Insurance News

House Seen Moving Quickly On Surplus Lines Bill

Posted on: June 11, 2009

WASHINGTON —The House plans to speed up consideration of a measure to reform regulation of surplus lines insurance and reinsurance, insurance lobbyists said today.

The bill (H.R. 2571) will be taken up under expedited procedures. At the same time the lobbyists said the pace of enacting regulatory reform legislation is slowing down as Congress deals with other priorities.

The lobbyists who commented made their remarks in briefing members of the Risk and Insurance Management Society attending the trade group’s annual “RIMS on the Hill” legislation seminar.

They included Libby Baney, an advisory at B&D Consulting, Kevin McKechnie, executive director of the American Bankers Insurance Association and Tracey Laws, senior vice president and general counsel of the Reinsurance Association of America.

An Obama administration tax proposal that would reduce the scope of the Terrorism Risk Insurance Act is unlikely to be supported by Congress, they said.

The group said that Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, has told them he believes the administration’s financial services regulatory reform proposals are likely to focus on banks, not insurance.

But, insurers will be subject to a systemic regulator and an agency will be given authority to deal with troubled insurers, amongst other non-bank financial services providers under the principles, the lobbyists said.

The House, where the Democrats have a large majority is expected to pass financial services reform legislation piecemeal, probably before Congress leaves for its August recess, they related.

But, they said the pace will then slow as the Senate, focused on healthcare and energy legislation, delays action—and then likely deals with regulatory reform issues in one omnibus package.

The administration’s principles for financial services reform will be unveiled by the White House June 17 under the present plan. Treasury Secretary Timothy Geithner will provide a detailed explanation of the administration a day later in scheduled testimony before the House Financial Services Committee, the lobbyists said.

Regarding surplus lines, the bill expected to receive prompt consideration in the House similar to legislation that passed the House in 2007.

But, companion legislation has not been introduced in the Senate. Ms. Baney said that Sen. Evan Bayh, D-Ind., has agreed to be a primary sponsor of such legislation in the Senate, as have Sen. Bill Nelson, D-Fla., and Sen. Mel Martinez, R-Fla.

After introduction in the Senate and passage in the House, the next likely step is a hearing in the Senate, Ms. Baney said.

Ms. Laws said surplus lines and reinsurance reform legislation has broad support within the industry as well as Congress, and that the National Association of Insurance Commissioners has acknowledged the need for reform.

One of the most important provisions for reinsurers, she said, is the one limiting the authority of state regulators to exercise “extraterritorial jurisdiction” over reinsurers based in their state in cases where those reinsurers engage in transactions outside that state.

The Nonadmitted and Reinsurance Reform Act is, in part, aimed at making access to the surplus lines market more efficient for consumers and the brokers and agents who assist them. In addition, the bill could help standardize state regulations facing the surplus lines industry, according to industry advocates.

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 bill would:

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

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

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

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

© Copyright 2009 National Underwriter Property & Casualty. A Summit Business Media publication. All Rights Reserved.

%d bloggers like this: