My readers may remember that in my last post of 2014, I made some Holiday wishes. To my surprise, one of those wishes came true at the end of last week. In two days, the Congress enacted a bill that renewed the terrorism reinsurance program and created a mechanism for the nonresident licensing of agents and agencies without having to go through the insurance commissioner’s offices of each state. If Congress could act as quickly to deal with other problems facing our nation, 2015 may turn out to be a very good year.
The Terrorism Risk Insurance Program Reauthorization Act of 2015 made some changes to the previous program. The federal government’s share of any losses related to terrorist acts will gradually decrease to 80%, the trigger for the program will gradually rise to $200 million in such losses, and the amount that insurance companies must pay back to the federal government will gradually rise to $37.5 million, which amount will then increase every year based on a formula in the Act. Other more technical changes were also made in the program. The IIABA has prepared a summary of the Act’s provisions which can be read by clicking here.
As you might suspect from the name, the National Association of Registered Agents and Brokers Reform Act authorizes the creation of an entity known as the National Association of Registered Agents and Brokers (“NARAB”). Membership in this entity will enable an agent or agency to conduct business in states other than their home states without having to obtain a non-resident license from the insurance commissioners of those other states or a certificate of authority from their secretaries of state. Instead, the agent or agency will just pay NARAB the licensing fee required by those other states and it will notify the insurance commissioners of those states that the agent or agency is now authorized to conduct insurance business in them. The insurance commissioners of those states do have the ability to contest the fact that an agent or agency has satisfied the NARAB’s membership criteria, but they cannot object to the conduct of business in their states by the agent or agency on the grounds that their licensing criteria have not been satisfied.
The best way to think of NARAB is as a nationwide Insurance Commissioner for licensing, except that membership in it is voluntary. NARAB will establish its own criteria for membership, which must at least meet the standards for personal qualifications, education, training, and experience that are found in the National Association of Insurance Commissioner’s (“NAIC”) Producer Licensing Model Act and will require, at a minimum, that the agent or agency’s license in their home state be in good standing. There will, of course, be a fee to join NARAB and membership will have to be renewed every two years. NARAB will have the authority to discipline its members for violations of its rules, and its members will also be subject to the disciplinary powers of the insurance commissioners of each state in which they are authorized to do business for the violation of their rules. Those agents and agencies that don’t want to deal with the NARAB’s rules will still be free to get non-resident licenses directly from the insurance commissioners of each state.
Unfortunately, it will take some time before agents and agencies can apply for membership in the NARAB (the Act calls for NARAB to be operational two years after its actual creation which is still some months away). Perhaps the most significant hurdle for the NARAB will be the necessity to raise the funds required to set it up, as the Act prohibits the use of federal funds for this purpose. Stay tuned for further developments. In the meantime, IIABA has created a summary of the Act’s provisions and a member guide that explains those provisions in more detail for those who are interested.