Surplus Lines Bill Reintroduced As HR 2571

The Senate took up a similar bill in 2007, but no action was taken in the Senate prior to the end of the 110th Congress, requiring that the bill be reintroduced in the 111th Congress in order to be considered.

The National Association of Professional Surplus Lines Offices, Ltd. in Kansas City, Mo., announced the reintroduction with a statement applauding the action.

In the statement, NAPSLO President John Wood said, "We are also encouraged regarding prospects for the bill being introduced in the Senate shortly. Passage of this bill would help streamline and reduce barriers in state regulation of surplus lines insurance."

The Independent Insurance Agents and Brokers of America and the National Association of Mutual Insurance Companies also voiced strong support. They believe the legislation represents the kind of targeted insurance regulatory reform that is preferable to federal regulation as represented by an optional federal charter.

The bill would:

o Establish national standards for how states regulate the surplus lines market and reinsurance.

o Create a uniform system of surplus lines premium tax allocation and remittance.

o Establish one-state compliance on multistate surplus lines risks.

o Allow for direct access to the surplus lines market for sophisticated commercial purchasers.

"These are concepts long endorsed by NAPSLO and promoted with members of Congress during meetings over the past few years," Mr. Wood said.

RIMS, whose members are the ultimate users of insurance products, also noted its support last week.

"RIMS believes the bill would reduce the regulatory costs for insurers that are passed on to consumers and would make insurance more available and affordable," said Deborah Luthi, a member of the RIMS board of directors.

RIMS noted that the Nonadmitted and Reinsurance Reform Act of 2009 would allow brokers representing large policy holders to go directly to the nonadmitted market to purchase insurance. It would also require all surplus lines carriers to meet certain financial, capital and other criteria in order to be eligible to provide surplus lines insurance in states, RIMS noted in its statement last week.

IIABA officials said they supported prompt passage of the legislation because it would be "another example of a positive, targeted approach to insurance regulatory reform."

"This legislation, by applying single-state regulation and uniform standards to the nonadmitted and reinsurance markets, along with giving the state sole regulatory authority, will preserve the strengths of the state-based insurance regulatory system," said Tom Koonce, IIABA assistant vice president for federal government affairs.

Marliss McManus, senior federal affairs director for the National Association of Mutual Insurance Companies, said, "This approach would streamline the current regulatory system by establishing uniform and consistent standards, while leaving the day-to-day regulatory control at the state level."

She added, "Since surplus lines complement the admitted market, reforming and standardizing regulation will ultimately provide more choices for insurance consumers."

David A. Sampson, president and chief executive officer of the Property Casualty Insurers Association of America, said, "This legislation is a vital step toward reforming and streamlining our current insurance regulatory system."

"This bill, if enacted, will create greater legal and regulatory certainty for surplus lines consumers, which will benefit insurers, businesses and the economy," he said.

Reps. Moore and Garrett, members of the House Committee on Financial Services, submitted the bill, which also had 20 other cosponsors, on Thursday, May 21.

Senators Evan Bayh, D-Ind., and Mel Martinez, R-Fla., members of the Senate Committee on Banking, Housing and Urban Affairs, have also announced that they plan on introducing a version of the bill in the Senate.

"We believe that this legislation will bring efficiency and reduce the cost of regulatory compliance in surplus lines placements with multistate exposures," said NAPSLO Executive Director Richard Bouhan. "Consumers will benefit because the costs related to the inefficiencies and redundancies, which they bear, will be eliminated," he added.