NAPSLO Seeks TRIA Changes

"We just have a problem with this," he said in an interview here during NAPSLO's 19th annual mid-year educational workshop. "We realize that there are some problems in the area of workers' compensation and with some of the life people, where they have some [exposure] concentrations, and there may be some areas in urban America where there are some centers that need to be dealt with because they are so vulnerable to terrorist attack?but they should deal with those issues exclusively and take the rest of us out of it."

Mr. Bouhan emphasized that at NAPSLO, "we are not opposing all of TRIA. We are not actively opposing it. We have indicated to [U.S.] Treasury [Department] officials, and some others, our problems and concerns, and that [we feel] it should not be extended in its present form."

From a personal standpoint, Mr. Bouhan said he was taken aback when the industry agreed to allow the federal government to mandate insurance coverage through TRIA, requiring all insurers to offer terrorism coverage to commercial accounts in return for federal reinsurance coverage.

"In one fell swoop, the industry allowed the government to regulate our forms," he said. "This is not a natural position. It was breathtaking to me that that would occur, and that the industry was so willing to allow Congress to regulate the forms. I think it is something the industry may not really wish to see continue."

On other subjects of concern to the wholesale community, an increasing number of states are promoting their residual plans over the surplus lines market, according to Mr. Bouhan. He said the association feels that surplus lines should be the first source for insurance clients to turn to if traditional markets have a capacity shortage, and that state residual markets should be a last resort, as they were intended to be.

Clients should be free to choose what markets they wish to turn to, and seek the extent of coverage they desire and not be limited by statutes, he added.

"What we are asking is that the choice should be allowed, and not to preempt surplus lines because there is a residual market available," Mr. Bouhan explained. "We also believe that because the residual market is subsidized [by taxpayers], they ought not to be burdened with the cost if they don't have to be."

One of the major missions of NAPSLO will remain explaining to legislators, at the state and federal level, the purpose of the wholesale market and its complexities within the insurance system, he noted.

Among current concerns are regulations and legislation relating to disclosure and contingency fee commissions. He said the association was heartened by comments made recently by New York Attorney General Eliot Spitzer that appear to recognize the appropriateness of these commissions to most brokers and agents, and that they should continue.

Typically, contingent commissions, including for wholesalers, are profit driven based on the book of business they place with a carrier.

Mr. Bouhan said he is "cautiously optimistic" that the regulatory questions on disclosure will favor NAPSLO's position that wholesale brokers should not disclose their compensation to the policyholder because there is no direct relationship.

On the question over federal and state regulation of the industry, NAPSLO favors provisions that would create a more efficient regulatory system, but preserve state regulation at its core.

The proposed SMART Act (State Modernization and Regulatory Transparency Act) being considered in Congress would be a big step in that direction and would help reduce a lot of the regulatory headaches and confusion facing wholesalers, especially in the area of paying taxes, he noted.

"It is a proposal that would not necessarily provide a federal inevitability [toward regulation]," said Mr. Bouhan. "But there is obviously a demand, both inside and outside of the industry, for regulation to become more efficient, more uniform and more consistent. We agree with that need, particularly as it relates to surplus lines regulations, and we see some provisions that affect surplus lines in the SMART Act that will help us to get there."