Regulatory Reform Picks Up Steam

The debate over how best to regulate the business of insurance just got a lot more interesting, with good news for organizations, like the Big “I,” that support reform of the state system and oppose an optional federal charter.

Before Congress recessed in July, Rep. Ginny Brown-Waite (R-Fla.) and Rep. Dennis Moore (D-Kan.) introduced a bipartisan surplus lines and reinsurance regulatory reform bill in the House with the support of Insurance Subcommittee Chairman Richard Baker (R-La.). Many on the Hill view it as a slimmer version of a reform concept originally proposed by Baker and House Financial Services Committee Chairman Mike Oxley (R-Ohio); some observers also see it as a first step in advancing the Oxley-Baker proposal, a concept the Big “I” has long supported.

The legislation, the Nonadmitted and Reinsurance Reform Act, will create a uniform system of premium tax allocation and collection for surplus lines; provide for regulatory deference to the policyholder’s home state for the nonadmitted market; adopt the National Association of Insurance Commissioners nonadmitted insurance model act on a national basis; create streamlined access to the non-admitted/surplus market for sophisticated commercial purchasers; and rely on the home state for reinsurance solvency oversight while prohibiting extra-territorial application of state law.

“This legislation will improve surplus-lines tax remittance and surplus lines broker licensing, both issues of concern to many of our members,” says Thomas Minkler, chairman of the Big “I” Government Affairs Committee and president of the Clark- Mortenson Agency in Keene, N.H. “Independent insurance agents and brokers in every state are truly pleased that headway is being made on these important reforms. Surplus-lines regulatory reform is a good initial step towards comprehensive reform of the state-based regulatory system, and we will definitely come out strong to support this legislation.”

Following the introduction of an OFC bill in the Senate by Sen. John Sununu (R-N.H.) and Sen. Tim Johnson (D-S.D.), a common-sense, non-OFC bill was just the ticket to give those unimpressed by OFC a rallying point, as well as a concrete piece of legislation to point to as a viable alternative to full-blown federal regulation.

“The introduction of this legislation is a tremendous first step,” says Big “I” CEO Robert A. Rusbuldt. “It will help modernize and improve state-based insurance regulation and facilitate needed reforms that will be good for independent agents and brokers—and consumers as well.”

The bill was introduced with an impressive number of cosponsors from both parties, and the Big “I” hopes it will be only the first step toward comprehensive, state-based regulatory reform.

“We will continue to strongly advocate for other improvements to the state regulatory system, such as agent licensing reform, and we look forward to working with members of the House Financial Services Committee as they continue work on state-based reforms,” says Charles E. Symington Jr., Big “I” senior vice president for government affairs and federal relations.

The introduction of a tangible piece of legislation gives independent insurance agents and brokers a terrific opportunity to support a constructive approach to real regulatory reform. Make sure to stay in touch with your elected representatives and let them know where you stand on this issue as it goes forward. And stay tuned.

Cliston Brown (cliston.brown@iiaba.net) is Big “I” director of public affairs/media relations.

Senate Banking Committee Ponders McCarran-Ferguson Exemption

Another issue of key interest to Big “I” agents and brokers on Capitol Hill these days is the continued discussion about the future of the McCarran-Ferguson antitrust exemption for the business of insurance. The Big “I” submitted testimony before the Senate Banking Committee in late June, making the case that repeal of the exemption could have negative implications for insurance purchasers.

“We are very concerned that repeal could reduce competition, thereby increasing the cost of insurance for consumers,” Big “I” CEO Robert A. Rusbuldt says. “Such a move also could make certain high-risk coverages less available to policyholders because the possibility of antitrust litigation could make insurers less willing to cooperate on efficiency-enhancing activities.”

In its testimony, the Big “I” argued that the financial condition and state of competition and consumer choice in today’s insurance marketplace are quite high, and that direct insurance supervision and law enforcement, in conjunction with the qualified application of federal antitrust law, has served both the industry and consumers well. It urged the committee, at a minimum, to await the report of the Antitrust Modernization Commission, established by Congress less than two years ago to study a variety of antitrust issues, including the multiplicity of exemptions and privileges currently existing.

“There is little reason or evidence that wholesale changes to the existing antitrust system are necessary or desirable,” says Charles E. Symington Jr., Big “I” senior vice president for government affairs and federal relations.