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To the editor: The June 2 Business Insurance editorial entitled "Speeding Up Deregulation" contains a reference to surplus lines and the industry's position on commercial lines deregulation that compels a clarifying comment from the National Assn. of Professional Surplus Lines Offices Ltd.
The editorial states, "Some surplus lines markets argue against deregulation, saying there is no need because they already are free from much regulation by the states. We think they may actually fear competition from newly deregulated insurers."
While NAPSLO only represents the wholesale surplus lines marketplace, the association, in its testimony last year before the NAIC on commercial lines deregulation, did not oppose or "argue against" commercial lines deregulation. We simply suggested that existing surplus lines laws/regulations should be amended so as to remove unnecessary barriers to accessing the surplus lines market, which would make surplus lines a more efficient mechanism to write commercial insurance on a deregulated basis.
Specifically, NAPSLO suggested the creation or expansion of export lists in the states and the creation of a clearinghouse to assist surplus lines brokers in the payment of premium taxes on multistate surplus lines risks as ways to make the "deregulated" surplus lines market more accessible.
As far as the surplus lines market fearing "competition from newly deregulated insurers," we note that history has shown that in jurisdictions where open competition, within the licensed market arena has occurred, such as in Illinois and, until 1989, in California, the surplus lines market has not only survived, but has also thrived as a supplemental marketplace to the licensed market. These are not the facts upon which "fear" is based.
The BI editorial contains an interesting irony on the alleged "fear" factor. Although the editorial suggests that the surplus lines market might "fear competition" from deregulated insurers, the editorial does not actually advocate the use of deregulated insurers, but promotes the "dismantling of regulation rates, forms and market restrictions" for large commercial policyholders as the route to the promised land. Under this approach there are no "deregulated insurers" to fear. There is only the "deregulated buyer" who is already substantially deregulated in its efforts to obtain coverages.
For the record, NAPSLO has neither opposed commercial lines deregulation nor fears it. What NAPSLO has said is that when the deregulation knife is used to cut away at commercial lines constraints for admitted insurers, some whittling should also occur to remove the fetters that prevent surplus lines from maximizing its potential as an effective market for placement of commercial insurance on a deregulated basis.
Gary D. Westphalen
National Assn. of Professional
Surplus Lines Offices Ltd.