The U.S. House of Representatives has passed reforms to the non-admitted insurance, or surplus lines, and reinsurance market, a move praised by two national agents’ groups.

Scott Garrett

The House passed the Nonadmitted and Reinsurance Reform Act of 2009 (HR 2571) Sept. 9 by voice vote and now the measure moves on to the Senate. The bill, sponsored by Reps. Dennis Moore (D-Kan.), and Scott Garrett, (R-N.J.), authorizes states to establish procedures to allocate among themselves the premium taxes paid to a policyholder’s home state.

On the floor of the House, Garrett thanked numerous people who helped with the bill, including Dr. Therese Vaughan of the National Association of Insurance Commissioners.

“I believe the inclusive and deliberative process that this legislation has undergone should serve as a model as we continue to work on revamping and modernizing other aspects of our financial regulatory framework,” he said.

Title I of the bill, addressing the surplus lines market, will “reduce regulatory overlap and clarify” where taxing authority lies with each market transaction, Garrett said. This section also establishes the NAIC’s eligibility requirements as the standard for participation in the surplus lines marketplace, he added.

The second title of the bill addresses reforms in the reinsurance market, giving the reinsurer’s state of domicile the sole responsibility of regulating financial solvency and prohibits a state from requiring a reinsurer to provide financial information other than that required to be filed with its NAIC-compliant domiciliary state.

“Both the Surplus Lines and Reinsurance titles are vital to promoting further harmonization for transactions occurring across state lines and eliminating unnecessary red tape which will reduce costs for consumers,” Garrett said. “In an increasingly complex world, it is essential that consumers and businesses be able to purchase insurance for risks outside of the traditional realm.”

The National Association of Mutual Insurance companies praised the work of Moore and Garrett for a bill it feels will “help to streamline the surplus lines and reinsurance markets while respecting the regulatory authority of the domiciliary state,” according to Marliss McManus, NAMIC’s senior director of federal affairs.

“If enacted it would help provide much needed clarity for surplus lines insurers, their policyholders and the economy,” she said in a statement.

The Independent Insurance Agents & Brokers of America also voiced its support, saying in a statement the bill “another example of a positive targeted approach to insurance regulatory reform.”

Charles E. Symington Jr., Big I senior vice president for government affairs, called the bill “an excellent example of a pragmatic approach that helps bring targeted reform to the state insurance regulatory system.”

Similar legislation was approved by the House during the last two Congressional calendars, but has not been passed by both chambers of Congress.