Key issues for the WSIA Legislative Committee in 2021
Flood insurance, cannabis business coverage and broker fee caps are all issues that have dominated the committee's attention.
PropertyCasualty360 recently checked in with the Wholesale & Specialty Insurance Association Legislative Committee to determine the group’s key areas of focus during 2021.
What follows is an update on the top issues with which the committee has been most closely engaged.
Flood insurance
Flood insurance continues to be of great concern, pointed out Keri Kish, director of Government Relations for WSIA. She stressed that surplus lines insurers write a significant amount of coverage in lieu of, or in addition to, the National Flood Insurance Program (NFIP), and WSIA never wants to see this critical program lapse.
“Since 2017, the NFIP has had 17 short-term extensions, but there needs to be long-term reauthorization of the NFIP,” Kish said, noting that NFIP was recently extended to December 3, 2021. “We are hoping that Congress will extend it until at least September 30, 2022,” she added.
As it has for many years, the WSIA Legislative Committee is continuing to advocate for a revised definition of private flood insurance that would clarify to lenders that private flood solutions from surplus lines insurers can be accepted in lieu of an NFIP policy to meet a mandatory coverage requirement, noted Phillip McCrorie, president of RSUI Group, Inc., and co-chair of the WSIA Legislative Committee.
McCrorie explained that headway was made toward that goal with a federal banking agency rule in 2019, but clarification is still needed on the language referring to surplus lines in the law.
“We also need a law that clearly allows consumers to be considered to have had continuous flood coverage if they move between private and NFIP policies,” he said. “This helps the consumer get the best price available to them each year and will increase the opportunities for our market to provide options.”
However, McCrorie added, to have a robust private market, we still need a viable and healthy NFIP. “We need a long-term reauthorization of the NFIP to help facilitate that.”
Kish pointed out that “while there was not a lot of state legislative activity during the 2021 legislative session specific to private flood insurance, we were pleased that Florida eliminated the diligent effort requirement on personal lines and commercial-residential lines private flood insurance. This is very helpful for consumers seeking options for Florida risks.”
Cannabis insurance
As state legalization of both medical and recreational cannabis use increases, Congress is considering legislation related to cannabis activity. However, conflicts between state and local laws continue to prompt insurance commissioners to work to address cannabis legislation.
Meanwhile, individuals and businesses engaged in legal cannabis-related activities need coverage, and surplus lines insurers need a higher comfort level about underwriting that coverage.
“Cannabis is a new and emerging risk that is an area that is of great interest to the surplus lines market,” Kish said.
“Cannabis risks are a growing segment of the U.S. economy in states that have passed legislation to legalize recreational or medical marijuana as a business,” added Coryn Thalmann, COO, Jimcor Agencies, and co-chair, WSIA Legislative Committee. “While there is significant interest from the insurance industry to provide coverage for these risks, two big roadblocks remain: Cannabis continues to be listed as a scheduled illegal drug by the federal government and, as a scheduled federal drug, proceeds from the drug sales can’t be processed through the federal banking system.”
There is currently reluctance in the financial services industry to provide services to legitimate businesses. “Without a safe harbor from liability, or removal from the federal drug schedule, some from the insurance industry, including WSIA members, are wary of entering into contracts to cover the risks,” Thalmann noted.
On Sept. 23, 2021, the Secure and Fair Enforcement (SAFE) Banking Act passed in the U.S. House of Representatives for the fifth time. However, it remains stalled in the Senate.
“WSIA and a coalition of other trades support the passage of the SAFE Banking Act in Congress,” Thalmann said. “This act would provide safe harbor provisions that prevent federal criminal prosecution and civil liability for agents, brokers and insurers when engaging in the business of insurance in states that have legalized cannabis in some form.”
Broker policy fee caps
Surplus lines brokers may charge a reasonable policy fee on policies issued by surplus lines insurers.
“WSIA has been a driver of several state legislative reforms in recent years, which successfully deregulated outdated broker policy fee caps in both Florida and Michigan,” McCrorie said. “In 2021, we are turning our attention to Maryland, where we hope to work with the state legislature to do the same in that state.”
McCrorie explained that this is simply an initiative to allow surplus lines brokers to charge a reasonable, current market fee for their service without a prescriptive fee cap.
National Association of Registered Agents and Brokers Reform Act (NARAB)
The Legislative Committee and WSIA believe it’s important for NARAB to come to fruition as soon as possible, Kish stressed. NARAB was enacted through legislation six years ago and is still not operational, Thalmann noted.
“WSIA strongly supports state-based regulation, but we are supportive of NARAB’s mission to create uniformity for multistate licensing,” Thalmann added. “It’s time to get that board nominated and approved so it can begin work, and we are supportive of collaborative efforts to develop a slate of candidates for consideration by the White House and Senate Banking Committee.”
Anna Trusky is a freelance writer based in Connecticut.
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