Federal Issues

NAPSLO closely monitors the work of federal legislators and regulators for issues that impact the surplus lines insurance industry. NAPSLO provides comments on legislation or regulations when appropriate and in the best interest of the NAPSLO membership.

Federal Definition of Private Flood Insurance

NAPSLO strongly supports revisions to the federal definition of private flood insurance and believes it is necessary to amend the current definition to ensure surplus lines insurers are eligible to offer private market solutions and alternatives to consumers in need of unique and complex flood risks.

On March 9, 2017, The Flood Insurance Market Parity and Modernization Act (H.R. 1422/ S. 563) was jointly reintroduced in a bipartisan effort to clarify the definition of private flood insurance by Representatives Dennis Ross (R-FL) and Kathy Castor (D-FL) and Senators Dean Heller (R-NV) and Jon Tester (D-MT). The purpose of the Act is to provide clarity to lenders that they may accept private flood insurance solutions from the surplus lines market, just as they had prior to the Biggert-Waters Act of 2012 (BW12). Surplus lines has traditionally served as a supplemental market to the NFIP and standard market. After the passage of BW12, confusion arose in the lending industry regarding accepting private flood insurance, including surplus lines policies. 

Since 2014, NAPSLO has strongly supported legislation to revise the federal definition of private flood insurance. The Flood Insurance Market Parity and Modernization Act was first introduced by Rep. Ross and then Congressman Patrick Murphy (D-FL) and Senators Heller and Tester in 2014 and again in 2015. During this time NAPSLO has worked to relieve the confusion caused by the BW12 language by offering NRRA-compliant language as part of the proposed revised definition. Each time this legislation has been offered, it has enjoyed strong support from both the insurance and banking industry. In January 2016, NAPSLO testified on H.R. 2901 before the House Financial Services Subcommittee on Housing and Insurance. NAPSLO's testimony was in support of the legislation as an issue of critical importance to the Association and its members. NAPSLO was extremely pleased when on April 28, 2016 the U.S. House of Representatives passed H.R. 2901 on a 419-0 vote, after passing the House Financial Services Committee 53-0. Unfortunately, the legislation failed to move in the Senate before Congress adjourned, but it is a positive step forward that the legislation was reintroduced so quickly in the 115th Congress. This Congress must also decide how or if to reauthorize the National Flood Insurance Program, which is set to expire on September 30, 2017, and therefore we expect flood insurance to be top of mind with Congress this year.

The Flood Insurance Market Parity and Modernization Act has remained relatively similar over the last few years, with only minor revisions such as retaining the disclosure requirements within current law, which apply to lenders, and improving the Government Servicing Entity (GSE) language in current law to assure no federal preemption of the state regulatory system. The current version is the same version that was unanimously passed by the House on April 28, 2016, which NAPSLO continues to strongly support. 

Foreign Account Tax Compliance Act (FATCA)

Surplus lines brokers and insurers’ compliance obligations related to the Foreign Account Tax Compliance Act (FATCA) took effect on July 1, 2014.  NAPSLO has compiled a number of helpful resources and updates related to FATCA reporting requirements. This page provides links and information that will help you as you develop your own compliance program. To learn more about FATCA we recommend starting with our Executive Summary and Legal Memorandum linked below.

NAPSLO was pleased when on February 6, 2017 Rep. Jason Smith (R-MO) filed H.R. 871 to eliminate the P&C industry’s requirement to report non-cash-value premiums under FATCA. The same legislation was filed at the end of the last Congressional session as H.R. 6159 but died in Committee. Since FATCA was passed, the P&C industry has asked for relief from FATCA reporting due to its unnecessary and burdensome application to our industry. Ultimately, FATCA is directed at foreign financial institutions and financial intermediaries and aims to prevent tax evasion by U.S. citizens, U.S. residents and corporations through the use of offshore accounts, but the application to the law cast a wide net, include groups like our industry that is not in a position to commit the type of tax evasion the law intended to curtail. Since Rep. Smith filed the legislation, additional members of the Ways & Means Committee have joined on in bipartisan support. We are hopeful that companion legislation will be filed in the Senate Finance Committee in the near term

NAPSLO Issued Resources

Helpful Resources

NAPSLO closely monitors developments related to FATCA. We encourage you to reach out to us with questions or concerns that we may be able to help you with or direct you to proper resources.

NAPSLO FATCA contact: Keri Kish, Director of Government Relations, at keri@napslo.org.

