[Congressional Record Volume 152, Number 123 (Wednesday, September 27, 2006)]
[House]
[Pages H7561-H7565]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
NONADMITTED AND REINSURANCE REFORM ACT OF 2006
Mr. OXLEY. Mr. Speaker, I move to suspend the rules and pass the bill
(H.R. 5637) to streamline the regulation of nonadmitted insurance and
reinsurance, and for other purposes, as amended.
The Clerk read as follows:
H.R. 5637
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the
``Nonadmitted and Reinsurance Reform Act of 2006''.
(b) Table of Contents.--The table of contents for this Act
is as follows:
Sec. 1. Short title and table of contents.
Sec. 2. Effective date.
TITLE I--NONADMITTED INSURANCE
Sec. 101. Reporting, payment, and allocation of premium taxes.
Sec. 102. Regulation of nonadmitted insurance by insured's home State.
Sec. 103. Participation in national producer database.
Sec. 104. Uniform standards for surplus lines eligibility.
Sec. 105. Streamlined application for commercial purchasers.
Sec. 106. GAO study of nonadmitted insurance market.
Sec. 107. Definitions.
TITLE II--REINSURANCE
Sec. 201. Regulation of credit for reinsurance and reinsurance
agreements.
Sec. 202. Regulation of reinsurer solvency.
Sec. 203. Definitions.
TITLE III--RULE OF CONSTRUCTION
Sec. 301. Rule of Construction.
SEC. 2. EFFECTIVE DATE.
Except as otherwise specifically provided in this Act, this
Act shall take effect upon the expiration of the 12-month
period beginning on the date of the enactment of this Act.
TITLE I--NONADMITTED INSURANCE
SEC. 101. REPORTING, PAYMENT, AND ALLOCATION OF PREMIUM
TAXES.
(a) Home State's Exclusive Authority.--No State other than
the home State of an insured may require any premium tax
payment for nonadmitted insurance.
(b) Allocation of Nonadmitted Premium Taxes.--
(1) In general.--The States may enter into a compact or
otherwise establish procedures to allocate among the States
the premium taxes paid to an insured's home State described
in subsection (a).
(2) Effective date.--Except as expressly otherwise provided
in such compact or other procedures, any such compact or
other procedures--
(A) if adopted on or before the expiration of the 330-day
period that begins on the date of the enactment of this Act,
shall apply to any premium taxes that, on or after such date
of enactment, are required to be paid to any State that is
subject to such compact or procedures; and
(B) if adopted after the expiration of such 330-day period,
shall apply to any premium taxes that, on or after January 1
of the first calendar year that begins after the expiration
of such 330-day period, are required to be paid to any State
that is subject to such compact or procedures.
(3) Report.--Upon the expiration of the 330-day period
referred to in paragraph (2), the NAIC may submit a report to
the Committee on Financial Services and Committee on the
Judiciary of the House of Representatives and the Committee
on Banking, Housing, and Urban Affairs of the Senate
identifying and describing any compact or other procedures
for allocation among the States of premium taxes that have
been adopted during such period by any States.
(4) Nationwide system.--The Congress intends that each
State adopt a nationwide or uniform procedure, such as an
interstate compact, that provides for the reporting, payment,
collection, and allocation of premium taxes for nonadmitted
insurance consistent with this section.
(c) Allocation Based on Tax Allocation Report.--To
facilitate the payment of premium taxes among the States, an
insured's home State may require surplus lines brokers and
insureds who have independently procured insurance to
annually file tax allocation reports with the insured's home
State detailing the portion of the nonadmitted insurance
policy premium or premiums attributable to properties, risks
or exposures located in each State. The filing of a
nonadmitted insurance tax allocation report and the payment
of tax may be made by a person authorized by the insured to
act as its agent.
SEC. 102. REGULATION OF NONADMITTED INSURANCE BY INSURED'S
HOME STATE.
(a) Home State Authority.--Except as otherwise provided in
this section, the placement of nonadmitted insurance shall be
subject to the statutory and regulatory requirements solely
of the insured's home State.
(b) Broker Licensing.--No State other than an insured's
home State may require a surplus lines broker to be licensed
in order to sell, solicit, or negotiate nonadmitted insurance
with respect to such insured.
(c) Enforcement Provision.--Any law, regulation, provision,
or action of any State that applies or purports to apply to
nonadmitted insurance sold to, solicited by, or negotiated
with an insured whose home State is another State shall be
preempted with respect to such application.
