It was an active week for insurers on Capitol Hill, with a regulatory reform bill for surplus lines and reinsurance reintroduced, but a split emerging between the House and Senate over renewal of the Terrorism Risk Insurance Act and whether to allow insurers to deduct punitive damages from their taxes.

Insurance industry groups are united in their support of legislation streamlining the regulation of multistate surplus lines risks and reinsurance, introduced last week.

Rep. Dennis Moore, D-Kan., said at a Council of Insurance Agents and Brokers legislative summit that he would be re-introducing the legislation with Rep. Ginny Brown-Waite, R-Fla. The same two introduced a similar bill last year, and it was passed overwhelmingly by the House before failing to gain traction in the Senate.

Reps. Moore and Brown-Waite are gathering a significant list of co-sponsors for their bill, which would greatly improve its chances of again receiving House approval. At the same event, Sen. Chris Dodd-D-Conn., who chairs the Senate Banking Committee, said the panel would be taking a "good look" at the measure this year.

Joel Wood, executive vice president of government affairs for the CIAB, said his group is "looking forward to the bill's introduction, given its strong industry support last year."

"This is virtually identical legislation to the bill that soared through the Financial Services Committee last year, and was approved on the House floor on a 417-0 vote," he noted. "The vote was late in the session, though, and we're hopeful that action this year, with this early reintroduction, will help us get the bill to the finish line."

Charles Symington, senior vice president of government affairs and federal relations for the Independent Insurance Agents and Brokers of America, said the bill's approach played a key role in winning that support.

"This consensus bill contrasts sharply with proposals such as the 'optional' federal charter, which is very controversial both within the industry and on Capitol Hill," he said. "Four hundred and seventeen House Members supported targeted reform last year, and we believe this action speaks volumes about the proper approach to reform the insurance market."

A representative for the National Association of Mutual Insurance Companies, Justin Roth, also hailed the bill's approach, which he said invites support because it does not radically alter the state regulatory system.

"We believe that it would help streamline and modernize the surplus and reinsurance regulatory structure, while still leaving the day-to-day oversight to the domiciliary state," he said. "As opposed to the optional federal charter concept in which the insurance industry is strongly divided, this legislation is an excellent example of common sense regulatory reform that the entire industry supports."

But support for the bill in the last Congress went beyond those seeking an alternative to OFC proposals, as Mr. Wood noted, and the proposal for this session will likely do so as well.

"What was remarkable about this bill last year, and again this year, is that it comes as close as any meaningful legislation we've ever seen to attracting universal support among the stakeholders--policyholders, insurers and, yes, even the state regulators, who have been extremely constructive in their commentary about the need for reform in this area," he said.

Under the legislation, the home state of the insured would act as primary regulator for a multistate surplus lines risk, and would also be responsible for allocating any taxes collected on the coverage to the other involved states. The legislation also makes it easier for sophisticated purchasers to access the surplus lines markets.

The legislation also seeks to streamline the reinsurance market in a similar manner by giving sole regulatory authority for determining whether or not a particular insurer qualifies for credit for reinsurance to the ceding insurer's home state.

For those in the surplus lines industry, passage of the bill is a "top legislative priority" in Washington this year, according to Richard Bouhan, executive director of the National Association of Professional Surplus Lines Offices, who added that the group's representatives in Washington have been meeting with members of the relevant House and Senate committee's to urge passage.

NAPSLO President William Newton added that the bill "will simplify the regulation of the excess and surplus lines business without diminishing consumer protections, and provide consumers with more opportunities to secure property/liability insurance in areas where natural disasters have made insurance availability scarce."

Meanwhile, lawmakers addressing an industry conference here revealed a division between the House and Senate over whether to approve permanent or temporary federal support for insurers against a major terrorism loss. While both bodies favor a federal backstop, the Senate is gearing up to pass a permanent measure, according to speakers at the CIAB legislative summit.

"I'm not going to do another temporary bill," said Sen. Dodd, a presidential candidate. "We're either going to have a permanent bill, or we're going to move on."

But a permanent measure "is not what we're looking for at this point," said Rep. Paul Kanjorski, D-Pa., the new chair of the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprise.

Rep. Kanjorski said that without question the committee and the full House will pass a bill that will extend the Terrorism Risk Insurance Act, which expires at year's end.

Rep. Kanjorski said Rep. Barney Frank, D-Mass., who chairs the full Financial Services Committee, have asked that an extension bill be ready for action on the House floor by April 2, with the goal of it being signed into law over the summer.

Sen. Dodd said that extending the TRIA program is also a high priority for his panel, and that he expects little opposition to continuing the program--especially given Treasury Secretary Henry Paulson's support prior to joining the Bush administration.

While not favoring a permanent measure, Rep. Kanjorski said the Financial Services Committee would consider a longer-term extension of six years or more to avoid having the issue resurface in every Congress. "We're not going to do any of this year-to-year nonsense," he said.

Rep. Kanjorski added that he is "still optimistic" a private market will develop for terrorism risk. Sen. Dodd said that "ideally" he would also like to see a private market solution to the problem, but "it hasn't happened."

In other Washington news, Sen. Trent Lott, R-Miss., has reintroduced a measure aimed at preventing resale of flood-damaged cars that insurers say fails to meet its objective. The new bill would hold insurers responsible for creating a national clearinghouse for information on all cars they have declared total losses.

The "Consumer Access to Total Loss Vehicle Data Act" would make data available to consumers about vehicles carriers have declared to be totaled. Companion legislation was introduced last week by Rep. Cliff Stearns, R-Fla.

The legislation would direct the National Highway Traffic Safety Administration to compel all insurers to commercially disclose information pertaining to total-loss vehicles through various sources. The bill would also require insurers to reveal the reason for the total loss (flood, collision, stolen, etc.), the date of total loss, the odometer reading on that date, and whether the airbag deployed.

Sen. Lott said consumers should not have to rely on the various states' titling processes because each state is different and the branding information is often not passed from one state to the next. When an insurance company declares a car totaled, the insurer assumes the title.

Sen. Lott first introduced the total loss bill last December after Mississippi auto dealers complained that some of the estimated 500,000 damaged vehicles from Hurricane Katrina were being resold.

The industry is divided on the bill, although the National Automobile Dealers Association has expressed support because its members wouldn't have to assume liability for the paperwork needed to establish a nationwide clearinghouse or disclosure system.

Dennis Kelly, a representative for the American Insurance Association, said the AIA had "looked at the bill" and decided "to work to improve it as it works through the congressional process...We don't want cars that should not be on the road to ever be back on the road."

But the Property Casualty Insurers Association of America and the National Association of Mutual Insurance Companies both said they don't think the bill will work.

"We believe that disclosure alone will not solve the root cause of the problem, which is that loopholes in some states make title laundering possible," said Cliston Brown, a federal affairs official with PCI.

Specifically, he said, PCI supports provisions that would result in the carrying forward of state title brands when vehicles are registered in subsequent states. "This solution would brand salvage vehicles for the life of the vehicle," he said.

Marliss Browder said NAMIC also supports permanent title branding, so that once an automobile is branded a salvage vehicle in one state, "that title must carry forward to all other states where someone might try to register it."

Finally, the House was expected to pass legislation late last week that could thwart Senate efforts to take away a tax deduction for insurers when they pay off punitive damage awards.

The Senate included a provision barring the deduction for punitive awards in civil suits in tax provisions attached to Senate minimum wage legislation.