MODES OF INSURANCE REGULATION — WHO SUPPORTS WHAT?

H.R. 5637, the Nonadmitted and Reinsurance Reform Act, would:

— Give sole regulatory and enforcement authority to the insured’s home state for the placement of surplus lines/nonadmitted insurance;

— Create a uniform system for the collection and allocation of premium tax obligations related to surplus lines/nonadmitted insurance;

— Establish the National Association of Insurance Commissioners Nonadmitted Model Act’s eligibility requirements as the criteria that each state would use in determining surplus lines eligibility for U.S.-domiciled, nonadmitted insurers;

— Establish the NAIC International Insurers Department’s Quarterly Listing of Alien Insurers as the sole list of surplus lines eligible alien insurers in each state; and

— Allow sophisticated commercial purchasers, as defined by the act, to have their insurance placed directly in the surplus lines market without a diligent search.

Most major insurance organizations, including the NAIC, Property Casualty Insurers Association of America, National Association of Professional Surplus Lines Offices, American Association of Managing General Agencies, the National Association of Mutual Insurance Companies, National Association of Professional Insurance Agents and the Independent Insurance Agents and Brokers of America have expressed strong support for the bill.

Many insurance professionals feel that H.R.5637’s approach — a harmonization of existing regulations, rather than their replacement — offers a more viable alternative than imposing federal regulation.

By contrast there is much less industry enthusiasm for the proposed National Insurance Act, although it has some powerful supporters. The American Insurance Association, the American Bankers Association and the American Council of Life Insurers were instrumental in getting the proposal drafted. The Council of Independent Agents and Brokers also supports H.R. 5637, but also supports NIA. NAMIC, PIA and the IIABA are among those opposed to the measure. NAPSLO’s Dick Bouhan noted: “Unfortunately, NAPSLO’s proposals to solve the current tax remittance and licensing problems of the industry were not included in the NIA legislation.”

Opposition from the states is almost unanimous. Last July the National Conference of State Legislatures issued the following statement. “The nation’s governors and legislators strongly oppose S. 2509, the ‘National Insurance Act of 2006,’ which would radically restructure the current system of insurance regulation by installing a new federal regulator, creating a massive new federal bureaucracy in Washington, and permitting insurance companies to ‘opt out’ of comprehensive state oversight and policyholder protection.”