(d) Workers' Compensation Exception.--This section may not
be construed to preempt any State law, rule, or regulation
that restricts the placement of workers' compensation
insurance or excess insurance for self-funded workers'
compensation plans with a nonadmitted insurer.
SEC. 103. PARTICIPATION IN NATIONAL PRODUCER DATABASE.
After the expiration of the 2-year period beginning on the
date of the enactment of this Act, a State may not collect
any fees relating to licensing of an individual or entity as
a surplus lines broker in the State unless the State has in
effect at such time laws or regulations that provide for
participation by the State in the national insurance producer
database of the NAIC, or any other equivalent uniform
national database, for the licensure of surplus lines brokers
and the renewal of such licenses.
SEC. 104. UNIFORM STANDARDS FOR SURPLUS LINES ELIGIBILITY.
A State may not--
(1) impose eligibility requirements on, or otherwise
establish eligibility criteria for, nonadmitted insurers
domiciled in a United States jurisdiction, except in
conformance with section 5A(2) and 5C(2)(a) of the Non-
Admitted Insurance Model Act; and
(2) prohibit a surplus lines broker from placing
nonadmitted insurance with, or procuring nonadmitted
insurance from, a nonadmitted insurer domiciled outside the
United States that is listed on the Quarterly Listing of
Alien Insurers maintained by the International Insurers
Department of the NAIC.
SEC. 105. STREAMLINED APPLICATION FOR COMMERCIAL PURCHASERS.
A surplus lines broker seeking to procure or place
nonadmitted insurance in a State for an exempt commercial
purchaser shall not be required to satisfy any State
requirement to make a due diligence search to determine
whether the full amount or type of insurance sought by such
exempt commercial purchaser can be obtained from admitted
insurers if--
(1) the broker procuring or placing the surplus lines
insurance has disclosed to the exempt commercial purchaser
that such insurance may or may not be available from the
admitted market that may provide greater protection with more
regulatory oversight; and
(2) the exempt commercial purchaser has subsequently
requested in writing the broker to procure or place such
insurance from a nonadmitted insurer.
SEC. 106. GAO STUDY OF NONADMITTED INSURANCE MARKET.
(a) In General.--The Comptroller General of the United
States shall conduct a study of the nonadmitted insurance
market to determine the effect of the enactment of this title
on the size and market share of the nonadmitted insurance
market for providing coverage typically provided by the
admitted insurance market.
(b) Contents.--The study shall determine and analyze--
(1) the change in the size and market share of the
nonadmitted insurance market and in
[[Page H7562]]
the number of insurance companies and insurance holding
companies providing such business in the 18-month period that
begins upon the effective date of this Act;
(2) the extent to which insurance coverage typically
provided by the admitted insurance market has shifted to the
nonadmitted insurance market;
(3) the consequences of any change in the size and market
share of the nonadmitted insurance market, including
differences in the price and availability of coverage
available in both the admitted and nonadmitted insurance
markets;
(4) the extent to which insurance companies and insurance
holding companies that provide both admitted and nonadmitted
insurance have experienced shifts in the volume of business
between admitted and nonadmitted insurance; and
(5) the extent to which there has been a change in the
number of individuals who have nonadmitted insurance
policies, the type of coverage provided under such policies,
and whether such coverage is available in the admitted
insurance market.
(c) Consultation With NAIC.--In conducting the study under
this section, the Comptroller General shall consult with the
NAIC.
(d) Report.--The Comptroller General shall complete the
study under this section and submit a report to the Committee
on Financial Services of the House of Representatives and the
Committee on Banking, Housing, and Urban Affairs of the
Senate regarding the findings of the study not later than 30
months after the effective date of this Act.
SEC. 107. DEFINITIONS.
For purposes of this title, the following definitions shall
apply:
(1) Admitted insurer.--The term ``admitted insurer'' means,
with respect to a State, an insurer licensed to engage in the
business of insurance in such State.
(2) Exempt commercial purchaser.--The term ``exempt
commercial purchaser'' means any person purchasing commercial
insurance that meets the following requirements:
(A) The person employs or retains a qualified risk manager
to negotiate insurance coverage.
(B) The person has paid aggregate nationwide commercial
property and casualty insurance premiums in excess of
$100,000 in the immediately preceding 12 months.
