NAPSLO Urges Reforming States System First

In response to the Bush Administration’s proposal to reform the financial regulatory system, NAPSLO is encouraging the U.S. House and Senate to complete work on the Nonadmitted and Reinsurance Reform Act of 2007 to improve the efficiency of the insurance industry before pursuing the federal approach proposed this morning.

Secretary of the Treasury Henry Paulson Jr. on Monday outlined the Bush Administration’s financial regulatory system overhaul and as part of the proposal recommended the establishment of an Optional Federal Charter (OFC) for the insurance industry, similar to the current dual-chartering banking system. The proposed new federal agency would be housed within the Treasury Department.

The proposals outlined this morning were designed to reform federal regulatory agencies and segments of a national regulatory structure that failed to perform adequately in recent years leading to the current economic crisis.

“State based insurance regulation has not been part of these regulatory failures,” said NAPSLO Executive Director Richard Bouhan. “In fact, the states have performed well in regulating insurance over the years and the state system would continue to exist with any Optional Federal Chartering framework Congress establishes.”

However, the state based regulatory process has inefficiencies that need to be addressed, Mr. Bouhan said and Congress should solve these problems immediately by enacting legislation that will direct and empower the states to establish a uniform and more efficient regulatory process. The NRRA, which NAPSLO believes would solve many of the inefficiency problems in the surplus lines industry, was passed unanimously in the House of Representatives (HR 1065) in June 2007 and a similar version (S 929) is currently in the Senate.

“Congress should enact the NRRA, now, before it discusses other changes in the current regulatory structure,” Mr. Bouhan said. “Passage of the NRRA would be a major step in creating a framework to eliminate duplication and inefficiency in the surplus lines and reinsurance segments of the insurance industry.”

Stamping Offices Report Mixed Results in 2007

Surplus lines stamping office reported a wide fluctuation in business in 2007 with an overall slight increase in premiums but a drop in number of items, according to the 2006/2007 Comparative Statistics report issued by the stamping offices, which is available to download.

Overall premiums increased by 0.6% from $22.998 million to $23.143 million among the 14 stamping offices, however the number of items dropped 1.5% from 3,485,473 to 3,431,84.

States recording double digit percent increases in premiums were Illinois, Idaho, Mississippi and Montana, while Oregon (-22%) and Pennsylvania (-15.2%) noted premiums decreased by double digit amounts.

Premium changes in states with more than one billion in premiums were: California (-2.7%); Florida (4.1%); Illinois (18.7%); New York (1.0%); and Texas (4.4%).

On the items side, the largest change was reported by Montana which noted a 74.2% increase, rising from 9,334 items to 16,261. Illinois noted a 6% increase and noted that electronic filing began May 1, 2007.

E&S School Brochure Now Available for Download

The E&S School brochure is now available for download on NAPSLO's web site here. Hard copy versions of the brochure were mailed today and should be delivered starting Monday.

Both sessions will take place at the Eric P. Newman Education Center in St. Louis. The cost is $1,200 and includes lodging at the Parkway Hotel, located nearby.

Classes offered at the sessions include Distribution System, Market Dynamics, MGAs & Brokers, Risk Takers, segments on regulation and financial accounting, and a presentation about Lloyd’s.

Instructors at the two sessions of the E&S School include: Richard Bouhan, NAPSLO; James S. Carey, CPCU Admiral Insurance Company; John M. DiBiasi, CPCU, XL Excess & Surplus Lines; Dave Leonard, RSUI Group; Jill K. Jinks, CPCU, ASLI, The Insurance House, Inc.; Marcus Payne, NAPSLO; and Steven Stephan, NAPSLO.

The registration deadline for both sessions is May 8. On the registration form, students should list the preference of which session they would like to attend. NAPSLO will attempt to honor each request but cannot guarantee it.

Wholesale Survey Results

Results of the NAPSLO survey of retailers conduct by the Chicago firm of McKnight Kurland Baccelli were released in late February and the overall results showed a positive view of wholesalers by retailers. (Results are available to view on the NAPSLO website.)

The survey had four major conclusions:

1. A large majority of retail brokers view specialty insurance wholesalers positively and expect to work with them in 2008.
2. Retailer brokers indicate they value wholesalers most highly for their access to insurance carriers and specialty insurance coverage, and for their experience, expertise and knowledge.
3. Retail brokers rate specialty insurance wholesalers most poorly for their lack of responsiveness. They also express frustration with a perceived lack of reasonable pricing/commissions and an inability to deliver quality outcomes for their clients.
4. Retailer brokers report significant differences in professionalism across the specialty insurance wholesaler community, drawing a sharp distinction between “good” wholesalers and “bad” wholesalers.

MKB said these conclusions suggest that retail brokers' perceptions of wholesalers are not as bad as assumed. However, they do confirm: 1) a lack of awareness of the value wholesalers bring to retail brokers and their clients, and 2) dissatisfaction with issues of pricing and professionalism (including responsiveness).

MKB recommended the development of a campaign to promote the positive attitudes retail brokers have about wholesalers to the commercial insurance marketplace using integrated marketing and communications strategies. The NAPSLO Board is currently reviewing the proposal and will be notifying the membership with details.