Agents Licensing Reform Legislation Introduced in Congress

The Big “I” has long advocated for targeted federal legislation to reform the state system of insurance regulation, including the area of agent licensing, and recently praised the reintroduction of the National Association of Registered Agents and Brokers Reform Act (H.R. 2554, commonly referred to as NARABII) in the House of Representatives. Lead sponsors Rep. David Scott (D-Ga.) and Rep. Randy Neugebauer (R-Texas) were joined by more than 30 Democrat and Republican original co-sponsors in introducing this bill.

The Big “I” continues to oppose federal insurance regulation, but believes the state system can’t effectively address certain regulatory problems on its own. The Big “I” therefore believes there is a vital role for Congress to play in helping to modernize state regulation.

Insurance producers are operating and obtaining licenses in more jurisdictions than ever, and the lack of real reciprocity makes compliance challenging and costly. These burdens are often ultimately detrimental to insurance consumers. The average independent agency is authorized to operate in at least eight states, and it is not uncommon for small and medium-sized agencies to be licensed in 35 to 50 jurisdictions.

Throughout this economic crisis, the state insurance regulatory system continues to demonstrate how well it protects both individual consumers and businesses. Although the system has worked effectively to ensure insurer solvency and protect policyholders, it does need some improvements, such as in the area of agent licensing. NARAB II would update and improve the current state-based system of insurance regulation by providing one-stop, non-resident licensing reciprocity. The legislation only relates to marketplace entry and would not impact the day-to-day state regulation of insurance.

This bipartisan effort would immediately establish NARAB as a private, non-profit entity managed by a board composed of a majority of state insurance regulators, as well as marketplace representatives.

NARAB would not be part of or report to, any federal agency and would not have any federal regulatory power. The legislation would permit producers in good standing in their home state to receive additional licenses if they satisfy NARAB membership criteria. Producers could remain licensed in the traditional manner, but those operating in multiple jurisdictions could apply for NARAB membership. For producers operating in multiple states, and those who would like to expand their operations, NARAB would effectively create one-stop producer licensing for additional licenses beyond the home state.

The Big “I” has worked and continues to work to gain insurance regulator, industry and congressional support for NARAB II. The House passed similar legislation, H.R. 5611, with overwhelmingly support in 2008. The Big “I” was encouraged by the House’s past action on NARAB legislation and looks forward to working with both the House and the Senate in 2009.

Margarita Tapia (margarita.tapia@iiaba.net) is Big “I” director of public affairs.


Surplus Lines Bill in the Hopper

Rep. Dennis Moore (D-Kan.) and Rep. Scott Garrett (R-N.J.) recently reintroduced the Nonadmitted and Reinsurance Reform Act of 2009. The bipartisan legislation is often referred to as the “surplus lines bill,” and the Big “I” supports it as an excellent example of a positive targeted approach to regulatory reform.

The bill addresses two areas where there is general consensus for reform: surplus lines regulation and reinsurance supervision. Independent insurance agents and brokers are instrumental in providing surplus lines (or nonadmitted) insurance.

The legislation modernizes surplus lines regulation by making the insured’s home state the source of regulation for individual surplus lines transactions and seeks to reduce overlapping, multiple-state regulation of certain areas specific to reinsurers. This approach modifies and preserves the strengths of the state-based insurance regulatory system.

In previous Congresses, similar legislative efforts passed in the House with overwhelming support from both sides of the aisle. The Big “I” believes that such strong bipartisan support coupled with near-unanimous industry approval proves that this model of limited regulatory reform of state regulation is the appropriate and most practical approach to reform.

-M.T.


Natural Disaster Bill Stirs Debate

Legislation that addresses the growing problems homeowners face in the aftermath of natural disasters was recently introduced by Rep. Ron Klein (D-Fla.) in the House. While not endorsing the bill, the Big “I” was pleased to see that the legislation once again focused attention on this important national issue.

The Homeowners’ Defense Act, H.R. 2555, contains four main provisions intended to help prevent potential insolvencies and to make the private insurance market more stable, with the hope of making catastrophe insurance more available before and after a major disaster.

The National Catastrophe Risk Consortium would allow multiple states to pool their catastrophic risk, with the goal of achieving an economy of scale and risk diversity that will lead to a lower cost of reinsurance than states could achieve independently.

The Catastrophe Obligation Guarantee Program would authorize the federal government to guarantee debt issued by eligible state catastrophe programs to assist in the financial recovery from natural catastrophes.

The Federal Natural Catastrophe Reinsurance Fund would allow the Treasury Department to write reinsurance contracts covering truly catastrophic–level events.

The Mitigation Grant Program would establish a grant program in the Treasury Department to develop, enhance, and maintain programs that prevent and mitigate losses from natural catastrophes.

-M.T.