(C) The person meets at least one of the following
criteria:
(i) The person possesses a net worth in excess of
$20,000,000.
(ii) The person generates annual revenues in excess of
$50,000,000.
(iii) The person employs more than 500 full time or full
time equivalent employees per individual insured or is a
member of affiliated group employing more than 1,000
employees in the aggregate.
(iv) The person is a not-for-profit organization or public
entity generating annual budgeted expenditures of at least
$30,000,000.
(v) The person is a municipality with a population in
excess of 50,000 persons.
(3) Home state.--The term ``home State'' means the State in
which an insured maintains its principal place of business
or, in the case of an individual, the individual's principal
residence.
(4) Independently procured insurance.--The term
``independently procured insurance'' means insurance procured
directly by an insured from a nonadmitted insurer.
(5) NAIC.--The term ``NAIC'' means the National Association
of Insurance Commissioners or any successor entity.
(6) Nonadmitted insurance.--The term ``nonadmitted
insurance'' means any property and casualty insurance
permitted to be placed directly or through a surplus lines
broker with a nonadmitted insurer eligible to accept such
insurance.
(7) Non-admitted insurance model act.--The term ``Non-
Admitted Insurance Model Act'' means the provisions of the
Non-Admitted Insurance Model Act, as adopted by the NAIC on
August 3, 1994, and amended on September 30, 1996, December
6, 1997, October 2, 1999, and June 8, 2002.
(8) Nonadmitted insurer.--The term ``nonadmitted insurer''
means, with respect to a State, an insurer not licensed to
engage in the business of insurance in such State.
(9) Qualified risk manager.--The term ``qualified risk
manager'' means, with respect to a policyholder of commercial
insurance, a person who meets all of the following
requirements:
(A) The person is an employee of, or third party consultant
retained by, the commercial policyholder.
(B) The person provides skilled services in loss
prevention, loss reduction, or risk and insurance coverage
analysis, and purchase of insurance.
(C) The person possesses at least two of the following
credentials:
(i) An advanced degree in risk management issued by an
accredited college or university.
(ii) At least 5 years of experience in one or more of the
following areas of commercial property insurance or
commercial casualty insurance:
(I) Risk financing.
(II) Claims administration.
(III) Loss prevention.
(IV) Risk and insurance coverage analysis.
(iii) At least one of the following designations:
(I) A designation as a Chartered Property and Casualty
Underwriter (in this clause referred to as ``CPCU'') issued
by the American Institute for CPCU/Insurance Institute of
America.
(II) A designation as an Associate in Risk Management (ARM)
issued by American Institute for CPCU/Insurance Institute of
America.
(III) A designation as a Certified Risk Manager (CRM)
issued by the National Alliance for Insurance Education &
Research.
(IV) A designation as a RIMS Fellow (RF) issued by the
Global Risk Management Institute.
(V) Any other designation, certification, or license
determined by a State insurance commissioner or other State
insurance regulatory official or entity to demonstrate
minimum competency in risk management.
(10) Premium tax.--The term ``premium tax'' means, with
respect to surplus lines or independently procured insurance
coverage, any tax, fee, assessment, or other charge imposed
by a State on an insured based on any payment made as
consideration for an insurance contract for such insurance,
including premium deposits, assessments, registration fees,
and any other compensation given in consideration for a
contract of insurance.
(11) Surplus lines broker.--The term ``surplus lines
broker'' means an individual, firm, or corporation which is
licensed in a State to sell, solicit, or negotiate insurance
on properties, risks, or exposures located or to be performed
in a State with nonadmitted insurers.
(12) State.--The term ``State'' includes any State of the
United States, the District of Columbia, the Commonwealth of
Puerto Rico, Guam, the Northern Mariana Islands, the Virgin
Islands, and American Samoa.
TITLE II--REINSURANCE
SEC. 201. REGULATION OF CREDIT FOR REINSURANCE AND
REINSURANCE AGREEMENTS.
(a) Credit for Reinsurance.--If the State of domicile of a
ceding insurer is an NAIC-accredited State, or has financial
solvency requirements substantially similar to the
requirements necessary for NAIC accreditation, and recognizes
credit for reinsurance for the insurer's ceded risk, then no
other State may deny such credit for reinsurance.
