NU Online News Service, Dec. 15, 3:22 p.m.EST

State-based insurance regulation has an “inherent weakness”—theability to stray from or misinterpret national standards or modellaws, says the Risk and Insurance Management Society Inc.

In a letter to Michael McRaith, director of the Treasury's newFederal Insurance Office, RIMS recommends more federal oversight inmaking uniform, nationwide insurance regulations to make it easierand less expensive for commercial insurance buyers to access theright coverage.

The disparity among states creates redundant filing requirementsand difficulties in launching new products, RIMS says.

“With a state-by-state patchwork of laws related to producerlicensing and forms and procedures, additional costs are commonlyincurred by consumers,” says Scott B. Clark, president of RIMS, ina statement. “Inefficiencies have become more profound, raisingquestions about fundamental fairness in the insurance market.”

As an example of the states' flaw, RIMS points to states'implementation of the Dood-Frank act's Nonadmitted and ReinsuranceReform Act (NRRA) meant to create clarity to the regulatory and taxpayment process in the surplus lines market.

Instead of clarity, states became divided over premium-taxallocation and two systems emerged—the Nonadmitted InsuranceMultistate Agreement and the Surplus Lines Multistate ComplianceCompact.

“Despite the clear intent of the NRRA, the states have not yetadopted nationwide uniform requirements, forms and procedures thatprovide for the reporting, payment and collection and allocation ofpremium taxes for nonadmitted insurance,” Clark writes to McRaith.“Additional Congressional action or pressure may be necessary.”

RIMS has “strongly supported” the FIO and it remains supportiveof an optional federal charter, but realistic short-term “stepstoward greater federal uniformity” are needed and “immediatefederal regulation is impractical and should be slowed.”