With a steady focus uniformity and simplicity, The Council of Insurance Agents & Brokers, along with the Independent Insurance Agents & Brokers of America, jointly testified today before the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity, on two issues critical to its member firms and their commercial clients: implementation of surplus lines reform and NARAB II agent/broker licensure reform.
Clay Jackson, Senior Vice President and Regional Agency Manager of Nashville-based BB&T Cooper, Love, Jackson, Thornton & Harwell, testified on behalf of The Council.
“The surplus lines provisions of Dodd-Frank made it clear that the only rules that would govern a multi-state placement of surplus lines products are the rules of the home state of the insured,” said Jackson. “All of us believed that the enactment of the NRRA provisions would have afforded the states to collectively devise an interstate compact to govern these transactions.”
Despite all of the different approaches taken by the states since the July 21 implementation date, The Council is hopeful that the intent of the law will ultimately be upheld and urged committee members to closely monitor the states’ implementation of the law. “This is simple and straightforward and all of the major stakeholders supported these provisions.”
Surplus lines insurance represents about a third of the commercial insurance marketplace, involving insurance risks that tend to be more sophisticated and are largely commercial. The surplus lines reform provisions were included in the Non-Admitted and Reinsurance Reform Act passed last year as part of the Dodd-Frank Wall Street Reform Act.
Jackson explained that states have long tried and failed to harmonize their laws governing interstate surplus lines transactions, especially the issue of premium tax allocation. “We’re confident that in the end, congressional intent will be upheld – a single standard for multi-state surplus lines transactions.”
On the issue of producer licensing, states adopted reforms and encouraged reciprocity on non-resident licensure as a result of the original National Association of Registered Agents and Brokers (NARAB) provisions of the Gramm-Leach-Bliley Act, but the reforms have not gone far enough. The creation of NARAB II would solve this problem, according to The Council.
“We work in a business that is increasingly interstate and international,” said Jackson. “There are still far too many state-by-state distinctions and bureaucratic requirements that add costs to consumers of insurance products without providing value or assuring the professionalism of those who sell insurance products.”
Supported by the producer community, NARAB membership would be optional. Agents and brokers who desire a passport for interstate licensure would have to be licensed in their home states and then submit themselves to a higher standard for NARAB membership, which would afford them an opportunity to obtain non-resident licenses in other jurisdictions.
The NARAB II legislation has been put forth on a bipartisan basis and has twice passed the House of Representatives. Jackson encouraged the committee to advance this legislation once again, and to help enact into law in this session of Congress. “This approach would assure strong standards of professionalism. The creation of an interstate, agent/broker licensing clearinghouse just makes common sense.”
Jackson also testified on behalf of the Independent Insurance Agents & Brokers of America (IIABA).