(b) Additional Preemption of Extraterritorial Application
of State Law.--In addition to the application of subsection
(a), all laws, regulations, provisions, or other actions of a
State other than those of the State of domicile of the ceding
insurer are preempted to the extent that they--
(1) restrict or eliminate the rights of the ceding insurer
or the assuming insurer to resolve disputes pursuant to
contractual arbitration to the extent such contractual
provision is not inconsistent with the provisions of title 9,
United States Code;
(2) require that a certain State's law shall govern the
reinsurance contract, disputes arising from the reinsurance
contract, or requirements of the reinsurance contract;
(3) attempt to enforce a reinsurance contract on terms
different than those set forth in the reinsurance contract,
to the extent that the terms are not inconsistent with this
title; or
(4) otherwise apply the laws of the State to reinsurance
agreements of ceding insurers not domiciled in that State.
SEC. 202. REGULATION OF REINSURER SOLVENCY.
(a) Domiciliary State Regulation.--If the State of domicile
of a reinsurer is an NAIC-accredited State or has financial
solvency requirements substantially similar to the
requirements necessary for NAIC accreditation, such State
shall be solely responsible for regulating the financial
solvency of the reinsurer.
(b) Nondomiciliary States.--
(1) Limitation on financial information requirements.--If
the State of domicile of a reinsurer is an NAIC-accredited
State or has financial solvency requirements substantially
similar to the requirements necessary for NAIC accreditation,
no other State may require the reinsurer to provide any
additional financial information other than the information
the reinsurer is required to file with its domiciliary State.
(2) Receipt of information.--No provision of this section
shall be construed as preventing or prohibiting a State that
is not the State of domicile of a reinsurer from receiving a
copy of any financial statement filed with its domiciliary
State.
SEC. 203. DEFINITIONS.
For purposes of this title, the following definitions shall
apply:
(1) Ceding insurer.--The term ``ceding insurer'' means an
insurer that purchases reinsurance.
(2) Domiciliary state.--The terms ``State of domicile'' and
``domiciliary State'' means, with respect to an insurer or
reinsurer, the State in which the insurer or reinsurer is
incorporated or entered through, and licensed.
(3) Reinsurance.--The term ``reinsurance'' means the
assumption by an insurer of all or part of a risk undertaken
originally by another insurer.
(4) Reinsurer.--
(A) In general.--The term ``reinsurer'' means an insurer to
the extent that the insurer--
(i) is principally engaged in the business of reinsurance;
(ii) does not conduct significant amounts of direct
insurance as a percentage of its net premiums; and
[[Page H7563]]
(iii) is not engaged in an ongoing basis in the business of
soliciting direct insurance.
(B) Determination.--A determination of whether an insurer
is a reinsurer shall be made under the laws of the State of
domicile in accordance with this paragraph.
(5) State.--The term ``State'' includes any State of the
United States, the District of Columbia, the Commonwealth of
Puerto Rico, Guam, the Northern Mariana Islands, the Virgin
Islands, and American Samoa.
TITLE III--RULE OF CONSTRUCTION
SEC. 301. RULE OF CONSTRUCTION.
Nothing in this Act or amendments to this Act shall be
construed to modify, impair, or supersede the application of
the antitrust laws. Any implied or actual conflict between
this Act and any amendments to this Act and the antitrust
laws shall be resolved in favor of the operation of the
antitrust laws.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Ohio (Mr. Oxley) and the gentleman from Kansas (Mr. Moore) each will
control 20 minutes.
The Chair recognizes the gentleman from Ohio.
General Leave
Mr. OXLEY. Mr. Speaker, I ask unanimous consent that all Members may
have 5 legislative days within which to revise and extend their remarks
on this legislation and to insert extraneous material thereon.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Ohio?
There was no objection.
Mr. OXLEY. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, today is a historic moment in the evolution of our
insurance marketplace. The Nonadmitted and Reinsurance Reform Act is an
important reform for consumers, helping American homeowners and
businesses to obtain more available and more affordable insurance
coverage. It will especially help consumers in high-cost areas, such as
coastal regions and urban cities vulnerable to terrorist risk. But
equally important, this bill is the next critical step in a long
journey towards comprehensive reform of how insurance is regulated at
the State and Federal levels.
In 1995, I chaired some of the first hearings in the new Republican
Congress on insurance reform and helped shape the largest financial
services modernization bill of the last decade, the Gramm-Leach-Bliley
Act. We finally got GLBA enacted in the waning days of 1999, but it
wasn't easy. The Congress had been working on regulatory reform for
some 66 years, enough time for three generations of lobbyists to put
their children through college.
