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Industry welcomes reinsurance reforms

The new bill is intended to address the plight of policyholders in areas that are vulnerable to catastrophe events by eliminating unnecessary duplication of regulation. For example, wind coverage for Florida homeowners could only be found in the surplus lines marketplace due to the withdrawal of local capacity

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American insurers have welcomed legislation passed by the US House of Representatives which aims to clarify conflicting state regulations governing the domestic surplus lines and reinsurance markets.

The key reform put in place by the “Non-admitted and Reinsurance Reform Act of 2007” (H.R. 1065) requires that only one set of state regulatory rules apply to policies that insure exposures in multiple states — those of the policyholder’s home state.

The bill, which was approved unanimously on 25 June, would establish national standards for how states regulate the surplus lines and reinsurance markets and would create a uniform system of surplus lines premium tax allocation and remittance, one-state compliance on multi-state surplus lines risks, and direct access to the surplus lines market for sophisticated commercial purchasers.

The bill also contains reinsurance provisions which charge the ceding insurer’s home state regulator with making the so-called “credit for reinsurance” determinations. It would also prohibit state insurance regulators from applying its laws to reinsurance agreements of ceding insurers domiciled in other states.