Friday, January 31, 2014

Important Updates from D.C.


The National Association of Registered Agents and Brokers Act, more commonly known as NARAB II, is inching closer to becoming law. NARAB II would streamline the licensing process for agents and brokers nationwide, eliminating burdensome multistate requirements while preserving important state regulatory authority and consumer protections.  The legislation, which is strongly endorsed by NAPSLO, was incorporated into S. 1926, the “Homeowner Flood Insurance Affordability Act.”

During debate of S. 1926, the Senate considered an amendment offered by Senators Coburn and McCain which would have allowed states to “opt out” of participation in NARAB. NAPSLO and other industry representatives sent a joint letter opposing the Coburn-McCain amendment, explaining that its inclusion would be detrimental to the underlying program. Our efforts proved successful as the Senate defeated the amendment by a convincing vote of 24-75. This was an historic day as it was the first time the body had passed the legislation. Similar legislation passed the House in September by a vote of 397-6.

The underlying flood legislation will now go to the House where it is expected that Republicans will introduce and pass an alternative proposal. NAPSLO has received commitments from House leadership that the NARAB II provisions will also be included in their flood legislation and so once the House has passed its legislation the House and Senate versions will be negotiated to produce a “conferenced” bill. With both chambers supporting the underlying NARAB II provisions, it will become law once that conferenced bill is enacted by both chambers and signed by the President.

Homeowner Flood Insurance Affordability Act

On Thursday, the Senate passed S. 1926 which delays implementation of the risk-based flood insurance rates prescribed by the Biggert-Waters Flood Insurance Reform Act. This has become an extremely political issue as residents in flood-prone areas have been subject to significant rate increases. S. 1926 would delay implementation for up to four years.

NAPSLO’s focus on flood insurance reform has been to ensure surplus lines insurers are eligible to offer private market solutions and alternatives to consumers in need of unique and complex flood risks.

To accomplish this, NAPSLO worked with Senators Heller and Lee on an amendment to clarify the definition of private flood insurance to include policies offered by insurance companies that may be “eligible as a nonadmitted insurer to provide insurance in the State or jurisdiction where the property to be insured is located, in accordance with section 524 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (15 U.S.C. 8204)”. The amendment failed by a narrow 49-50 margin over concerns surrounding standards for private flood insurance policies and consumer protections. NAPSLO continues to work to educate Senators as to the role and regulation of nonadmitted insurers to alleviate these concerns. In addition, we are working heavily with leadership in the House to ensure that the language is included in their alternative flood proposal.

GAO Releases Flood Insurance Report on Strategies for Increasing Private Sector Involvement

Last week, the GAO released a report to Congress on the National Flood Insurance Program focused on ways to reduce the financial burden on the federal government.
The 2014 report notes no new conclusions or recommendations since its earlier June 2011 report. The purpose of the report was to provide strategies for the federal government to increase private market participation in flood insurance. The report indicated that key to private market participation is allowing private insurers to charge what is appropriate and commensurate with the underlying risk. NAPSLO was pleased with the GAO’s continued recommendations and support of private market solutions to the financial challenges facing the NFIP.

The Biggert-Waters Insurance Reform Act of 2012 directed the GAO to consider various strategies for privatizing the NFIP. This report concluded that in order to increase private market participation, private insurers would require (1) the ability to charge actuarially sound rates to ensure profitability, (2) the ability to decline applicants and (3) sufficient consumer participation. Key findings of the report include:

• Eliminate subsidized rates and charge policyholders risk-based rates, limiting the Flood Program to direct means-based subsidies.

• Implement recommended strategies in order to increase the private market participation to reduce the debt of the NFIP.

• The NFIP operates as a residual market of last resort for policies decline by the private sector.

• The Government could consider assuming the role of reinsurer, although the report acknowledges the consumers would have to absorb these costs.

Friday, January 24, 2014

Surplus Lines Stamping Offices Report Continued Premium Growth in 2013

The Surplus Lines Stamping Office of Texas issued a report showing that 14 states with stamping offices saw growth in surplus lines premium during 2013 when compared to 2012. Total surplus lines premium reported to the Stamping Offices was nearly $22.5 billion, representing more than 3.1 million transactions. While the report indicates growth of 15.5% in total, it is heavily influenced by a large amount of prior years’ return premium transactions processed by New York in 2012. In 2012, New York processed a significant volume of return premium for policy years prior to 2012. Therefore, total 2012 New York premium was artificially low, making the percentage increase in New York premium comparing 2012 to 2013 artificially high. When excluding New York for this anomaly, the remaining stamping offices reported a 12.2% increase in 2013 premium compared to 2012. This report is now available by clicking here.

