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Surplus Lines Bill Is First Step Toward Uniformity


Big “I” president testifies before Congressional subcommittee, supports H.R. 5637


WASHINGTON, D.C., Sept. 19, 2006—Alex Soto, president of the Independent Insurance Agents & Brokers of America (the Big “I”), testified today before a subcommittee of the House Judiciary Committee that a recently introduced surplus lines bill is a crucial first step in uniformity in producer licensing.


Soto, who is also president of Miami-based In-Source Inc., commended H.R. 5637, the Nonadmitted and Reinsurance Reform Act of 2006, as the right approach. He thanked the bill’s sponsors, Rep. Ginny Brown-Waite (R-Fla.) and Rep. Dennis Moore (D-Kan.), and also thanked Rep. Richard Baker (R-La.), chairman of the Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, for his work.


“The IIABA supports the Nonadmitted and Reinsurance Reform Act of 2006,” Soto testified. “IIABA believes that this legislation is an excellent example of a pragmatic reform approach that utilizes targeted, federal tools to improve the state-based regulatory system. We are also hopeful that this approach will be used in the near future to facilitate additional reforms in the state-based system of insurance regulation.”


Soto noted that the legislation singles out two areas—surplus lines regulation and reinsurance supervision—where there is general consensus for early action, and that independent insurance agents and brokers play a crucial role in surplus lines (or nonadmitted) insurance, which provides coverage for unique or hard-to-place property/casualty risks.


“IIABA believes that continued state supervision of this market is necessary to ensure that the nonadmitted marketplace continues to function as the ‘safety valve’ for the overall insurance market for hard-to-place risks,” Soto said. “Nevertheless, the current state-based regulatory scheme is burdened by inefficiencies that disrupt the nonadmitted marketplace with respect to the allocation and remittance of premium taxes, licensing of nonresident surplus lines brokers, and duplicative regulation of the nonadmitted market generally.”


Soto also testified that premium tax allocations vary significantly from state to state, and that the lack of a universally applicable allocation formula for multistate risks and sufficient guidance on which states’ laws apply to multistate surplus lines transactions creates confusion and conflicts. This results in inefficiencies and expenses which ultimately impact policyholders as well as producers.


“IIABA supports the Nonadmitted and Reinsurance Reform Act of 2006 because it eliminates this confusion,” Soto testified. “Under the bill, a surplus lines licensee (the broker accessing the nonadmitted market) need only remit premium taxes to the home state of the insured, and if requested, a report of the location and insured values of properties and risks by states covered under the policy being placed.”


Soto also noted that the bill streamlines surplus lines regulation by making the insured’s home state the source of regulation for individual surplus lines transactions. He added that the bill’s second title would seek to reduce overlapping, multiple-state regulation of both reinsurer financial condition and credit-for-reinsurance on the balance sheets of ceding insurers. This is important to the Big “I” due to its reaffirmation of state-based regulation, which the Big “I” strongly supports.


“While IIABA is less directly concerned with this title, except to the extent some of our members serve as brokers of outward reinsurance programs, we nevertheless note and applaud that this reinsurance title also seeks to retain and improve state regulation rather than create a federal regulator.”


Founded in 1896, IIABA (the Big “I”) is the nation’s oldest and largest national association of independent insurance agents and brokers, representing a network of more than 300,000 agents, brokers and their employees nationally. Its members are businesses that offer customers a choice of policies from a variety of insurance companies. Independent agents and brokers offer all lines of insurance—property, casualty, life, and health—as well as employee benefit plans and retirement products. Web address:





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