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WASHINGTON--Supporters of a bill that would streamline the regulation of reinsurers and surplus lines insurers are guardedly optimistic that the Senate will follow the House's lead in approving the measure.
The House of Representatives last week approved the Nonadmitted and Reinsurance Reform Act of 2007 on a voice vote. The bipartisan bill, introduced by Rep. Dennis Moore, D-Kan., and cosponsored by Rep. Ginny Brown-Waite, R-Fla., would make it easier for many insurance buyers to access the nonadmitted market.
The bill also would simplify the regulation of nonadmitted insurers by subjecting them to the premium taxes of policyholders' home states. States would create a compact among themselves to allocate taxes collected. The bill also would ease reinsurers' regulatory burdens by subjecting them only to the solvency laws of their state of domicile under most circumstances.
A similar measure was approved by the House last year on a 417-to-0 vote but failed to move in the Senate.
A key provision of the reform bill would 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."
The Risk & Insurance Management Society Inc. objected to the definition of qualified risk manager in the 2006 House measure that required, among other things, that such a risk manager meet at least two of three criteria: having 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 bar many risk managers from taking advantage of the liberalized access to the nonadmitted market. But the bill passed by the House last week gives risk managers five ways to meet the requirement, a change that won RIMS' support (see box).
"RIMS is pleased by the unanimous vote taken by the House on the surplus lines bill," said Terry Fleming, a RIMS board member and director-division of risk management for Montgomery County, Md., in Rockville.
"This legislation will result in multiple efficiencies for the commercial consumers whom RIMS represents as well as the brokers and insurers. RIMS looks forward to working with the Senate to ensure that all RIMS members are able to utilize this legislation to achieve these efficiencies," he said.
"We're delighted that it passed in the House and appreciate the efforts of the sponsors" and other legislative supporters, said Dick Bouhan, executive director of the Kansas City, Mo.-based National Assn. of Professional Surplus Lines Offices Ltd. "We're now moving to the Senate and we are hopeful the Senate will start work in it soon."
"We're pleased to see federal legislation enabling reform of regulation related to reinsurance," said Frank Nutter, president of the Reinsurance Assn. of America in Washington. He said the RAA "would encourage" state insurance regulators "to recognize that federal enabling legislation is the best way to achieve uniformity."
"We've been very gratified by the interest from senators on both sides of the aisle in advancing this legislation," said Joel Wood, senior vp of the Council of Insurance Agents & Brokers in Washington. Enactment of the reform bill is the CIAB's top priority.
"There's a widespread recognition that no other piece of insurance regulatory reform can attract as much universal sentiment among the important stakeholders," said Mr. Wood. He cautioned, though, that "the Senate Banking Committee has always been a haven of consensus making, and so we don't expect this legislation will be able to move until we can convince all the members of the committee that this is a good and needed reform."
A placeholder bill identical to last year's House bill was introduced earlier this year in the Senate. Reform supporters believe it would be superseded by the most recent House bill.