Several trade groups representing agents and brokers immediately voiced support for the bill.

The National Association of Insurance Commissioners, whose members have voiced concerns over federal efforts to regulate insurance, which under the McCarran-Ferguson Act has been left to the states, had a measured reaction.

A spokesman said by e-mail that the group “is presently analyzing the provisions of the proposed Nonadmitted and Reinsurance Reform Act of 2006, and plans to monitor the Congressional hearing. As always, the NAIC will offer any technical guidance as appropriate.”

In May, House Financial Services Committee staffers were drafting a proposal aimed at giving pre-emptive regulatory authority to home-state regulators.

The plan was to present a finished product to the two primary sponsors of the SMART Act–Reps. Mike Oxley, R-Ohio, and Richard Baker, R-La., chairman of the House Financial Services Committee and its primary subcommittee, respectively.

That plan has apparently been abandoned in favor of the incremental approach. The purpose of both initiatives is to reduce the size and complexity of the SMART Act and galvanize industry and legislative interest in legislation that would standardize state insurance regulation.

The panel is also seeking to focus interest on their more modest proposal, in contrast to legislation introduced in April in the Senate that would create an optional federal charter for insurers.

A hearing on the surplus lines bill will be held Wednesday before Rep. Baker's Capital Markets Subcommittee.

The Nonadmitted and Reinsurance Reform Act will create a uniform system of premium tax allocation and collection for surplus lines.

It will also provide for deference to the policyholder's home-state regulator for the nonadmitted market and adopt the NAIC's nonadmitted insurance model act on a national basis as well as create streamlined access to the nonadmitted/surplus market for sophisticated commercial purchasers.

The legislation proposes to rely on the home state for oversight to ensure the carrier's reinsurance solvency while prohibiting extra-territorial application of state law.

In a note to members of the Council of Insurance Agents and Brokers obtained by National Underwriter, Ken Crerar, CIAB president, said introduction of this bill is “very significant.”

He said it “represents the first effort to enact one of the specific titles of SMART,” legislation which was first presented to industry and the NAIC in draft form by Reps. Oxley and Baker two years ago, “and has since gone through several iterations.”

The bill was introduced by Rep. Ginny Brown-Waite, R-Fla., and Rep. Dennis Moore, D-Kan. It has 15 additional sponsors from both political parties.

In the note to members, Mr. Crerar said, “We believe there is a very good chance the House will pass this legislation this year due to the strong support of Rep. Baker.”

Charles E. Symington Jr., Independent Insurance Agents and Brokers of America senior vice president for government affairs and federal relations, agreed.

Bi-partisan sponsorship means the bill is doable, “unlike controversial proposals such as the [Senate's] 'optional federal charter [bill],'” Mr. Symington said.

Mr. Crerar said the legislation would “correct intractable flaws in the state-by-state regulation of commercial insurance.”

State regulations are in conflict and regulators for decades have been unable to reconcile their differences, he said, commenting, “With respect to multistate commercial insurance placements, the current system benefits no one, least of all the policyholders who ultimately pick up the tab.”

Dick Bouhan, executive director of The National Association of Professional Surplus Lines Offices, Ltd., based in Kansas City, Mo., said the trade group “is pleased” that the committee has decided to take up legislation “dealing with the many regulatory inefficiencies and inconsistencies that affect the surplus lines industry today.”

Mr. Bouhan said the bill adopts the concepts previously endorsed by NAPSLO, particularly a uniform system of premium tax allocation and remittance. “This bill will address many of the problems that NAPSLO members face every day,” he added.

Thomas Minkler, chairman of the Government Affairs Committee of the IIABA, said his members “in every state are truly pleased that headway is being made on these important reforms.”

This article updated June 20, 7:44 p.m. EDT