The first signs of Congressional activity affecting business in London appears to be the re-introduction of legislation which would standardise the regulation of surplus lines business and even reinsurance.
Given the speculation of what we might expect, this development, which emanates from the House Financial Services Committee, is welcome. Earlier versions of this Bill received broad support from both industry and Congress but failed to reach the President’s desk for signature for various reasons. Other Bills seeking to introduce Federal options to regulate insurance and, of course, overall financial turmoil, served to push the surplus lines bill onto the back-burner.
The London market writes substantial amounts of surplus lines business which by its very nature is often hard to place within the local US market. To write this business London insurers have to currently comply with individual regulatory requirements on a State by State basis. The new Bill would provide a uniform and consistent framework of surplus lines regulation at a State level. It could even, for example, create regulatory harmonisation which would allow 50-State surplus lines eligibility to be obtained by IUA member companies by merely being approved in a single State.
Interestingly, the Bill also has a reinsurance section. This does not on the face of it seem a natural fit and is currently drafted to introduce certain regulatory consistency for US reinsurers. This section however could provide a medium for the Reinsurance Task Force’s new reinsurance framework to be implemented. This would however require substantial re-drafting of the current re-introduced Bill’s language to cater for non-US reinsurers’ interests.
Many were predicting that this Bill would be re-introduced given its previous wide-spread support. It will be interesting to see how much reliance the NAIC will be placing on it at their forthcoming Spring meeting.
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