Last Wednesday, the House Financial Services Committee made its first move toward modernizing the insurance regulatory system by approving legislation designed to ease regulatory burdens on surplus lines insurance market participants and reinsurers.
As the committee debated the bill, Rep. Mike Oxley, R-Ohio, the chairman, said it represented "the first step in this committee's journey toward insurance regulatory modernization."
The bill, HR 5637, which is known as the Nonadmitted and Reinsurance Reform Act, was passed by voice vote.
The next step is a sequential referral to the House Judiciary Committee, according to Rep. Dennis Moore, D-Kansas, one of the bill's co-sponsors. That panel will decide whether it will merely support the bill or hold its own review, he said.
In any case, lobbyists and congressional staffers said a September vote on the House floor is likely.
The consensus of congressional staffers and industry lobbyists is that the Senate is unlikely to act on the bill this year, although Sen. Richard Shelby, R-Ala., chairman of the Senate Banking Committee, earlier this month committed himself to another hearing on insurance regulatory issues in September.
Introduced by Reps. Ginny Brown-Waite, R-Fla., and Moore, the bill would streamline regulation of multistate surplus lines insurance transactions by establishing the insured's home state as the regulator over the transaction. Additionally, that state would be charged with collecting all premium taxes and allocating them accordingly among the involved states.
For reinsurers, the legislation would ensure that states do not interfere with their arbitration agreements, and that ceding insurers are given credit for the reinsurance of their ceded risk if they are in states accredited by the National Association of Insurance Commissioners, or in those states that have regulations similar to requirements for NAIC accreditation.
Along with Rep. Debbie Wasserman-Schultz, D-Fla., Rep. Brown-Waite noted that the problems the bill seeks to address have been keenly felt in Florida, adding that they are being increasingly felt in other states as well.
"This is not just a Florida problem," Rep. Brown-Waite said, noting that as the availability of coverage from the admitted market has decreased and prices have risen, consumers need to rely increasingly on surplus lines insurers.
"What began in Florida is certainly rippling throughout the rest of the United States as well," she said.
The ranking Democrat on the panel, Rep. Barney Frank, D-Mass., offered a note of caution during the proceedings, saying the committee should not be working to nationalize insurance regulation or to preempt state insurance laws completely. He thanked Rep. Oxley for making significant changes to the bill based on recommendations from the NAIC.
The main alteration to the bill increased the qualifications for a "qualified risk manager" required to be employed by a commercial insurance buyer if that company wanted to seek coverage from the surplus lines market without first going to the admitted market.
The bill now requires a "qualified risk manager" to have an advanced degree in risk management, as well as five years of experience and at least one designation showing competency in risk management from an organization such as the American Institute for CPCU or the National Alliance for Insurance Education & Research.
Additionally, Rep. Oxley added a mandate for the Government Accountability Office to study the surplus lines market upon passage of the bill to determine, in Rep. Frank's words, "the potential problem of people gaming the system" or insurers moving between the admitted and nonadmitted markets to find more favorable or lenient regulatory regimes.
The committee vote was likely the last for Rep. Oxley, who is retiring from Congress at the end of his term this year.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.