But on another insurance-related bill strongly supported by his home state constituents -- a proposal to create a federal backstop and reinsurance mechanism covering catastrophic natural disasters -- Sen. Mel Martinez, R-Fla., said he thinks the chances of such a bill clearing the Senate in the near future are "slim."
According to the senator, "apathy and lack of understanding" remain the primary hang-ups to moving the Nonadmitted and Reinsurance Reform Act, which Martinez is working to introduce in the Senate with Sen. Jack Reed, D-R.I. Twice passed unanimously by the U.S. House, the measure would grant regulatory authority over most aspects of surplus lines insurance transactions to the home state of the insured.
Martinez told the summit -- which is jointly sponsored by the Council of Insurance Agents & Brokers and the Reinsurance Association of America, both supporters of the bill -- that he didn't "think there's any kind of entrenched opposition" to the measure and he believes a hearing on the matter would "begin to erode a lot of the roadblocks that currently exist."
The surplus lines bill would prohibit any state but the home state of the insured from collecting premium-tax payments for surplus lines risks, and recommends creation of an interstate compact to formulate how premium taxes may be allocated among the states for multi-state risks. The measure also provides exemptions from existing state "due diligence" rules that require insureds to demonstrate the unavailability of coverage in the admitted market before placing a risk in the non-admitted market.
In addition to its surplus lines provisions, H.R. 1065 also would impact the reinsurance market. The law dictates the solvency of reinsurers would be left solely to the jurisdiction of the reinsurer's home state regulator, and it would prohibit states from requiring reinsurers to furnish any financial information that isn't required by their home state regulators, a change reinsurers strongly supported. Determinations on whether to grant a credit for reinsurance would be left to the home state regulators of the various primary insurers.
"I would suggest that you explain, particularly when dealing with Republicans, about regulatory reform," Martinez told industry participants. "We believe that government regulations usually stand in the way of business and progress. Explain that this is a modernizing, sort of streamlining effort to fix the regulatory problems that would make this part of the industry more vibrant and competitive."
Martinez also lamented the recent departure from the Banking Committee of Sen. John Sununu, R-N.H., who had led efforts for insurance regulatory reform by sponsoring the National Insurance Act, which proposes an optional federal charter system for the industry. For OFC to gain any further traction, Martinez said members of Congress would "need to evolve a better understanding of whether the model we've been on, really all our history, will continue to work for the future."
"I believe that states always have to have some regulatory roles, but there may be some of these other ideas that are out there floating about for a national regulatory scheme that would at least provide a certain commonality, so that companies can compete effectively in the global marketplace," Martinez said. "I am not 100% there yet, but I do understand."
On efforts to create a national catastrophe fund, such as that proposed by the Homeowners Defense Act, which the U.S. House passed in November 2007, Martinez said while he thinks it "would be a good thing to provide some basic coverage of reinsurance" to the states, he concedes th