The debate on GLBA underscored the importance of the financial
services industry to our country and the critical need for additional
reform. To facilitate further legislative reforms and continue building
on our hard-fought success, the House leadership created the Committee
on Financial Services, which I have had the privilege of chairing for
nearly its 6 years in existence.
Since then, we have had dozens of hearings with hundreds of witnesses
on insurance regulation. We have heard that, starting back in 1871, the
State insurance regulators committed to modernizing their regulations
to provide for more uniformity and coordination and that they continue
to hope to some day reach that goal. We have sorted through numerous
State and Federal proposals to address the problems of a sluggish
insurance marketplace beset by inefficient regulation and the threats
of terrorism and other catastrophic disasters. And we have completed
numerous investigations of how insurance providers and regulators have
lived up to their promises to consumers and the marketplace.
After Gramm-Leach-Bliley, the heads of the State insurance regulators
approached our committee to work together in forging several formal
policy papers making a commitment towards uniformity and reform,
culminating in an agreement to pursue Federal legislation to help the
States achieve their own modernization goals.
These policy discussions culminated in the State Modernization and
Regulatory Transparency Act, or SMART, as a template for further
reform. Two of the SMART titles that appeared to have the greatest
bipartisan consensus now form the basis of the legislation before us
being moved forward by the leadership of Representative Ginny Brown-
Waite, Representative Moore, Capital Market Subcommittee Chairman
Baker, Representative Wasserman Schultz, and several others.
Insurance reform is never easy and never quick. Believe me, it is
never quick. Each success that we have had has been the result of
strong bipartisan cooperation in working together to overcome the turf
and vested interests that will always cling to the status quo.
I am proud though to have had the opportunity to work with my
colleagues to finish one stage of modernization and help launch the
next, and I wish my colleagues well as they continue down this long
journey towards modernization of insurance regulation.
I again compliment the bill cosponsors, subcommittee Chairman Baker
and Ranking Members Frank and Kanjorski for their help and leadership.
I look forward to passing this measure to improve the availability and
affordability of insurance and taking another giant leap forward in
this historical step towards insurance reform.
Mr. Speaker, I reserve the balance of my time.
Mr. MOORE of Kansas. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, I would like to thank Congresswoman Ginny Brown-Waite
for introducing H.R. 5637, the Nonadmitted and Reinsurance Reform Act,
and for working with me on it as it has moved through the legislative
process. I would also like to thank Chairman Mike Oxley and Richard
Baker and Ranking Members Barney Frank and Paul Kanjorski for their
support of this measure. The bipartisan support for this bill is a good
example of how both sides can come together to introduce and pass
legislation that is not and should not be about Democrats and
Republicans.
Congresswoman Ginny Brown-Waite and I introduced H.R. 5637 three
months ago on June 19 with strong bipartisan support and strong support
on the Financial Services Committee. Since the bill's introduction, the
Capital Market Subcommittee has held a useful and informative hearing
on the issue, followed by a markup in which the bill received unanimous
support. The full Financial Services Committee followed the successful
subcommittee markup with a voice vote just one week later, and I look
forward to strong support on the House floor today.
In short, H.R. 5637 would improve the regulation of two specific
areas in the commercial insurance marketplace, namely, surplus lines
and reinsurance transactions. This legislation would prohibit the
extraterritorial application of State laws and allow ceding insurers
and reinsurers to resolve disputes pursuant to contractual arbitration
clauses. This reform, Mr. Speaker, is long overdue and necessary to
restore regulatory certainty to the reinsurance market.
Finally, I would like to note that while many legislative attempts to
reform the insurance industry encounter at least some industry
opposition, H.R. 5637 is supported by the insurers, the reinsurers, the
agents and brokers, as well as by many State regulators.
Mr. Speaker, I look forward to passage of this legislation.
Mr. Speaker, I reserve the balance of my time.
Mr. OXLEY. Mr. Speaker, I am pleased to yield such time as she may
consume to the gentlewoman from Florida (Ms. Ginny Brown-Waite), one of
the leaders and the lead sponsor of this legislation.
Ms. GINNY BROWN-WAITE of Florida. Mr. Speaker, I thank the chairman.
