Magazine article Risk Management

Regulatory Reengineering Comming near You

Magazine article Risk Management

Regulatory Reengineering Comming near You

Article excerpt

Regulatory reengineering for commercial insurance lines has become the buzz phrase of choice for the majority of insurance regulators across the country. At a time when 32 governors are Republican and the regulatory atmosphere in many states has become more friendly to business, it is no wonder that insurance deregulation is gaining momentum.

After the last gubernatorial election cycle, several state insurance departments started to display a more streamlined and efficient way of doing business. Insurance regulators in Massachusetts, New York, Pennsylvania and other states began to repeal hundreds of unnecessary regulations, eliminate paper requirements and work to upgrade technology. For example, in 1996 alone, New York enacted legislation that changed or rescinded 101 of the state's 150 insurance regulations.

This new spirit has also swept through the National Association of Insurance Commissioners (NAIC), where regulatory reform efforts launched in 1995 have begun to bear fruit in the form of the White Paper on Regulatory Re-engineering of Commercial Lines Insurance. The white paper deals with a number of issues such as removing barriers to the surplus lines market, establishing uniform surplus lines tax allocations in multistate transactions, state licensing of nonresident brokers and facilitating continuing education programs. What's in it for risk managers? Plenty.

The NAIC white paper, which calls for the consolidation of rate and form laws, would exempt certain large insurance buyers, classified as Exempt Commercial Policyholders (ECPs), from rate and form regulation altogether. The paper recommends exploring various approaches, including competitive rating with no regulatory review, limited prior approval for certain noncompetitive lines and flex rating. The primary concern over rates is solvency protection. As for forms, the NAIC proposal favors retaining prior approval statutes while exploring alternatives such as Colorado's selfcertification approach. When filings are necessary, the NAIC hopes that its System for Electronic Rate and Form Filing (SERFF) will help make the process faster and more efficient. The white paper defines ECPs as insurance buyers who meet at least two of the following criteria: a net worth of over $50 million; net revenues or sales of over $100 million; more than 500 employees per individual company (or 1,000 per holding company aggregate); procurement of insurance through the use of a risk manager (employed or retained); or aggregate premiums of over $500,000. For nonprofit or public entities, the exemption would apply to organizations with an annual budget or assets of at least $45 million or municipalities with populations over 50,000. …

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