Surplus Lines Industry Says It Is 'Big Winner' In Fin Reform Bill

The Dodd-Frank Wall Street Reform and Consumer Protection Act, H.R. 4173, is expected to be signed by President Obama next week.

Regarding the surplus lines provisions, NAPSLO executive director Richard Bouhan explained that the full promise of this legislation will not be realized until the states have implemented through an interstate compact or similar mechanism uniform forms, processes and procedures for collection, payment and allocation of surplus lines premium tax.

Currently, the majority of states require payment of an allocated portion of tax on a multistate risk, but several state statutes impose the tax on the entire gross premium of a multistate risk which can create a "double tax" on a portion of the premium in some transactions.

Mr. Bouhan said the surplus lines modernization provisions "will make access for insurance consumers to the surplus lines market quicker, more efficient and the payment of surplus lines premium taxes to the states less burdensome for the consumer and broker."

He added that, "The legislation also establishes that only one state, the home state of the insured, can regulate a multistate surplus lines transaction."

Charles Chamness, president and chief executive officer of The National Association of Mutual Insurance Companies agreed, and noted that, "Reforming the regulation of surplus lines insurance has been among NAMIC's goals for years."

Regarding the overall bill, Mr. Chamness said the final version "does not impose onerous new federal or dual regulation on the property and casualty insurance industry."

He said that, "While we remain concerned by the bill as a whole, the Dodd-Frank bill recognizes that the property and casualty insurance industry is unique among financial services and recognizes the prudent management of p & c insurance companies–particularly mutual insurance companies–and the performance of the states in protecting consumers and ensuring solvency since the financial crisis began."

He said NAMIC will be particularly wary about the operation of the new Federal Insurance Office that will be established under the legislation.

Mr. Chamness said the legislation specifies that the FIO should provide Congress and the administration with information regarding the insurance industry and assistance in trade negotiations and other policy decisions.

"This office was created with the intent of providing information and expertise about the insurance industry to policymakers, and NAMIC will continue working as the FIO takes shape to ensure it remains true to that purpose," he said.

American Association of Managing General Agents President Mark Rothert, of Ron Rothert Insurance Services in Portland, Org., noted the efforts of other associations, in addition to NAPSLO, in getting the surplus lines provision passed including the Independent Insurance Agents & Brokers of America, Council of Insurance Agents & Brokers, Property Casualty Insurers Association of America, Reinsurance Association of America, and Risk and Insurance Management Society.

"We now continue with the second phase of moving this from legislation to implementation through the Surplus Lines Insurance Multistate Compliance Compact which industry has been working on with all state regulators and the AAMGA member surplus line and stamping offices. We have a year to get the job done and will continue to move this forward with the same mutual energies that allowed us to persevere with this effort," Mr. Rothert added.