Richard Bouhan, executive director of the National Association of Professional Surplus Lines Offices, Ltd. in Kansas City, Mo., also said his group's top priority in the upcoming Congress will be to enact surplus lines reform legislation that will streamline premium tax payments and to simplify compliance requirements on the placement of multistate surplus lines risks.

He noted that these reforms were contained in Title I of the Nonadmitted and Reinsurance Reform Act which passed the House unanimously in both the 109th and 110th Congresses.

The latest bill, H.B. 1065, was passed by the House in February 2008. The same bill, titled H.B. 5637, passed the House in 2007.

A similar bill was introduced in the Senate, S. 929, but action was delayed after it got caught in the financial turmoil last September that forced Congress to focus on the Troubled Asset Relief Program before leaving last October with much unfinished business.

Mr. Bouhan said NAPSLO expects the 111th Congress to “engage in a vigorous debate over restructuring financial services regulation, which will include a discussion of a much larger federal role in regulating property-casualty insurance.”

He added that NAPSLO members and staffers “will convey to members of Congress the important role surplus lines plays in assuring consumers have insurance coverage available to them and work to assure that this important supplemental market is preserved in any federal overhaul of financial services regulation.”

Mr. Bouhan also said that NAPSLO plans to work toward passage of insurance producer licensing reform legislation that eliminates red tape and facilitates the easy acquisition of nonresident licenses for surplus lines brokers.

NAPSLO wants to “make certain that the surplus lines community has a voice in the implementation and governance of this process,” he said.

AAMGA's Mr. Rothert reported that members of Congress and lobbyists have told AAMGA “it is a little up in the air” when Congress will deal with surplus lines reform, especially with the congressional focused on fixing the economy. “It is our intent to be on top of everything as best as we possibly can,” he said.

“We support either S. 929 or something new. It is our intent to be at the forefront of efforts to modernize the system,” he added.

AAMGA also wants to see the equivalent of H.B. 1065 reintroduced in the House. “We've been speaking with a number of interested congressmen about this,” he said.

He said the group is also working with NAPSLO and lobbyists for the Council of Insurance Agents and Brokers as part of a consortium of interested insurance associations. “There is broad support within the industry for these bills.”

Mr. Rothert cautioned that in all likelihood a new series of hearings will have to be held in the House on the legislation, or if not in the House, at least in the Senate.

The passage of necessary surplus lines modernization legislation “has been and will remain the AAMGA's top priority,” he said.

AAMGA plans to “continue our work with the NAIC, the National Council of Insurance Legislators on modernizing state regulation with respect to taxation of multistate surplus lines risk.”

In addition, he said, “there are some changes the NAIC is talking about in regard to uniformity in producer licensing, continuing education and other regulatory issues that cross over state lines.”

As we meet with these regulators, said Bernd Heinze, AAMGA executive director, “our goal is to educate them on the unique and innovative marketplace of the wholesale industry and to allow consumers to have greater access and protections to the innovative lines of business that managing general agents like [Mr. Rothert] offer.”

Mr. Rothert added that AAMGA opposes any attempt to repeal the McCarran-Ferguson Act, and also opposes any attempt by Congress to add wind coverage to the National Flood Insurance Program.

“We very much support the continuation of the program but believe that wind coverage is already available in the private sector or through existing state-supported pools,” Mr. Rothert said.

AAMGA also supports legislation recreating the National Association of Registered Agents and Brokers, legislation which passed the House last year Sept. 17 as H.R. 5611, too late for action in the Senate. The bill would set up a national system to create uniform nonresident agent licensing.

As for NAPSLO, several state issues are on its agenda.

One issue is resolving the problems created for the industry by the Essex v. Zota decision by Florida Supreme Court–a decision that seems to make the surplus lines industry subject to the section of the Florida Insurance Code that regulates insurance contracts/forms.

NAPSLO is seeking a legislative solution to the decision. NAPSLO legislative director Steve Stephan said NAPSLO is working with state and other national associations, the Florida Insurance Department, and with Florida legislators “to clarify that the surplus lines market has the freedom of form it requires to fulfill its role as a supplemental market for Florida insurance buyers unable to find coverage through standard admitted markets.”

Mr. Stephan said NAPSLO will continue to monitor the Silvers v. State Board of Equalization case in California. He said NAPSLO believes that if the plaintiff prevails in this case, surplus lines premiums will be subject to the state's 2.5 percent premium tax in addition to the 3 percent surplus lines tax which the law now requires be assessed to surplus lines policyholders.

“Such double taxation would be disastrous for buyers of surplus lines insurance [and] the overall California surplus lines market,” he said. “NAPSLO will take whatever action it can to help secure a positive decision for the surplus lines industry in this litigation.”

As for state regulation, NAPSLO wants a more efficient “national” licensing system for surplus lines brokers and is asking the NAIC to withdraw its position that nonresident surplus lines brokers must also have a nonresident agent or broker license before the nonresident surplus broker license can be issued by a state.

“The result of this 'requirement' is that a surplus lines broker, operating on a nationwide basis, may have to secure and maintain up to 150 separate licenses to conduct surplus lines business,” Mr. Stephan said. “Nonresident surplus lines licenses were not available, except in six states, until after the enactment of the Gramm-Leach-Bliley (GLB) Act in 1999, which was, in part, aimed at solving this lack of nonresident license availability,” he said.

“Unfortunately, as the NAIC and the states have implemented the nonresident surplus lines license provision of GLB, the 'cure' has become worse than the disease,” he added.

“NASPLO wants to have the intent of GLB be fulfilled and the requirement for multiple nonresident licenses be eliminated,” he concluded.

Mr. Stephan said NAPSLO will continue to urge that the NAIC and the National Conference of Insurance Legislators endorse the surplus lines interstate compact known a SLIMPACT in order to create an efficient, transparent and auditable system for payment of surplus lines premium taxes, particularly on multistate risks.

“SLIMPACT could also ease the burden of unnecessary multiple compliance requirements for surplus lines multistate risks,” he argued. “SLIMPACT is compatible with and could be implemented in conjunction with the surplus lines reform legislation being proposed in Congress,” Mr. Stephan said.