Insurance Industry associations were pleased with the House of Representatives passage of HR 5637, the Non-admitted and Reinsurance Reform Act of 2006, by a vote of 417-0.

According to the National Association of Mutual Insurance Companies (NAMIC), the bill would create a uniform system for taxing and regulating certain types of insurance products. Specifically, NAMIC added, the bill would establish national standards for how states may regulate, collect, and allocate taxes for a type of insurance that covers unique or atypical risks " known as surplus lines or nonadmitted insurance. The bill also would establish national standards for how states regulate reinsurance.

The provisions in the bill, according to NAMIC, would:

Prohibit states from taxing and regulating certain insurance products issued by companies not based in the state;

Prohibit states from collecting fees from certain brokers of insurance unless states participate in a database of national insurance producers for the licensing of surplus lines brokers and the renewal of those licenses;

Preempt laws in at least 40 states regarding how insurance polices with multi-state risks are taxed and how those taxes are distributed among states;

Preempt laws in at least 14 states regarding certain requirements for reinsurance.

In addition, the legislation would require a study by the Government Accountability Office (GAO) of the admitted and non-admitted insurance market.

The bill was sponsored by Reps. Ginny Brown-Waite (R-Fla.) and Dennis Moore (D-Kan.).

NAMIC senior federal affairs director Justin Roth said, We believe that this legislation will help streamline both the surplus lines of insurance, and the reinsurance marketplace, while at the same time preserving the domiciliary states regulatory authority.

Roth added, By passage of this bill today, NAMIC is optimistic that Congress can help assist states in modernizing insurance regulation, without adding additional bureaucracy and regulation. We are hopeful that the Senate will take up this very important measure as we have a unique opportunity to pass legislation that the insurance industry universally supports.

The Property Casualty Insurers Association of America (PCI) joined NAMIC in praising the bill. PCI senior vice president, government affairs, Ben McKay, said, HR 5637 is an important first step in the effort to reform a state-based regulatory system that is becoming increasingly burdensome for insurers across the country.

He added, HR 5637 will streamline a critical component of the surplus lines insurance market, specifically in the areas of placement, tax payment, and the allocation of premium for multi-state surplus lines risks.

McKay also stated, For reinsurance, the legislation will prohibit extraterritorial application of state laws to reinsurance transactions. HR 5637 would also require the states to accept the determination of the reinsurers state for credit for reinsurance.

Yesterdays vote is a victory for those who believe the state-based regulatory system can be reformed without being abandoned. The legislation, while providing a simple remedy to a problem that has existed for decades, sends a clear message to state regulators that Congress is willing to streamline the regulatory morass if states are unwilling to do so themselves."

The American Insurance Association (AIA), which has been supportive of an optional federal charter solution to the industrys regulatory issues, urged Congress to continue moving forward with HR 5637. Leigh Ann Pusey, AIA chief operating officer and senior vice president, government affairs, said, Policyholders would be better served by the reforms in this legislation, which aims to improve availability and affordability for customers in this market segment.

She added, Regardless of market segment or product line, all of our member companies and their customers are hampered by the current state regulatory system of price and product controls, and the current patchwork of regulatory systems that differ from state to state.

As for action in the Senate, a story appearing on National Underwriters Online News Service quoted Joel Wood, senior vice president, government relations, at the Council of Insurance Agents and Brokers (CIAB), as stating, Obviously, the chances for full enactment this year are slim due to the Senates timetable, but weve been encouraged by a number of conversations weve had with leaders and staff of the Senate Banking Committee.