Nonadmitted And Reinsurance Reform Act Of 2006
Mr. Speaker, I thank the chairman. Mr. Speaker, today the regulation of the surplus lines market is fragmented and very cumbersome. Insurers and brokers who want to provide insurance across State lines are subject to a myriad of different…
Mr. Speaker, I thank the chairman.
Mr. Speaker, today the regulation of the surplus lines market is fragmented and very cumbersome. Insurers and brokers who want to provide insurance across State lines are subject to a myriad of different State tax and licensing requirements. Oftentimes these regulations will conflict, making it virtually impossible for one company to comply with all of them. This situation leaves policyholders underinsured and with little choice in providers.
Moreover, most of the policyholders who have purchased insurance in the nonadmitted market do so every day. These very sophisticated commercial entities have educated risk advisers on staff with a thorough understanding of the market and their risk exposure.
Yet most States require that these experts be denied coverage from multiple providers before they are allowed to purchase insurance in the nonadmitted market.
The reinsurance market faces additional obstacles because some State regulators are taking it upon themselves to throw out arbitration agreements between reinsurance providers and primary carriers. These are contractual agreements decided upon by sophisticated parties on both sides of the transaction to settle disputes without tying up the courts.
Accordingly, the bill that we have before us today, H.R. 5637, specifies that only the tax policies and licensing regulations of the State in which the policy holder is domiciled will govern the transaction. It also requires States within 2 years of the bill's passage to participate in the National Association of Insurance Commissioners National Insurance Producer Database and to adopt regulations under NAIC's Nonadmitted Insurance Model Act.
The bill allows sophisticated commercial entities direct access to the surplus lines market without going through the multiple denial process. It also prohibits States from voiding established contractual arbitration agreements between reinsurers and primary companies.
Policyholders in a number of States are facing skyrocketing rates. With these obstacles already impeding affordability, adding a quagmire of inefficient State rules certainly does not help. Additionally, with reinsurance rates rising at an alarming rate, companies should be encouraged to stay out of the courts and to follow their own voluntarily entered into arbitration agreements. This bill provides commonsense solutions to the nonadmitted and reinsurance market.
I want to thank certainly Chairman Oxley, who will be very much missed, not only by the committee, but by this entire body, certainly Representative Moore and the other Members who signed onto this very bipartisan bill, as well as Mr. Baker, for their leadership on this very important issue.
I urge members to vote in favor of H.R. 5637.