Family Education Freedom Act of 2007

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 1065) to streamline the regulation of nonadmitted insurance and reinsurance, and for other purposes.

Mr. Speaker, I ask unanimous consent that all Members have 5 legislative days within which to revise and extend their remarks on this legislation and to insert extraneous material thereon.

Mr. Speaker, I yield myself such time as I may consume.

I would like to thank, Mr. Speaker, Congresswoman Ginny Brown-Waite for her help and leadership on H.R. 1065, the Nonadmitted and Reinsurance Reform Act of 2007, as it has moved through the legislative process both in this Congress and in the 109th Congress, when it passed by 417-0. It has been a pleasure working with the gentlewoman and again I appreciate your leadership on this issue.

I also would like to thank the Capital Markets Subcommittee Chair Paul Kanjorski and Ranking Member Spencer Bachus of the committee for their support of this measure, as well as Chairman Barney Frank for his support in moving this legislation to the House floor.

I reintroduced this bill along with Congresswoman Ginny Brown-Waite in February with strong bipartisan support and strong support from the Financial Services Committee. As I previously mentioned, this legislation is virtually identical to legislation that passed the House unanimously by a vote of 417-0 in the 109th Congress. The bipartisan support for this bill is a good example of how both sides can come together to introduce and pass legislation that is not about partisan politics, is not about Republicans or Democrats.

In short, H.R. 1065 would significantly improve the regulation of two specific areas in the commercial insurance marketplace, namely, surplus lines and reinsurance transactions.

Disparate and sometimes directly conflicting State laws in the surplus lines market create unnecessary inefficiencies and make it difficult, if not impossible in some cases, for producers and others to comply with their legal duties.

Testifying in 2005 in front of the Capital Markets Subcommittee on behalf of the National Association of Insurance Commissioners, the Pennsylvania insurance commissioner acknowledged the need for reform of surplus lines regulation, specifically with regard to the way premium tax allocation is handled. According to Commissioner Diane Koken, ``Either Federal legislation or another alternative such as an interstate compact may be needed at some point to resolving conflicting State laws regulating multi-state transactions. The area where this will most likely be necessary is surplus lines premium tax allocation. Federal legislation might also be one option to consider to enable multi-state property risks to access surplus lines coverage in their home States under a single policy subject to a single set of requirements.''

This legislation, Mr. Speaker, addresses the area of surplus lines reform

that I just mentioned as well as necessary reforms in the area of reinsurance. Specifically, this legislation would prohibit the extraterritorial application of State laws and allow ceding insurers and reinsurers to resolve disputes pursuant to contractual arbitration clauses. This reform is long overdue and necessary to restore regulatory certainty to the reinsurance market.

Finally, I would like to note that while many legislative attempts to reform the insurance industry encounter some industry opposition, this bill, Mr. Speaker, is supported by the insurers, the reinsurers and the agents and brokers as well as by most of the State regulators.

I look forward to the passage of this legislation today.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield 3 minutes to the gentleman from Texas (Mr. Hinojosa) who is a member of the Financial Services Committee as well as chairman of the Subcommittee on Higher Education.

Mr. Speaker, I would like to return the compliment to Ms. Ginny Brown-Waite, the gentlewoman from Florida, and thank her very, very much for her hard work on this legislation and for her leadership. She also works in a bipartisan manner in the times I have seen her in our committee and on the House floor. I very much appreciate it. We need more of that.

Mr. Speaker, I have no further requests for time, and I yield back the balance of my time.

I thank the gentleman from Kansas for his kind words.

Mr. Speaker, I rise today in support of H.R. 1056, the Nonadmitted and Reinsurance Reform Act that my colleague, Congressman Dennis Moore, introduced. This bill is almost identical to the bill I introduced last year and the one which he referred to that passed the House by 417-0.

For States like Florida and many others on the gulf coast where commercial insurance has been difficult or impossible to come by, the only recourse is to turn to the surplus lines or nonadmitted market. Certainly streamlining the rules in this market is crucial to the consumer and any State that is facing an insurance crisis. Unfortunately, today, the regulation of the surplus lines market is fragmented and cumbersome. Insurers and brokers who want to provide insurance across State lines are subjected to a myriad of different State tax and licensing requirements. Oftentimes these regulations will conflict, making it impossible for one company to comply with all of them.

This situation leaves policyholders underinsured and with even less of a choice in providers. Moreover, most of the companies that purchase insurance in the nonadmitted market do so frequently. These sophisticated commercial entities are large corporations that employ educated risk advisers with a thorough understanding of the market and their risk exposure. Yet in most States, including my home State of Florida, these companies are required to shop around in the admitted market where they know they will be denied coverage, they know that this has happened before and it will happen again, they know they can't get it.

They have to do this before they are permitted to shop in the surplus lines market. This practice is useless and cumbersome and it only adds to the cost for the policyholder. H.R. 1056 solves this quagmire, giving policyholders alternatives to restrictive markets.

The bill also acknowledges another program in the insurance industry, this time on the reinsurance front. Over the years, some State regulators have been taking it upon themselves to throw out arbitration agreements between reinsurance providers and primary carriers. These are contractual agreements decided upon by very sophisticated parties on both sides of the transaction in order to settle disputes without having to go to court. If these agreements are valid in one State, they should be valid in all accredited States. Therefore, H.R. 1056 prohibits States from voiding established, contractual arbitration agreements between reinsurers and primary companies.

Obtaining insurance already has its obstacles. Adding 49 other States' speed bumps of inefficient State rules does not help. And with reinsurance rates rising at crippling numbers, companies should be encouraged to stay out of the courts and follow their own arbitration agreements. Our bill provides commonsense solutions to the nonadmitted and reinsurance market and it enjoys broad support. I thank Mr. Moore for sponsoring this important insurance reform with me.

I urge the Members of the House to support this bill.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I don't have any additional speakers on this bill, but I wanted to take a moment to indicate that it is such a pleasure to work with Mr. Moore, the gentleman from Kansas. He always looks at things in a very bipartisan manner and always with the end goal in mind of helping the consumer. I certainly appreciate that. I know that the policyholders out there do. I would certainly urge passage of this very important bill, H.R. 1056.

With that, I yield back the balance of my time.

Mr. Speaker, I thank the Congressman from Kansas for yielding time to me. I rise in strong support of H.R. 1065, the Nonadmitted and Reinsurance Reform Act of 2007. Congressman Moore from Kansas has been a very effective member of the Financial Services Committee and I commend him for his leadership on reinsurance legislation. I thank the gentleman for sponsoring this much-needed legislation and I am proud to be a cosponsor of this bill.

This important bill will harmonize and in some cases reduce regulation and taxation of this insurance by vesting the home State where it is headquartered with the sole authority to regulate and collect the taxes on a surplus lines transaction. Those taxes that will be collected may be distributed according to a future interstate compact. Absent such a compact, their distribution would be up to the home State.

Mr. Speaker, this legislation will implement streamlined Federal standards allowing a sophisticated commercial purchaser to access surplus lines insurance. It will reduce uncertainty in this marketplace. It will also help protect contractual agreements between sophisticated parties entering into a reinsurance contract. For these reasons and more, I encourage my colleagues on both sides of the aisle to support this important bill.