Surplus Lines Bill Passes House

Primary sponsors of the legislation are representatives Dennis Moore, D-Kan., and Ginny Brown-Waite, R-Fla.

In an abbreviated floor debate on the bill, Rep. Ruben Hinojosa, D-Texas, said: "This is much needed legislation. It will harmonize regulation of these products, and in some cases reduce taxes on these transactions."

The industry was highly supportive of the bill.

"This measure is a market imperative for the insurance industry, and the House vote is a victory for common sense," said Ken Crerar, president of the Council of Insurance Agents and Brokers. CIAB had aggressively lobbied for the legislation, which passed the House last year by a vote of 417-0.

"Everyone involved in moving this bill, from the chief sponsors to the key committee chairmen and ranking members, has recognized that the duplicative and conflicting system of state regulation was making compliance difficult if not impossible, and that a congressionally-imposed solution was truly the only way out," Mr. Crerar said.

Ben McKay, senior vice president of federal government affairs for the Property Casualty Insurers Association of America (PCI), called this bill "a crucial first step toward reforming and streamlining an increasingly burdensome state regulatory system."

"We encourage the Senate to pass it as well and send it on to President Bush's desk as expeditiously as possible," Mr. McKay added.

Bernie Heinz, executive director of the American Association of Managing General Agents, said his group is grateful for the broad bipartisan coalition which has "been formed to begin looking at the first steps toward insurance efficiencies and modernization and reforms."

Similar legislation–S.929–was introduced in the Senate in February by Florida's senators–Democrat Bill Nelson Republican Mel Martinez–but the Senate bill will likely need upgrading to reflect changes added at the request of the Risk and Insurance Management Society that ensures the definition of "Qualified Risk Manager" is sufficiently broad to include as many RIMS members as possible.

Terry Fleming, head of the Montgomery County, Md., Division of Risk Management and a RIMS board member, said RIMS is "delighted with the result of those changes and is grateful for its passage in the House."

She added that RIMS has already begun to contact Senate staff to express support for moving the bill this year.

Justin Roth, senior federal affairs director for the National Association of Mutual Insurance Companies, suggested that a strong impetus for the bill was the greater capacity and perhaps lower prices it would provide for policyholders hard-hit by recent hurricanes in coastal areas.

"This bill will help policyholders that are vulnerable to natural catastrophes and terrorist attacks by eliminating unnecessary duplication of regulation," he said.

"Many Florida homeowners, for example, have had to find wind coverage in the surplus lines marketplace due to recent hurricanes," Mr. Roth added.

Robert Rusbuldt, chief executive officer of the Independent Insurance Agents and Brokers of America, said the bill not only eliminates duplication in surplus lines regulation but can also serve "as a shining example of how responsible insurance reform can occur–by using targeted federal legislation to address areas of concern while retaining the strengths of the current regulatory system."

While the bill had strong insurance industry support, some groups' reaction displayed the ongoing tension over the topic of regulation as a whole.

The American Insurance Association said it also supported comprehensive reform through an optional federal charter for insurers, while NAMIC voiced a hope that the Senate would take up the surplus lines measure rather than focusing on legislation to create an optional federal charter.