House Bill Includes E&S, Reinsurance Reform Measure

Washington

Reinsurance and excess and surplus lines purchases would be governed by the tax policies, licensing and other requirements of the buyer's home state under a provision added to the House version of financial services regulatory reform legislation passed by the House on Dec. 11.

The amendment contained in the House bill reflects the same language passed by the House as the stand-alone Nonadmitted and Reinsurance Reform Act of 2009, known as the NRRA.

That bill's provisions are now part of the broader H.R. 5173–the Wall Street Reform and Consumer Protection Act of 2009. (See related story on page 6.)

The reinsurance and surplus lines provisions were added at the request of the industry because financial services regulatory reform is a priority in Congress.

"By establishing that the home state of the policyholder governs a transaction, the surplus lines industry would no longer face trying to comply with confusing and conflicting laws and regulations of multiple states on a multistate transaction," said Richard Bouhan, executive director of the National Association of Professional Surplus Lines Offices.

"The surplus lines industry should be governed by one set of consistent rules on a transaction, and this amendment will do that," he added.

NAPSLO President Marshall Kath added that his association and sector of the industry "have been seeking reform regarding tax remittance and regulation of multistate surplus lines transactions for many years and are pleased to see it as part of the bill."

Looking ahead, Mr. Kath noted that the reinsurance and surplus lines provisions were included in the draft financial services regulatory reform bill recently circulated by Sen. Chris Dodd, D-Conn., chair of the Senate Banking Committee. "With the House and Senate taking up the language as part of reform legislation, we are hopeful that the issue will be resolved," he said.

Frank Nutter, president of the Reinsurance Association of America, said the inclusion of the NRRA legislation in the broader House financial services reform bill is "an important step toward a more efficient regulatory regime for global reinsurers, and vital to modernizing our current insurance regulatory system."

Adding the reinsurance and surplus lines provisions to the financial reform measure increases the odds that the NRRA will ultimately be enacted, according to Joel Wood, senior vice president of government affairs for the Council of Insurance Agents and Brokers.

In addition, according to Mr. Wood, "the inclusion of the NRRA in the House bill will make the issue a 'conference-able' issue, even in the event 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.

The NRRA bill 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," Mr. Wood explained.

Steve Bartlett, president and CEO of the Financial Services Roundtable–whose members include multinational insurers–said enactment of this provision into law will improve U.S. insurance regulation "in a narrow, but meaningful way."

At the same time, Mr. Bartlett said he would "urge Congress to build on this progress toward uniformity by moving to pass comprehensive insurance reform for all lines of insurance."

He added that "we believe financial services regulatory reform remains incomplete without the creation of a functional regulator that would give insurers and reinsurers the ability to be chartered and exclusively regulated at the federal level."