AAMGA Lobbies For Federal Surplus Lines Bill

The American Association of Managing General Agents said it is putting together a lobbying plan in support of proposed federal legislation to regulate the surplus lines insurance marketplace.

Bernard G. Heinze, executive director of the King of Prussia, Pa.-based AAMGA, said the association's members are campaigning hard for passage of the measure intended to modernize and streamline the regulatory environment for surplus lines wholesalers.

During a June 2 hearing on the measure, Rep. Richard Baker, R-La.–chairman of the Capital Markets Subcommittee and one of the authors of the State Modernization and Regulatory Transparency Act (better known as SMART)–suggested to witnesses that the surplus lines bill might serve as an effective “test case” for a new incremental approach to the more broad-based SMART initiative to establish federal standards for state regulators.

Since his group testified before Congress in support of the bill, Mr. Heinze said the membership has been hard at work, with their colleagues in surplus lines meeting and discussing a lobbying effort in support of the bill.

One plan calls for holding a meeting with state regulators to continue the dialogue aimed at modernizing and developing uniformity with the federal bill. He said members are also working the phones, speaking with their individual representatives to impress on them the importance of this legislation.

The bill, Non-Admitted and Reinsurance Reform Act of 2006 (HR 5637), would establish a “home state” system, in which the state of domicile of the insured would serve as the authority for a multistate surplus lines insurance transaction.

Additionally, premium taxes would be paid entirely to the state of domicile, which would then be charged with distributing the funds to other states.

In testimony before the Capital Markets Subcommittee in Washington, D.C., Mr. Heinze said “this act is an important step in sustaining the nonadmitted insurance market's effective, efficient and economical services to the public and private sector.”

He said the bill would enhance speed to market for insurance products; stimulate competition; simplify and make uniform taxes on surplus lines; make regulatory compliance and licensing uniform and consistent between states; and allow for general equality and efficiency of the lines.

Mr. Heinze told National Underwriter that he expects passage of the bill no later than next year, but hoped it would be passed in the current session.

“But as in every bit of legislation, the devil is in the details, and here the details are how is all this going to be implemented,” said Mr. Heinze. “That is something we continue to work with the committee in Washington on, as well as our state regulator colleagues.”

He added, “When this bill does pass, and we certainly expect that it will, we will be ready to get the benefits right back where they belong–to the consumers for their protection, as well as to the agents and brokers who now will have a lot less paperwork. And we will be able to maintain the flexible rate and form environment that the surplus lines are known for.”

Representatives from the Independent Insurance Agents & Brokers of America and the Council of Insurance Agents & Brokers said the bill could open the door to broader federal standards and could prove to be more palatable to state regulators because it is not mandating federal regulations (see NU, June 26, page 6).