Reinsurance, Surplus Lines Measure Moves Ahead In House

Joel Wood, senior vice president of government affairs for the Council of Insurance Agents and Brokers, said he expected the amendment would be approved during action on the omnibus legislation, the Wall Street Reform and Consumer Protection Act of 2009 ( H.R. 4173).

The entire bill, incorporating nine separate bills, reported out by House committees over the past several months, is expected to pass the House Friday.

One of the reasons the surplus lines and reinsurance amendment was seen as likely to get approval is that it has bipartisan support. Its primary sponsors are Rep. Dennis Moore, D-Kans., and Rep. Scott Garrett, R-N.J.

The measure would also prohibit states from voiding established, contractual arbitration agreements between reinsurers and primary insurers, according to a summary prepared by the House Rules Committee.

The Rules Committee serves as the gatekeeper for House floor action. The committee agreed to allow floor debate on only 36 of the 260 amendments to the bill that members of Congress asked be approved for House floor debate.

Mr. Wood said, "The inclusion of the NRRA in the legislation expected to clear the House this week will make the issue a "conference-able" issue, even in the event that the Senate fails to include surplus lines reform and modernization provisions in its version of the bill."

"Again, this does not in any way diminish our determination to build strong bipartisan support for surplus lines reform in the Senate – but we're grateful for this 'insurance policy' that moves us to our long-sought goal," he said.

In a note to CIAB members, Mr. Wood said reform of the surplus market that provides coverage not available from insurers licensed in the buyer's state is important because, "With the steep declines in the values of property and casualty insurers' investment portfolios, available capital in the traditional property/casualty marketplace is becoming more and more constricted and the need for the insurance capital brought by the surplus lines – or "non-admitted" – insurers is becoming increasingly essential."

He explained that, "Unfortunately, access to the surplus lines marketplace for policyholders that are seeking to insure risks in more than one state is greatly impaired by extensive, duplicative and sometimes conflicting state statutory and regulatory requirements which impede the effectiveness of the market and increase the costs to surplus lines consumers."

He added that, "Inclusion of the NRRA – supported widely by all of the major insurance stakeholders, including commercial insurance consumers – would alleviate these impediments."

Mr. Wood said the amendment would streamline state rules and ease compliance burdens without sacrificing the consumer protection objectives shared by all states.

It also would subject surplus lines transactions to a single set of regulations – those of an insured's home state or principal place of business – regardless of the location of the risk.

"Such a step would consolidate regulatory oversight and streamline surplus lines regulation, eliminating current overlapping and (for tax filings) sometimes conflicting rules that vary from state to state," he explained.

The National Association of Professional Surplus Lines Offices Ltd. also noted the pending House action, and reiterated the industry's reason for seeking its inclusion in the financial services reform bill.

"Including the NRRA, language in the bill will make it easier to enact the NRRA as the Senate Banking committee's proposed Financial Services Reform bill also contains the NRRA language," explained Richard Bouhan, NAPSLO executive director.