No NCOIL, NAIC Agreement on Surplus Lines Law Implementation

NU Online News Service

State regulators and legislators today failed to reach agreement on a model law needed to implement the federal legislation reforming and modernizing regulation of the surplus lines and reinsurance industries.

At the same time, they agreed at the annual meeting of the National Conference of Insurance Legislators (NCOIL) in Austin that they must act to implement the law before a drop-dead date of June 11, 2011, or Congress is likely to step in.

Representatives from NCOIL and the National Association of Insurance Commissioners engaged in a lengthy discussion of the implementation issue at today's meeting.

Members said that, "we have 200 days to act" on an approach "everyone at the state level can support," according to several people who attended the meeting.

At the summit, NCOIL and NAIC members agreed that the "worst of all possible worlds" would be that some states adopt NCOIL's Surplus Lines Insurance Multi-State Compliance Compact (SLIMPACT) proposal and other states adopt the NAIC's Nonadmitted Insurance Multi-State Agreement (NIMA) proposal.

If that is what happens, the officials said, "Congress is likely to step in."

According to Nicole Allen senior vice president, strategic resources, for the Council of Insurance Agents and Brokers, the NCOIL proposal addresses the issues associated with the collection and allocation of surplus lines taxes.

It "also promotes the development and adoption of uniform surplus lines regulatory standards in compacting states, including [insurer] eligibility standards," she said.

By contrast, the NAIC proposal is running into unanimous opposition from the industry.

In a letter sent to the NAIC last Monday, six trade groups contend that the NAIC proposal "continues, by contract," the burdensome system that Congress sought to eliminate through the new law.

The law that the competing proposals seek to implement is the Nonadmitted and Reinsurance Reform Act, which was incorporated into the Dodd-Frank financial services reform legislation. States are required to act to implement the law by June 2011.