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WASHINGTONA legislative effort to streamline the regulation of reinsurers and nonadmitted insurers has won the backing of risk managers, who objected to an earlier bill because of restrictions on who could take advantage of the proposed changes.
The Risk & Insurance Management Society Inc. had opposed a version of the Nonadmitted and Reinsurance Reform Act passed by the House last year on a 417-to-0 vote because of its stringent definition of a "qualified risk manager," a definition that would have to be met before a broker representing a policyholder could access the nonadmitted market directly without first having to seek to place coverage in the admitted market. But a revised version of the bill introduced in the House of Representatives on Feb. 15 by Reps. Dennis Moore, D-Kan., and Virginia Brown-Waite, R-Fla., contains a much more flexible definition, flexible enough to win RIMS support.
In a statement announcing the introduction of the new bill, Rep. Moore said it was designed "to eliminate the problem of conflicting and inefficient state laws regarding nonadmitted insurance and reinsurance. Making the insurance market fairer and simpler benefits us all. With such broad, bipartisan support in the past, I'm confident that this legislation, which is long overdue, will again receive very strong support in the House and I hope that the Senate will join us in passing this legislation."
The bill, like its predecessor, streamlines the regulation of nonadmitted insurers by subjecting them to the premium taxes of the policyholder's home states. States would create a compact among themselves to allocate taxes collected. The bill also eases reinsurers' regulatory burdens by subjecting them only to the solvency laws of their state of domicile under most circumstances.
A key provision of the reform bill is to allow brokers representing large policyholders to go directly to the nonadmitted market to seek coverage without having to prove that they had first sought the coverage in the admitted market. One of the prerequisites for doing so, however, is that the policyholder must employ a "qualified risk manager."
Last year's version of the bill required, among other things, that a qualified risk manager meet at least two of three criteria: holding an undefined "advanced degree" in risk management, holding at least one of several specified professional designations or having at least five years' experience in specific areas of insurance.
RIMS held that the requirements were too stringent and could ban many qualified risk managers from taking advantage of the liberalized access to the nonadmitted market.
But the new version of the bill gives risk managers five ways to meet the definition of "qualified risk manager," said Terry Fleming, a member of RIMS' board of directors.
"We were prepared to oppose this until they made the change," said Mr. Fleming, who is also director-division of risk management for Montgomery County, Md., in Rockville. "We're satisfied; we negotiated with staffers on the Hill. The language that is in the bill now is acceptable to RIMS."
Under the new bill, risk managers could meet that portion of the definition through any of five combinations of education, experience and professional designations (see box).
Industry backers of the bill were confident that the measure could move swiftly through the House and they hope the Senate as well.
"The RAA does support the principles of the excess and surplus lines and reinsurance bill," said Frank Nutter, president of the Washington-based Reinsurance Assn. of America. "We're enthusiastic about the willingness of the House and hopefully the Senate to take up regulatory reform related to reinsurance and look forward to working with them to build upon this piece of legislation as a sound basis for moving forward."
"We're delighted it's been introduced," said Richard Bouhan, executive director of the Kansas City, Mo.-based National Assn. of Professional Surplus Lines Offices Ltd. "We are optimistic that it can find passage in both the House and Senate."
Mr. Bouhan said the bill addresses "issues that we've had problems with for a long time," particularly regarding current requirements that surplus lines brokers collect and pay the multiple state taxes levied on multi-state risks. He also said that allowing exempt commercial purchasers to seek coverage in the nonadmitted market without having to first go through the admitted market creates a "level playing field" for those buyers.
"I feel very confident this legislation will clear the House of Representatives," said Joel Wood, senior vp at the Council of Insurance Agents & Brokers in Washington. He noted there also is interest in the bill in the Senate, which failed to take up last year's proposal.
For example, Senate Banking, Housing and Urban Affairs Committee Chairman Christopher Dodd., D-Conn., told the CIAB's legislative summit earlier this month that the committee would "take a good look" at the issue.
Mr. Wood noted that the tight coastal property market could impact the bill's fate as well. Anything that eases access to coverage "is certainly welcome," he said.