Mr. Speaker, today the regulation of the surplus lines market is
fragmented and very cumbersome. Insurers and brokers who want to
provide insurance across State lines are subject to a myriad of
different State tax and licensing requirements. Oftentimes these
regulations will conflict, making it virtually impossible for one
company to comply with all of them. This situation leaves policyholders
underinsured and with little choice in providers.
Moreover, most of the policyholders who have purchased insurance in
the nonadmitted market do so every day. These very sophisticated
commercial entities have educated risk advisers on staff with a
thorough understanding of the market and their risk exposure.
[[Page H7564]]
Yet most States require that these experts be denied coverage from
multiple providers before they are allowed to purchase insurance in the
nonadmitted market.
The reinsurance market faces additional obstacles because some State
regulators are taking it upon themselves to throw out arbitration
agreements between reinsurance providers and primary carriers. These
are contractual agreements decided upon by sophisticated parties on
both sides of the transaction to settle disputes without tying up the
courts.
Accordingly, the bill that we have before us today, H.R. 5637,
specifies that only the tax policies and licensing regulations of the
State in which the policy holder is domiciled will govern the
transaction. It also requires States within 2 years of the bill's
passage to participate in the National Association of Insurance
Commissioners National Insurance Producer Database and to adopt
regulations under NAIC's Nonadmitted Insurance Model Act.
The bill allows sophisticated commercial entities direct access to
the surplus lines market without going through the multiple denial
process. It also prohibits States from voiding established contractual
arbitration agreements between reinsurers and primary companies.
Policyholders in a number of States are facing skyrocketing rates.
With these obstacles already impeding affordability, adding a quagmire
of inefficient State rules certainly does not help. Additionally, with
reinsurance rates rising at an alarming rate, companies should be
encouraged to stay out of the courts and to follow their own
voluntarily entered into arbitration agreements. This bill provides
commonsense solutions to the nonadmitted and reinsurance market.
I want to thank certainly Chairman Oxley, who will be very much
missed, not only by the committee, but by this entire body, certainly
Representative Moore and the other Members who signed onto this very
bipartisan bill, as well as Mr. Baker, for their leadership on this
very important issue.
I urge members to vote in favor of H.R. 5637.
Mr. MOORE of Kansas. Mr. Speaker, I yield 1 minute to the gentlewoman
from Florida (Ms. Wasserman Schultz).
Ms. WASSERMAN SCHULTZ. Mr. Speaker, as an original cosponsor of this
bill, I commend the Financial Services and Judiciary Committees for
working together in a bipartisan spirit to move it forward. I
especially want to thank Ranking Member Conyers and Ranking Member
Frank and you, Chairman Oxley, for your support and leadership.
This bill provides much needed relief to Florida's commercial firms,
which are experiencing severe increases, and I mean thousands of
percent increases in insurance premiums.
This is not endemic to Florida. It is really happening across the
Nation. Surplus lines are a safety valve on traditional insurance
markets. In some cases, they are the only way firms can get insurance
when regulated lines fail.
Market perception of unsustainable increases in catastrophic risk has
resulted in the precipitous decline of insurance coverage availability
at astronomical cost to consumers.
This bill expands market capacity to provide surplus lines coverage.
It eliminates hundreds of billions of dollars in administrative costs
and duplicative filing fees, which are passed on to consumers.
Maintaining the status quo means higher costs for commercial firms,
consumers, and ultimately our economy.
I encourage my colleagues to support this bill because it ensures
that companies are able to obtain insurance, meaning they can stay in
our communities, provide much needed jobs and keep our economies
strong. Companies in my home State are literally closing their doors or
leaving Florida altogether because they cannot get insurance.
I urge my colleagues to support this bill.
Mr. OXLEY. Mr. Speaker, I am pleased to yield 2 minutes to the
gentleman from Bucks County, Pennsylvania (Mr. Fitzpatrick).
Mr. FITZPATRICK of Pennsylvania. Mr. Speaker, the surplus lines and
reinsurance marketplace is subject to regulatory problems that hamper
efficiency and pass on higher costs to policyholders.
I find it extremely troubling that surplus lines policyholders in a
number of States are facing skyrocketing rates due to an unnecessary,
inefficient and burdensome regulatory maze for compliance. In addition,
I find it problematic that reinsurance rates are rising because some
State regulators are taking it upon themselves to throw out arbitration
agreements between reinsurance providers and primary carriers. For this
reason, I am an original cosponsor of this bipartisan and broadly
endorsed legislation.
