The National Association of Registered Agents and Brokers Reform Act of 2008 (NARAB II), H.R. 5611, passed the House Capital Markets Subcommittee July 9, after adoption of a Manager's Amendment put forth by Rep. Davis Scott (D-GA). While the members praised the bipartisan reform efforts in the subcommittee hearing, the affection was seemingly short-lived as preemption concerns loom.
NARAB II, introduced by Reps. David Scott (D-GA) and Geoff Davis (R-KY) on March 13, 2008, would (1) create a National Association of Agents and Brokers (Association) to manage how states interact with member agents and brokers—whether registered or not; and (2) preempt certain state regulation of nonresident agents and brokers, even those who are not members of the Association. These measures were originally suggested in the context of the Gramm-Leach-Bliley Act of 1999 (GLBA) but were not then enacted.
Specifically, the bill would preempt certain state regulation of nonresident producers. States would be prohibited from imposing continuing education requirements on nonresident producers. Additionally, the bill would bar states from imposing licensing or registration requirements on nonresident producers doing business with an insured that has risks in multiple states when the producer is licensed in its home state and the insurance policy covers risks located in that state. The bill would also prevent states from imposing licensing or background checks on nonresident producers that are members of the Association.
Rep. Jackie Speier (D-CA) opposed the bill, claiming that it would only benefit seven states, as most other states have already signed onto the "GLBA compact." She also expressed concerns about potential unintended consequences of the bill's preemption provision.
Rep. Melissa Bean (D-IL) voiced her opposition to the bill by explaining that NARAB would not increase consumer choice but would likely only benefit agents. Rep. Bean may also oppose the bill because of its potential effect on her bill calling for the creation of an Optional Federal Charter (H.R. 3200). Supporters of NARAB II view the bill as a narrow means of targeted reform that works within the existing state regulatory system rather than a part of the sweeping changes proposed by Optional Federal Charter (OFC). The Manager's Amendment received broad bipartisan support and was even hailed by Rep. Jeb Hensarling (R-TX) as a move to lessen the regulatory burden. The amendment was adopted and the bill has been favorably recommended.
Rep. Scott introduced his Manager's Amendment during the July 9, 2008 Capital Markets Subcommittee markup, stating it would clarify that the bill:
- Does not govern resident agents and producers and will not interfere with a state's day-to-day oversight of agents and brokers, including consumer protection and market conduct regulation and receipt of licensing revenue—the bill addresses only marketplace entry for nonresident agents and brokers;
- Increases the size of the Association's board of directors from nine to eleven and creates a narrow majority of state insurance regulators; and
- Strengthens the NAIC's role by requiring the filing of the Association's bylaws and reports with the NAIC and directing the board to consider collaborating with the NAIC as the central clearinghouse and national database for regulatory information.
The amendment modified the statement of purpose to clarify that the Association provides a licensing reciprocity system for producers that conduct business in multiple states "without affecting the laws, rules, and regulations pertaining to resident insurance producers or appointments or producing a net loss of producer licensing revenues to States." While the original bill had language that maintained a state's right to set licensing fees and consumer protection regulation, this new language clarifies that the Association's activities will not disturb existing state regulatory mechanisms for resident producers.