Nonadmitted and Reinsurance Reform Act
The Act incorporates the Nonadmitted and Reinsurance Reform Act (the “NRRA”) that was passed by the House of Representatives on September 9, 2009 without any changes. The NRRA would establish national standards on how states may regulate and tax surplus lines insurers and also sets national standards concerning the regulation of reinsurance.
In particular, the NRRA would give regulators in an insured’s home state authority over most aspects of surplus lines insurance, including the right to collect and allocate premium tax with respect to policies with multi-state perils, and regulators in a reinsurer’s state of domicile would be given the sole responsibility for regulating the reinsurer’s financial solvency. Surplus lines brokers would only be required to be licensed in an insured’s home state. The NRRA would also prohibit a state from denying credit for reinsurance if the domiciliary state of the insurer purchasing reinsurance recognizes credit for reinsurance. Both reinsurance provisions require the domiciliary state to be NAIC-accredited or have financial solvency requirements substantially similar to NAIC accreditation requirements.
Office of National Insurance
The Act would create an Office of National Insurance (the “ONI”) within the Department of Treasury and is based on the draft proposal released by the Obama Administration in July 2009. The ONI is designed to promote national coordination within the insurance sector, and would have the authority to perform the following functions: (1) monitor all aspects of the insurance industry, including identifying issues or gaps in the regulation of insurers that could contribute to a systemic crisis in the insurance industry or the United States financial system; (2) recommend to the Agency for Financial Stability that it designate an insurer, including its affiliates, as an entity subject to regulation as a Tier 1 financial holding company; (3) assist the Treasury Secretary in administering the Terrorism Insurance Program; (4) coordinate federal efforts and establish federal policy on prudential aspects of international insurance matters, including representing the United States as appropriate in the International Association of Insurance Supervisors; (5) determine whether state insurance measures are preempted by International Insurance Agreements on Prudential Measures; and (6) consult with the states regarding insurance matters of national importance and prudential insurance matters of international importance. The Act differs from the Insurance Information Act of 2009 recently reintroduced into the House of Representatives that we covered here, in that the ONI would not be granted any regulatory authority.
The Act would also grant the Secretary of Treasury the power to “negotiate and enter into International Insurance Agreements on Prudential Measures on behalf of the United States.” The Act defines “International Insurance Agreements on Prudential Matters” as a written agreement between the United States and one or more foreign governments, authorities or regulatory entities with respect to prudential measurers concerning the business of insurance or reinsurance.
For the complete text of the Act (see pages 304 through 341 for Title V), click here.
We will continue to monitor the Act and provide updates on InsureReinsure.com.