National Association of Registered Agents and Brokers (NARAB II)

The National Association of Registered Agents and Brokers (NARAB II) was enacted as part of the Terrorism Risk Insurance Program Reauthorization Act of 2015. NAPSLO strongly supported the creation of NARAB II and advocated for its passage with Congress. Unfortunately the NARAB Board of Directors has yet to be approved by the Senate and therefore NARAB has yet to become operational. Industry remains dedicated to NARAB and is hopeful that the President will nominate board members in the near term and the Senate Banking Committee will take quick action to approve those nominations. No movement on nominations has occurred since the turnover in President and Congress in January 2017. 

NAPSLO supports NARAB because it will streamline agent and broker licensing for those operating on a multi-state basis. It creates a nonprofit board governed by a panel of state insurance regulators and industry representatives to create rigorous standards and ethical requirements with a goal of applying licensing, continuing education and nonresident insurance producer standards on a multi-state basis. With a focus on nonresident licensing, agents or brokers applying for a national license through NARAB will first be required to hold a current license in their home state, pass a national criminal background check and meet the criteria established by the Board, which shall include standards for personal qualifications, educational training and professional experience. 

The underlying NARAB legislation directed the President, with the advice and consent of the U.S. Senate, to appoint the 13 Board members (8 regulators and 5 industry members) 90 days from January 12, 2015. The former President issued 10 nominations but none of the nominees received hearings by the Senate prior to the expiration of the last Congress. Prior nominees may request reconsideration by the new administration; however, the administration may announce new nominees at its discretion for consideration by the Senate.

Once a quorum of the board is approved, it will first establish rules, requirements and procedures for membership, as well as a national licensing clearinghouse. For additional information about NARAB, visit NAPSLO's
NARAB implementation resource

Terrorism Risk Insurance Program Reauthorization Act of 2015

On January 12, 2015 the Terrorism Risk Insurance Program Reauthorization Act of 2015 was enacted, reauthorizing the program for an additional six years (12/31/2020). Although the program expired on December 31, 2014 due to lack of action by Congress, the January reauthorization allowed for no gap in program coverage. Key changes to the TRIA program that began January 1, 2016 are:
  • Federal share reduces from current 85% to 80% (by 1% per year)
  • Program trigger increases from current $100M to $200M (by $20M per year)
  • Industry’s aggregate retention increases from current $27.5B to $37.5B (by $2B per year), and Treasury’s recoupment rate increases from 133% to 140% 
View a side-by-side comparison of expired TRIA program and the new Terrorism Risk Insurance Program Reauthorization Act of 2015.  

In March 2016, FIO issued a voluntary data call, which treated admitted and nonadmitted insurers consistently. Although voluntary in 2016, this data call was the first of the required annual data call and 2017 and subsequent responses will be mandatory. In July 2016, the NAIC also issued a mandatory data call related to terrorism insurance. 

On June 30, 2016 the Federal Insurance Office (FIO) released a report required by the 2015 reauthorization of the program. The report indicates that it had limited data available to review based on a voluntary data call of insurers, but nonetheless FIO found the program continues to ensure availability and affordability for terrorism coverage in the United States. Future data calls for the required annual report will be mandatory for all insurers providing coverage. Download the report here. The NAIC has not issued a report on its 2016 data call at this time.

Subsequent to the reauthorization of TRIA, State Insurance Departments issued guidance concerning the reauthorization of TRIA. In general, the focus of the guidance was in regards to policy filings but there may be information of interest to the surplus lines market. NAPSLO is aware that the below agencies have issued guidance: We recommend reviewing Department of Insurance websites for TRIA related bulletins to ensure you maintain appropriate compliance as it relates to your practice.

NAIC Model Bulletin on Filing Procedures for Compliance with TRIA Program Reauthorization Act U.S. Department of Treasury issued interim guidance concerning the TRIA Program Reauthorization Act. 

Additional Comment Letters

December 10, 2014 - Trade Association TRIA Support Letter
May 15, 2014 – NAPSLO Letter of Support for Insurance Data Protection Act
February 25, 2014 - NAPSLO Testimony before Senate Banking Committee on TRIA June 10, 2013 – NAPSLO Comments to FIO on Natural Catastrophes and Insurance
May 17 and February 27, 2013 – NAPSLO Letters to FHFA regarding Lender Placed Insurance
September 16, 2013 – NAPSLO Comments to FIO on TRIA
March 19, 2013 – NAPSLO Testimony to Senate Banking Committee on NARAB