Sen. Martinez Says Surplus Lines Bill Could Pass
Feb 7, 2008
National Underwriter–Feb. 6, 2008
BY ARTHUR D. POSTAL
WASHINGTON —Congress could pass a measure this year reforming and modernizing surplus lines and reinsurance industry regulation, but support is lacking for legislating a federal backstop for state catastrophic reserve funds, a senior member of the Senate Banking Committee said today.
Sen. Mel Martinez, R-Fla., made his comments to the 2008 Insurance Legislative Summit here sponsored by the Council of Insurance Agents and Brokers in association with the Reinsurance Association of America.
The senator said he is “encouraged” that the Senate will take up S. 929, the Nonadmitted and Reinsurance Reform Act of 2007. The House version of the bill, H.R. 1065, passed overwhelmingly June 25.
At the same time, he gave a grim prognosis for the prospects of H.R. 3355, the Homeowners’ Defense Act of 2007. That bill passed the House Nov. 8; there is no companion bill in the Senate.
This legislation would provide a federal backstop for qualifying state-sponsored insurance programs that provide natural catastrophe coverage for homeowners.
“There is a strong lack of concern about it,” Sen. Martinez said. “There are differences of opinion” about its value from senators from other states, like those in the Midwest and West, but it is a “byword” in Florida, he said, adding, “the likelihood of that occurring soon is not great.”
The measure has the opposition of Sen. John McCain, R-Ariz., the current front runner for the Republican presidential nomination who, despite his stance, was a strong winner in Florida’s primary yesterday.
During his campaigning in that state, Sen. McCain said that a federal insurance pool would create a duplicative bureaucracy. He also said the Federal Emergency Management Agency should be able to handle disasters and their aftermath.
Ironically, both Sen. Martinez and Florida Gov. Charlie Crist, R, are vocal supporters of Sen. McCain.
Regarding the surplus lines bill, Sen. Martinez said a hearing—which he called a critical first step—is likely to be held on the bill in mid-spring by the committee, with committee and floor action likely thereafter.
He noted there is no “entrenched opposition” to the bill in the Senate, and that the key to passage this year is moving action on the surplus lines bill to the top of the committee agenda.
He said key holdups to passage are congressional “apathy and lack of understanding” of the nature of the bill—something that education of members of the Senate by industry officials can overcome.
The House version of the bill, H.R. 1065, passed overwhelmingly last fall.
Sen. Martinez also noted that he is working with Sen. Jack Reed, D-R.I., to update the Senate bill to match the House version.
The Senate surplus lines bill was introduced last March by Sen. Martinez and Sen. Bill Nelson, D-Fla., as part of a package of bills designed to deal with the backlash of Florida homeowners to big increases in the cost of homeowner’s insurance in the state in the wake of a number of hurricanes on the Gulf and Atlantic coasts in 2005 and 2006.
Besides the surplus lines legislation and legislation creating a national backstop for state natural catastrophe insurance programs, the four others include legislation creating a national hurricane research initiative to improve preparedness; a bill providing a limited tax credit for mitigation efforts undertaken by both businesses and homeowners to reduce storm impacts; and a bill allowing creation of pretax natural catastrophe reserves by insurers and creating new individual catastrophe savings accounts.
Another, “The Commission on Natural Catastrophe Risk Management and Insurance Act of 2007,” would have created a 16-member panel to be appointed by the congressional leadership to study various aspects of natural disasters and insurance as it was passed by the Senate Banking Committee last August.
But, before it was passed, it was substantially rewritten to prevent the submission of any recommendations embarrassing to the insurance industry.
The report was to have been submitted to Congress this December but is now considered dead.
None of these bills, with the exception of the surplus lines bills, have gained traction in the Senate. The catastrophe bill passed by the House was a different one, authored by Reps. Ron Klein and Tim Mahoney, both D-Fla.
But it doesn’t include language added to the House bill as it made its way through that body revising the criteria needed to qualify to be a risk manager.
Sen. Reed, a member of the Banking panel, is expected to be the co-sponsor with Sen. Martinez of updated legislation that includes the revised language.