September 8, 2008
Chairman Christopher Dodd
Senate Committee on Banking, House and Urban Affairs
534 Dirksen Senate Office Building
Washington, D.C. 20510
Dear Chairman Dodd:
On behalf of the 10,700 members of the Risk & Insurance Management Society, Inc. (RIMS), I am writing to express our support for legislation pending before the Senate Banking Committee to make insurance more readily available and affordable. As one of the industry voices representing consumers of commercial insurance, I want to convey our support for three initiatives which address the anticompetitive and inefficient bureaucracy that is inherent in the current regulatory structure.
As its members are the primary purchasers of commercial insurance for their organizations, RIMS has a compelling interest in the surplus lines arena, which is primarily commercial. RIMS urges the Senate Banking Committee to advance legislation this year to address the non-admitted or surplus lines insurance market. Specifically, as passed by the House of Representatives and pending in the Senate, these bills would streamline the regulatory structure and correct the current cumbersome framework whereby surplus lines insurers are subject to premium taxes not only in states where they place insurance but also in the home state. S. 929, the “Non-Admitted and Reinsurance Reform Act” would prohibit any state but the home state from collecting premium-tax payments. The legislation would also make it less burdensome for sophisticated purchasers who employ “qualified risk managers” to go directly to the non-admitted market to purchase insurance. The House of Representatives has already unanimously passed its version of similar legislation last year. As the association representing risk managers, RIMS also supports the broader definition of “qualified risk manager” contained in the House bill as opposed to the very narrow definition contained in the Senate bill.
By definition, the surplus lines industry is important to the nation’s economic well being because it provides insurance for unusual and difficult to place risks that are not written by standard insurers in the licensed market. Examples of this property/casualty insurance include business interruption, environmental impairment, insurance on coastal properties, as well as general, professional and business liability coverage with unique underwriting qualities. In fact, estimates indicate that $35 billion in annual premiums are written by surplus lines carriers. That figure represents over 13% of the total annual amount of commercial insurance premiums and is a significant segment of the market with a consequential impact on consumers.
Second, RIMS also urges the Senate Banking Committee to move legislation to create a federal Office of Insurance Information within the United States Department of Treasury. The “Insurance Information Act of 2008”, would create a federal office of insurance information. The legislation establishes, for the first time, a repository for the collection and dissemination of information related to insurance at the federal level within the U.S. Department of the Treasury. This data collection and advisory function would facilitate the federal government’s development of a much needed expertise in insurance matters. Additionally, the office of Insurance Information would have clearly defined, and strictly limited, preemptive powers applicable only if state laws conflict with United States’ international trade agreements. This provision would provide certainty to non-U.S. insurers and permit both domestic and alien insurers to compete on a level playing field thus promoting greater access to affordable insurance.
Finally, RIMS also endorses the “National Insurance Act”, creating an optional federal charter. We recognize this comprehensive legislation may require more analysis and discussion before it is ready to advance, however RIMS wants to be on record in support of legislation which would permit insurers to choose whether to take out a federal charter, exempting them from most state insurance regulations, or to continue under a state charter and the 50 state system of insurance regulation. The legislation applies to life insurance and property/casualty, including surplus lines (except title insurance). As one of the primary purchasers of property/casualty insurance, RIMS wants to emphasize its support for the legislation as currently crafted to include property/casualty.
RIMS has been a long-time proponent for an optional federal structure because the ability to achieve national treatment would enable a single charter insurer to do business in all states and avoid higher costs of state regulation due to the need to comply with a multitude of regulators. This would ensure a greater supply of insurance and lower cost to consumers as insurance companies compete on a national scale. Additionally, the National Insurance Act would facilitate more “speed to market” for product approval so insurers will not be at a distinct advantage in new product creation and innovation. A greater variety of products and quicker response to market demands will ultimately benefit the consumer.
Again, RIMS wants to express its strong interest in seeing Senate Banking Committee action on legislation to promote greater accessibility and affordability for insurance consumers. We urge you to move legislation creating the Office of Insurance Information and a bill dealing with the non-admitted market before Congress adjourns. Thank you for consideration of our views.
Kind Regards,
Janice Ochenkowski
President