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The End of Suffering?
With all of the human misery in the world, my heart really goes out to one long-suffering individual: the combination surplus lines broker-Chicago Cubs fan. Every spring, hope springs eternal as visions of a championship flag flying over Wrigley Field dance in your head, along with the hopes that perhaps someone will finally do something about that perennial mess of coping with the headaches and heartaches of the multistate risk.
I'll leave the prospects of the former to those more knowledgeable than I. But as for the latter, it just seems like this year surplus lines brokers will no longer have to say, "Wait till next year." In two sessions in a row under both GOP and Democratic rule, the House has approved the Non-Admitted Insurance and Reinsurance Reform Act, with latest passage coming with a unanimous vote of 417-0. Even this year's Mother's Day Resolution stirred up more acrimony when it appeared to look like a cynical, stalling, parliamentary maneuver.
What's unusual, and what the unanimous House vote underscores, is that there are no real bad guys. Either that, or they really need to look into hiring a new lobbying firm. Wood said the current situation is a nightmare for brokers as they have to juggle the competing claims of state insurance regulators for a portion of the premium tax stemming from a multistate risk that brokers, as the only regulated entity in the surplus lines realm, must referee. "Aon has produced a couple of examples for us involving tax filings for one placement alone that go upward of 1,000 pages," he said. Richard Bouhan, executive director of NAPSLO, said that, not only has surplus lines coverage as a percentage of overall commercial risk nearly doubled in recent years, but the risks have also grown as the nation's commerce has become more complex. That is why the issue simmering for more than three decades just might come to a full boil on the floor of the Senate this year as the price of not dealing with it grows. "This legislation will make the placement of multistate risks easier, less treacherous and less costly for the surplus lines broker," Bouhan said. For Wood, the main obstacle this year is what he calls "oxygen," in that, up until very recently, the Senate Banking Committee had its hands full dealing with an economy at times seemingly on the brink of collapse from the imploding credit markets. After all, solving the surplus lines broker kerfuffle does not have quite the same ring as doing likewise for the home foreclosure crisis. But most of the credit crunch legislation is out of committee, clearing the decks for final passage of surplus lines reform. The current legislation would have all premium taxes go to the state where the risk is headquartered. But it does give the states the option of forming an interstate compact to come up with a system of divvying up the premium. In addition, it will relieve brokers from having to obtain declinations from the admitted market for certain buyers classified by size as sophisticated. Newly liberated surplus lines brokers may soon be able to concentrate on the challenges of a continuing soft market that makes their business ripe pickings for those admitted carriers who might have turned up their noses in cycles past. STEVE TUCKEY has written on insurance issues for a decade for several national media outlets. July 1, 2008 Copyright 2008© LRP Publications |
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