This commonsense bill fixes the problems created by the multitude of
conflicting State laws and regulations and by some state-by-state
regulators that are taking it upon themselves to throw out the
agreements between the reinsurance providers and primary carriers to
settle disputes without tying up the courts.
Congress must correct flaws in the current regulatory regime of
commercial insurance. These policyholders cannot continue to be picking
up the tab because of the basic problems in the current insurance
regulatory system.
I commend Congresswoman Ginny Brown-Waite and Congressman Dennis
Moore for introducing this legislation. I strongly urge the Members to
vote for H.R. 5637.
Mr. MOORE of Kansas. Mr. Speaker, I yield such time as he may consume
to the gentleman from Massachusetts (Mr. Frank).
Mr. FRANK of Massachusetts. Mr. Speaker, just as the ranking member,
I want to say that the leadership shown both by the gentleman from
Kansas and the gentlewoman from Florida on this has been very
important. Particularly I would say the gentleman from Kansas has been
a very steady contributor to our deliberations regarding the importance
of balance; and given the physical conditions that have occurred in
Florida and the reaction thereto, the gentlewoman from Florida (Ms.
Wasserman Schultz) has been a real leader in trying to get an
appropriate Federal response to the insurance crisis, and I am glad we
were able to take this step today.
{time} 1700
Mr. OXLEY. Mr. Speaker, I am pleased now to recognize the chairman of
the Capital Markets Subcommittee, Mr. Baker, for 2 minutes.
Mr. BAKER. Mr. Speaker, I certainly want to start by acknowledging
the focused work of our chairman who has worked diligently on many
aspects of reform, and the bill now pending is one small piece of a
larger puzzle which has been constructed by the committee in an effort
to facilitate provision of insurance of all sorts, but particularly
focusing on the needs of homeowners. And a word of special appreciation
from those of us in Louisiana as a result of the debacles of Katrina
and Rita. We are experiencing a similar circumstance to that of our
colleagues in the State of Florida.
The remedy posed under the pending bill is an important one. In one
small area, it enables someone to have direct access to surplus lines
policies which currently is not facilitated. Current rules require you
to apply to at least three separate companies and be denied coverage
before you can approach a surplus lines company to acquire the needed
insurance. The proposed reform would enable certain qualifying
purchasers of product, whether it be business owners or individuals, to
have direct access. And in the case of the Katrina-Rita impact areas,
this is of extreme importance in facilitating access to insurance which
otherwise would not be made available.
I also want to speak to those members of the committee who worked
diligently on this subject matter. As the ranking member indicated,
this has been a bipartisan effort, and certainly Mr. Moore and Ms.
Wasserman Schultz on their side are to be commended for their
contributions. Ms. Brown-Waite and Mr. Fitzpatrick and others on our
side have worked diligently as well.
I think the product we now have pending before the House is a very
important step, but should be viewed only as that, a first step. There
is much work yet to be done to facilitate regulatory commonsense
oversight of the insurance industry, and hopefully provide for enhanced
product development and competitiveness in markets where
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we find in many States people are better served where markets are open,
products are available, and prices are competitive.
I believe this surplus lines reform proposal will demonstrate that as
an effective remedy to the problems we now face in a very expensive
insurance market, and, in some cases, a market where a product is not
available at all.
Mr. MOORE of Kansas. Mr. Speaker, I thank Mr. Baker and the other
speakers and the ranking member all for their comments. I hope we pass
this.
I yield back the balance of my time.
Mr. OXLEY. Mr. Speaker, this was, again, in the great tradition of
our committee, a good bipartisan effort by a lot of members that have
been mentioned heretofore, and it is really what makes our committee
very special. I am very proud of the work product that was put out. It
is a somewhat controversial subject, the overall issue; but to be able
to take a chunk of this, a very important chunk, and move it separately
I think was a wise decision that our staff participated in as well as
the members.
Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore (Mr. Bradley of New Hampshire). The question
is on the motion offered by the gentleman from Ohio (Mr. Oxley) that
the House suspend the rules and pass the bill, H.R. 5637, as amended.
The question was taken.
The SPEAKER pro tempore. In the opinion of the Chair, two-thirds of
those present have voted in the affirmative.
Mr. OXLEY. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the
Chair's prior announcement, further proceedings on this question will
be postponed.
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