While NITCH was the closest that state regulators came to a solution at the time, the project failed, he reported, noting that it merely produced a proposal to create software to tell brokers what they already knew--that it was impossible to comply with the conflicting E&S premium tax laws.

"NITCH offered a technological solution to what is a legal, statutory or political problem," he wrote.

Fast-forward to July 29 2008, and Mr. Bouhan was testifying before the Senate Banking Committee in Washington, using words that echoed those he wrote a decade earlier. The tax remittance system is "dysfunctional and chaotic," he said. "The states are just not capable of coming together to create a universal system of tax allocation and remittance....they can all accept. NAPSLO has concluded that the only solution is federal legislation."

It was at the end of that hearing that NAPSLO Legislative Committee Co-Chair Tom Mulligan became truly optimistic that NRRA's passage would ultimately become a reality. Sen. Christopher Dodd, D-Conn., said point blank at the end of that hearing that the committee was "going to do something with this" or words to that effect, seeing no opposition to the measure.

"That was our first clear sign. We knew this was going to be included in whatever the Senate did," Mr. Mulligan said.

TAKING IT TO THE FEDS
Despite the frustration behind Mr. Bouhan's words in 1999, it was not the failed efforts to get action in the states that led NAPSLO to contact the staff of the House Financial Services Committee in late 2003, but instead rumblings that Congress was examining a bill to overhaul the entire state insurance regulatory process.

NAPSLO wanted to make sure that the surplus lines industry "had a voice in this process," Mr. Mulligan said, recalling activity that actually predated the start of his six-year stint as NAPSLO Legislative committee co-chair.

In February 2004, NAPSLO President Jim Griffith, then Legislative Co-Chairs Andrew Frazier and John Wood, and Mr. Bouhan met with Robert Gordon, senior counsel of the HFSC to discuss the "national standards" legislation that would become known as the State Modernization and Regulatory Transparency, or SMART Act.

After the meeting, NAPSLO wrote to Mr. Gordon to convey the four principles it envisioned as part of federal standards legislation: freedom of rate and form regulation; automatic export for sophisticated purchasers; uniform licensing; and uniform premium tax payments.

"It was a bit of a surprise to NAPSLO shortly thereafter when the SMART Act went away, and Congress picked a few provisions [that] they viewed as the low-hanging fruit, or the provisions that they viewed as non-controversial," carving out a standalone bill on surplus lines and reinsurance issues, said Mr. Gordon.

That was "the first deer across the meadow," he said. "We never really thought that it would be such a high-profile issue."

Ms. Berthoud agreed that this was a major step toward the goal line, explaining that it would have been much more difficult to move a bill with the 13 titles that SMART Act originally contained.

"The rest is on record," Mr. Mulligan said, referring to the fact that NRRA passed in Congress four times--three times in as a standalone bill in the House, and ultimately as part of the federal financial services reform legislation in both houses.

ON RECORD
Libby Baney supplied a record of Congressional activity leading up to the signing on July 21, adding one additional action taken by Rep. Dennis Moore, D-Kan., one day later. On July 22, Rep. Moore, "who had been actively involved in the legislation over his lifetime, and who had been one of the key sponsors this year" put a statement into the Congressional record emphasizing Congress' intent for:

• Brokers to remit all tax on an E&S transaction to the home state

• Each state to adopt nationwide uniform procedures, such as an interstate compact,

• Regulatory requirements to be imposed only by the insured's home state.

Ms. Baney named Rep. Moore (D-Kan.) and Rep. Scott Garrett, (R-N.J.), as well as Sen. Evan Bayh, (D-Ind.), as three of many key "NRRA Congressional champions, who pushed NRRA forward."

The B&D consultants noted that grass roots efforts of NAPSLO members to educate member of Congress about the surplus line industry were critical in garnering such champions.

Three NAPSLO members lived in Rep. Garrett's district at one point, Ms. Berthoud said, referring to Mr. Mulligan, Bill Malone, and Mary Ellen Rozzell.

"Some of the messages that resonated in Congress were those about how surplus lines allows innovative technology to come to market that otherwise might not be insured," Ms. Baney said--how E&S insurance "greases the wheels of commerce." For example, Sen. Bayh's state has a number of medical device companies, research organizations and universities, she said.

NAPSLO "Legislative Days" were an important part of the effort. Ms. Berthoud explained that the once-a-year fly-in of more than a dozen NAPSLO senior executives from the Legislative Committee would mix the executives with key members of committees and their staffs. "They brought a real-world perspective," she said.

"It is not the most well-known or easily explained portion of insurance industry," said Legislative Committee Co-Chair Hank Haldeman. "In the early days, it was really explaining fundamentals: Why is there surplus lines? What role does it play in the industry?"

"It has been an education process, much more than a negotiation process," he said, noting that the No. 1 question the lawmakers asked was why the problematic circumstances surrounding multi-state tax and regulatory problems existed.

The NAPSLO representatives and lobbyists said there were two more ingredients in the recipe for NRRA success--a coalition of industry groups speaking with one voice and timing.

"In Washington, it's nice to get things done in numbers rather than trying to run up the Hill by yourself," Ms. Berthoud said, referring to the fact that a broad-based coalition of industry trade groups formed in 2006--known as the Surplus Lines and Reinsurance Coalition, which was chaired by NAPSLO--presented a united front on all of the issues that NRRA addressed.

As for the final ingredient, Ms. Baney said this was the "right policy at the right time"--coming when members of Congress were looking to remedy the financial system, deal with Wall Street and put forth consumer benefits.

United
We Stand

NAPSLO executives and lobbyists say NRRA couldn't have passed without a united industry front. Members of the Surplus Lines & Reinsurance Coalition who worked together on the effort were:

• NAPSLO
• RIMS
• IIABA
• RAA
• PCI
• AAMGA
• CIAB
• Dewey & LeBoeuf
• ACLI
• AIA
• NAMIC
• Swiss Re
• Nationwide
• Aon
• Chubb
• Generali