[Congressional Record (Bound Edition), Volume 152 (2006), Part 15]
[House]
[Pages 20128-20132]
[From the U.S. 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 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

[[Page 20129]]

     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
       (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.

[[Page 20130]]




                             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. 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

[[Page 20131]]

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 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

[[Page 20132]]

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.
  Ms. WATERS. Mr. Speaker, I rise in support of the Non-admitted and 
Reinsurance Reform Act of 2006, reported by the Committee on Financial 
Services. I want to thank the Gentlelady from Florida, Ms. Brown-Waite, 
for sponsoring this bill and the distinguished Chairman of the 
Committee on Financial Services, Mr. Oxley for reporting this 
legislation out of the Committee.
  If any of you have visited the Gulf Region in the last year since 
Hurricanes Katrina and Rita, you know how essential it is that we come 
to grips with reality and the potential for a major disaster by 
reforming nonadmitted and reinsurance in this nation. More than half 
the City of New Orleans' pre-storm population of 450,000 has not 
returned to the City, while large areas of the City remain 
uninhabitable. We were not adequately insured to deal with the 
aftermath of Katrina and Rita--no more than we are today to address 
another disaster somewhere else in this country.
  We all know that one of the major elements to any recovery after a 
disaster is insurance, and many of us have heard the horror stories 
related to the damage incurred as a result of the hurricanes in the 
Gulf Region. Insurance is one aspect of recovery that we need to be 
able to rely on after a catastrophe to help make victims whole again. 
However, on many occasions the reverse has been true, and insurance 
claims have gone unpaid, or the claims paid have not been commensurate 
with the damage to the property. In addition, there are many who have 
not been able to afford insurance and have not been covered, or there 
are those who had limited and inadequate insurance prior to a natural 
catastrophe. In many places like California, many homeowners decide not 
to carry disaster insurance at all, precisely because they believe that 
the government will become involved if a natural catastrophe occurs.
  In the Gulf Region, many insurance companies did not offer flood 
damage insurance. Although homeowners have the option to obtain a 
policy under various state programs, it is unaffordable for most. Most 
people do not carry any insurance for protection from disasters for 
this reason. In New Orleans, only one-half of the households had flood 
insurance under the government's National Flood Insurance program.
  This bill will create more uniformity among the different state 
insurance programs by streamlining the regulation of nonadmitted and 
reinsurance activities. This would be accomplished primarily through 
preempting various state laws. While these state laws would not be 
replaced with federal law, laws from other states or model laws of the 
National Association of Insurance Commissioners (NAIC). Further, the 
bill requires a GAO study of the nonadmitted insurance market. 
Currently, 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. 
These nonadmitted or surplus line insurers provide insurance for 
natural disasters. Disaster insurance is regulated and taxed by the 
state by placing requirements on the brokers who initiate the 
transactions. Because non-admitted and reinsurance policies are 
different from state to state, this bill will allow for 
``harmonization'' of state laws. It will bring some sanity to the 
insurance marketplace, particularly where disasters are concerned. Many 
states have seen a dramatic increase in the cost of non-admitted and 
reinsurance forcing some businesses to relocate, resulting in 
unemployment and lost revenue. Therefore, I urge my colleagues to 
support this bill.
  Mr. OXLEY. 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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