing TRIA premiums on a pro-rata basis. (See NU, May 19, page 26 for details.)
Dan Maher, executive director of the Excess Line Association of New York, who was instrumental in the effort opposing the regulation, spoke on several other principlesincluding the one opposing surplus lines guaranty funds–at the NAPSLO meeting.
Noting that New Jersey is the only state with such a fund, he reported that the administration had raided it "to the tune of $400 million and they also cut back on the type of risks that are going to be covered."
"Ive had a number of New Jersey surplus lines brokers tell me, When I sold policies, I told my insureds that they were protected by the guaranty fund."
"So somewhere between egg on their face[s] and liability exposures is what theyre looking at today," he said.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, October 24, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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