H.R. 2571: Nonadmitted and Reinsurance Reform Act of 2009

H.R. 2571

Nonadmitted and Reinsurance Reform Act of 2009

Date
September 9, 2009 (111th Congress, 1st Session)

Staff Contact
Communications

Floor Situation

The House is expected to consider H.R. 2571 on the House floor on Wednesday, September 9, 2009, under a motion to suspend the rules, requiring a two-thirds majority vote for passage. This legislation was introduced by Rep. Dennis Moore (D-KS) on May 21, 2009.

Bill Summary

H.R. 2571 would harmonize, and in some cases reduce, regulation and taxation of nonadmitted or surplus lines insurance by vesting the "home State" of the insured with the sole authority to regulate and collect the taxes on a surplus lines transaction. H.R. 2571 also would implement streamlined federal standards allowing a commercial purchaser to access surplus lines insurance. Lastly, the bill would vest the home State of the insurer purchasing the reinsurance with the authority over the transaction while vesting the home State of the reinsurer with the sole authority to regulate the solvency of the reinsurer. The bill would take effect one year after enactment.

Background

H.R. 2571 is similar to H.R. 1065, which passed the House in the 110th Congress by voice vote.

H.R. 2571 intends to streamline conflicting State regulation of surplus lines and reinsurance.  Similar legislation has passed the House in the last two Congresses.  The bill attempts to eliminate extraterritorial application of State laws and promote more efficient solvency regulation of reinsurers by providing for a single regulator (home State) for financial solvency.

All States require licenses for insurance companies, and most States closely regulate insurance companies and the details of insurance products sold within their borders.  Such regulation can create barriers to entry in the insurance market and reduce the supply of insurance that is available to consumers.  Rather than requiring consumers who may be unable to find insurance from a licensed insurer to go without insurance, States have allowed consumers to purchase insurance from non-licensed insurers, commonly called "nonadmitted" or "surplus lines" insurers.  While any sort of insurance could be sold by a surplus lines insurer, these transactions tend to be for rarer and more exceptional risks, such as art and antiques, hazardous materials, natural disasters, amusement parks, and environmental or pollution risks.

Although surplus lines insurance is sold by insurers who do not hold a regular State insurance license, it is not unregulated. The sale of this insurance is regulated and taxed by the States through requirements placed on the brokers who facilitate the insurance transactions. The varying State requirements for surplus lines insurance have sparked efforts for greater harmonization between the States' laws and for federal intervention to promote uniformity, such as H.R. 2571. 

Cost

The Congressional Budget Office (CBO) has not yet produced a cost estimate for H.R. 2571.