The report of stamping office premium during the first six months of 2013 relative to the same period in 2012 is also available illustrating a 21.2% increase. When excluding New York and its 2012 return premium transaction anomaly, the remaining stamping offices reported a 15.1% increase in premium. To view the six-month report of 2013 to 2012 data, click here.

The report of calendar year 2012 to 2011 comparisons is also available illustrating a 0.9% increase in 2012 premium volume. When excluding New York and its 2012 return premium transaction anomaly, the remaining stamping offices reported an 11.8% increase in premium. To view the report of 2011 to 2012 data, click here.  

Texas Data Call Includes Surplus Lines Insurers

Surplus lines insurers eligible to do business in Texas should have received notice early this month from the Insurance Commissioner requiring all insurers to report the number of policies in force in Texas as of December 31, 2013. Insurers have been required to report this information annually since 2006. The Surplus Lines Stamping Office of Texas (SLSOT) will continue to report policy count data on behalf of those insurers not desiring or able to self-report.

SLSOT issued a memo to each insurer eligible in Texas this week, along with its policy count information, based on data from SLSOT.  The memo notes each insurer will get a second run of its policies in March, to account for policies in force as of December 31 that agents reported to SLSOT office during January and February of this year.  If you have any questions regarding this requirement, contact the SLSOT directly at 800.449.6394.

Thursday, January 16, 2014

NAPSLO Applauds Government Accountability Office Report on NRRA

Today, the GAO released its report to Congress titled “Effects of the Nonadmitted and Reinsurance Reform Act of 2010.” NAPSLO is pleased with the GAO’s report and applauds its effort to understand and explain the significance of the NRRA and its positive impact on the surplus lines industry. The report also compliments the role and financial stability of the surplus lines industry.

As mandated by the NRRA, the purpose of the GAO’s study was to (1) examine the effects, if any, on the price and availability of insurance coverage in the surplus lines market and (2) examine actions states have taken to implement the NRRA. NAPSLO served as a resource to the GAO during the development of this report.

Key GAO findings include:

  1. The surplus lines industry is financially strong and works well as a safety valve for risks the admitted market will not cover.
  2. The NRRA has had little, if any, effect on the prices or availability of coverage, as the NRRA was not intended to affect these areas. The GAO notes that any changes in price and availability, or flow of business between the admitted and nonadmitted markets, would be due to normal insurance business cycles rather than the NRRA.
  3. The NRRA and resulting changes in states’ laws have simplified the compliance process for brokers and insurers writing multistate risks. Consistent with our advocacy on behalf of the NAPSLO membership, the home state provision has produced significant benefits for the surplus lines industry by reducing the need for brokers and insurers to comply with differing sets of rules, disclosures and requirements. The GAO notes that market participants interviewed agreed that the home state provision has brought needed clarity to the market.
  4. The NRRA has simplified the collection of premium taxes for multistate risks, but the states are not yet uniform in their treatment of surplus lines premium tax post-NRRA.
  5. Not all states have fully implemented the NRRA, and industry concerns remain related to the non-uniform implementation of the NRRA’s eligibility provisions.
NAPSLO members with questions should contact either Keri Kish, NAPSLO Director of Government Relations, or Brady Kelley, NAPSLO Executive Director, at 816.741.3910.  

Wednesday, January 15, 2014

Wholesale Value Highlighted in Trade Publications

The value of the wholesale distribution system is highlighted in several trade publications out this month. We are pleased to have contributed to these stories and are always on the lookout for ways to help educate insurance professionals about how NAPSLO member wholesalers can customize solutions for the retail industry.

Check out the good news here:

Thursday, January 09, 2014

NAPSLO members in the news

Congratulations to three NAPSLO members for their recognition by Insurance Business America in the "Hot 100 Insurance Professionals of 2013" list.

NAPSLO President, Kevin Westrope, and committee members Alan Kaufman and Bryan Sanders, were all honored by the publication in its January 2014 issue. Click here and browse to page 20 to read more about the honorees.