Alerts Issued on Surplus Lines Reform Bill

Legislative alerts on United States Senate Bill 929, also known as the “Nonadmitted and Reinsurance Reform Act of 2007,” along with a suggested sample letter of support for the bill have been issued today by the American Association of Managing General Agents (“AAMGA”) and the National Association of Professional Surplus Lines Offices (“NAPSLO”). 

The alerts are reprinted below, respectively, along with a hyperlink to the template letter of advocacy included in both.

A National Association of Insurance Commissioner’s issue brief on S. 929 also is reprinted below, or click here to view a downloadable copy.

 

Should you have any comments or questions, please do not hesitate to contact Colodny Fass.

 

AAMGA

Your Help is Needed for Surplus Lines Reform Today

Dear Fellow AAMGA Members:

We need your immediate help. The Governmental Affairs Committee has been tracking and supporting the Non-admitted and Reinsurance Reform Act, Senate Bill 929. Senator Christopher Dodd, Chairman of the U.S. Senate Banking, Housing and Urban Affairs Committee has expressed interest in passage of some insurance reform during this legislative session. In Hearings held on Capitol Hill this summer, he has expressed support for the reforms S 929 will provide. Now is the time for AAMGA to show its grassroots’ support of this needed legislation to create a uniform manner in which to collect and pay surplus lines premium taxes on commercial multi-state risks that, currently, waste millions of dollars.

We encourage you to add your name to the attached letter and e-mail it to your Senators and Senator Dodd’s Committee. This is a short session so it is imperative that you do this today.

To find out the name and e-mail address of your Senators, please click here.

The AAMGA has made a formal submission to the Senate on the importance of passing this necessary reform now – before another congressional session comes to a close. As a member of the oldest, respected representative of the wholesale insurance industry, your help is needed to show the grassroots’ strength of our marketplace. Please join with our colleagues at NAPSLO, Council of Insurance Agents and Brokers, Big “I” and other professional trade associations by taking a minute and making a difference.

Thank you,

AAMGA Governmental Affairs Committee 
Co-chairs: Kurt Bingeman & Bill Malone
Board Liaison: Mark Rothert

 

NAPSLO

Help pass S. 929; Write Your Senator!

With only a few months before the 110th Congress concludes, NAPSLO is asking its members to help get S. 929 (the Nonaddmitted and Reinsurance Reform Act) approved by the Senate before the end of the current legislative session.

A simple email or letter (such as this draft letter) to your Senator expressing the benefits to consumers and the surplus lines market that a more efficient tax and compliance system would establish under S. 929 would be helpful. You can contact your Senator by visiting their web site and a list of Senate sites is available here.

A similar version of S. 929  (H.R. 1065) was passed in 2007 by the House of Representatives and the Senate version is currently before the Senate Banking Committee. In late July NAPSLO was among eight industry groups to testify on industry regulation and urged the committee to support the bill and forward it on to the full Senate for review.

If the bill is not approved and signed into law before the end of the year, the process will have to start over next year, requiring passage in both the House and the Senate.

“We have a small window of opportunity to get the bill approved and it would be helpful for members to contact their Senators to urge them to support the bill and push for passage,” said NAPSLO Executive Director Richard Bouhan.

S. 929 is aimed specifically at streamlining and reducing barriers in state regulation of surplus lines insurance and reinsurance. It would create a uniform system, while preserving the role of the state regulator.

 

NAIC Issue Brief on S. 929

Surplus Lines Insurance Reform

Conflicting state oversight and licensing rules governing surplus lines insurance and surplus lines brokers, particularly for premium tax collection and allocation, should be resolved through a state compact or through federal legislation.

A state compact that simplifies the premium tax collection and allocation for surplus lines relieves brokers of a complicated and conflicting compliance problem, and ensures that states are collecting all the revenues they are due.

There is broad industry and Congressional consensus for reforming surplus lines and reinsurance oversight as legislation addressing this issue passed the House twice in a 9-month span.

Issue Background

Surplus lines insurance (non-admitted insurance) is insurance for unusual risks where coverage is typically unavailable in the traditional marketplace. The majority of these policies are purchased by sophisticated commercial entities to cover commercial risk and they are typically less regulated than traditional insurance products. There are conflicting state rules and tax allocation policies for surplus lines insurance, and given the business-to-business nature of the coverage, a simplified system is appropriate for this particular product. Developing a common premium tax allocation system, and providing a single point of contact for premium tax collection, simplifies the process for surplus lines brokers and ensures compliance so states collect what they are owed.

Legislation that addresses this issue, and reinsurance oversight, passed the House unanimously in 2006 and 2007. Parallel to the legislation, a group of interested parties, with input from regulators, continues working on a draft interstate compact model that would address the problem without the need for federal legislation.

Key Points

• H.R. 1065 and S. 929 call for a “home state” deference system where only the rules and regulations of the insured’s home state would apply to a surplus lines policy, regardless of how many states the risk is spread over.
• For business-to-business risks where a contract is negotiated between sophisticated commercial purchasers, a single state or home state regulatory approach is appropriate.
• Streamlining the regulatory process for surplus lines insurance should not hinder the ability of states to collect and share data related to surplus lines policies providing medical malpractice coverage.

 

 

To unsubscribe from this newsletter, please send an email to ccochran@cftlaw.com.