NAPSLO outlines views in regulatory principles

The NAPSLO Board adopted a set of nine Regulatory Principles in the summer of 2003 aimed at guiding the Association in its response to legislation/regulatory issues affecting in E&S industry at both the state and federal level.

In its principles, the Board supported a system of state based regulation, freedom of rate and form for E&S policies and standardization of taxation of multi-state surplus lines risks.

The nine principles were the focus of a panel discussion at the 2003 NAPSLO NAPSLO Annual Convention in San Diego.

The principles were developed to advise the NAPSLO membership and the industry of the NAPSLO Board's positions on major regulatory issues impacting the industry and to provide its Legislative Committee and future Boards with a roadmap regarding Association's positions on regulatory issues.

"We believed it was important to outline our beliefs," said former President Nick Cortezi. "On several issues, such as freedom of rate and form regulation, our position had always been very clear and well-known. On other issues we had developed positions but they may not have been very well known among our members and the industry. This set of regulatory principles allows our board, committees, membership, and also the industry to know our position on important regulatory issues."

The following outlines NAPSLO's position as adopted in the regulatory principles. A complete copy of NAPSLO Regulatory Principles is attached and can also found in the Legislative/Regulatory section of the NAPSLO web site.

NAPSLO REGULATORY PRINCIPLES

I. Freedom From Regulation of Surplus Lines Rates and Forms

II. The Principle of Export - surplus lines transactions involve state regulated surplus lines brokers exporting business to non-admitted companies not regulated by the state.

III. Primacy of Surplus Lines - state based residual market mechanisms should not be given risk placement preference before surplus lines

IV. Uniform and Reciprocal Licensing of Surplus Lines Brokers Between the States - NAPSLO's goal is a uniform and reciprocal 50 state system.

V. Standardization of Taxation of Multi-State Surplus Lines Risks - NAPSLO's goal is a simple and conflict free single payment system for remitting surplus lines taxes on multi-state risks.

VI. Guaranty Funds - NAPSLO is opposed because they promote a false security; they promote the use of financially weak companies; there is a potential premium assessments which is an unfair burden on surplus lines consumers; the surplus lines marketplace is financially secure and dominated by companies with average ratings significantly higher than the overall market.

VII. Commercial Lines Deregulation - Automatic Export - Transactions involving exempt commercial policyholders under state commercial lines deregulation laws should automatically qualify for export to the surplus lines market without conducting a diligent search.

VIII. State Regulation - NAPSLO favors the continuation of a stated-based regulatory system for insurance over a federal system. However, the current state-based system must become more uniform and efficient. Any Federal regulation should include the uniformity and reciprocity among and between the states in the areas of producer licensing and taxation are desirable.