STATE MODERNIZATION AND REGULATORY
TRANSPARENCY ACT
TITLE I – GENERAL PROVISIONS
This title sets out the title of the Act, the table of contents, and various definitions.
Title II –Market Conduct and Uniform Standards
Title III – Insurer Licensing
Title IV – Producer Licensing
Title V – Life Insurance
Title VI – Commercial Property and Casualty Insurance
Title VII – Personal Lines Property and Casualty Insurance
Title VIII – Surplus Lines and Independently Procured Insurance
Title IX – Reinsurance
Title X – Antifraud Network
Title XI – Viaticals
Title XII – Miscellaneous Insurance
Title XIII – Receivership
Title XIV – Financial Surveillance
Title XV – State-National Insurance Coordination Partnership
Title XVI – Creating Competitive Insurance Markets
Title XVII – Scope
TITLE II – MARKET CONDUCT AND UNIFORM STANDARDS
This title enhances insurance consumer protection and promotes efficiency by
ensuring that the States develop and coordinate uniform market conduct oversight
of insurers that is consistent, reliable, transparent, and focuses resources on
patterns of abuses. To achieve improved market conduct oversight within three
years, States will be required to develop and implement:

A coordinated system for implementing market conduct examinations of
multi-State insurers on a regular basis

Uniform procedures for “for cause” market conduct examinations

Transparent and published standards for all State market conduct rules or
regulations

Uniform adoption and implementation of market conduct laws, procedures,
and practices, so that States can rely on each other’s oversight

Inclusion of market conduct in the NAIC’s State accreditation process

Coordination of market conduct analysis and examination information
requests, including full utilization of NAIC’s market analysis databases

Development, adoption, and implementation of updates and improvements to
the models and coordinated uniform standards governing market conduct
TITLE III – INSURER LICENSING
This title requires the States to develop and coordinate a single point-of-entry for
insurance company licensing based on adequate standards and using uniform
electronic application filing systems based on NAIC’s Uniform Certificate of
Authority and ALERT standards. Specifically, the States will be required to
achieve:

Streamlining of company licensing that allows an insurer that is licensed in
good standing in a model State to submit a uniform application and Uniform
Certificate of Authority to all other States electronically to receive a license in
those States

Streamlining of requirements for license filing, name change, or changes in
business lines, based on ALERT standards, for States other than an insurer’s
home State

Streamlining of consideration of multi-State mergers and acquisitions,
including development of memorandums of understanding based upon the
NAIC’s lead-state framework to defer most actions to the designated lead
States
TITLE IV – PRODUCER LICENSING
This title streamlines agent and broker licensing by promoting efficiency, uniformity
and fairness. Building on the success of NARAB, the States are required to
implement reciprocal licensing for agents and brokers within two years. The title
also requires the States, within three years, to achieve:

Streamlined licensing standards and increased uniformity for agents and
brokers

Elimination of discriminatory requirements and excessive continuing
education burdens imposed against nonresident agents and brokers

Full implementation and utilization of the NAIC’s National Producer
Licensing Database for coordinated licensing of agents and brokers

Adoption of coordinated electronic filing for agent and broker license
applications for both new licenses and renewals

Uniform insurer appointment standards and procedures, including
procedures to receive required reports from insurers of the insurers’
appointed agents and brokers, including reports of “for cause” terminations
TITLE V – LIFE INSURANCE
This title encourages the States to enter into an interstate compact authorized
under this title to establish, coordinate, and maintain a Uniform Multistate Filing
System within three years that:

Includes a single point of filing, review, and approval for life insurance policy
forms, as well as updated uniform laws and regulations governing the filing,
content, and regulation of policy forms for life insurance

Creates a more efficient and effective product review to bring products to
consumers more quickly

Provides for publication of interpretations of the new laws and regulations
and a process to quickly resolve conflicting interpretations among the States

Ensures full participation in the interstate compact with enforced deadlines
and without deviations

Establishes uniform national standards that reflect the current product
approval standards in the States

Provides a streamlined forms review process for sophisticated purchasers, the
definition of which should be adopted nationwide
TITLE VI – COMMERICAL PROPERTY AND CASUALTY INSURANCE
This title streamlines business access to commercial insurance by promoting
efficiency and recognizing exempt commercial policyholders. Specifically, within
three years the States will achieve:

Full implementation of SERFF with coordinated checklists for full
compliance to establish a coordinated electronic system for nationwide single
point filing of property and casualty policy forms

Updated standards for product filing for applicable commercial property and
casualty insurance, including either the appropriate NAIC model law or laws
or regulations that provide for A) competitive rating for commercial
insurance with expedited rate filings; B) expedited review of policy forms,
within a 30 day review period for self-certified filings; C) recognition of singlestate governance of policy form requirements, based on the primary location
of the policy risk and the consumer’s principal place of business; and D)
recognition of qualified exempt commercial policyholders whose insurance is
not subject to rate and form review

Common filing nomenclature to reduce unnecessary form filing deviations
and coordinate filing reviews

Greater transparency in rates and forms regulation through elimination of
unpublished desk drawer rules
TITLE VII – PERSONAL LINES PROPERTY AND CASUALTY INSURANCE
This title modernizes and streamlines the review of personal lines insurance forms
with resulting consumer benefit. Specifically, within three years the States will
achieve:

Full implementation of SERFF with coordinated checklists for compliance to
establish a nationwide electronic system for single point filing of property
and casualty policy forms

Common filing nomenclature to reduce unnecessary form filing deviations
and coordinate filing reviews

Elimination of unpublished desk drawer rules

Expedited review of property and casualty policy forms, particularly for
filings that are the same or substantially the same as existing insurance
filings
TITLE VIII – SURPLUS LINES AND INDEPENDENTLY PROCURED
INSURANCE
This title encourages the States to develop and coordinate a uniform system for the
regulation of surplus lines insurance under which a single set of regulatory
obligations will apply to each individual transaction. The Congress specifically
intends that any tax obligations related to surplus lines or directly procured
insurance transactions should:

Be required to be paid only to the home State of the insured

Be allocated among the States in accordance with an allocation formula and
procedure that the States should develop and implement

Be processed through a uniform and centralized national electronic system
for the payment and allocation of taxes related to surplus lines and directly
procured insurance that the States should develop and implement
The Congress further intends that the regulation of surplus lines should be
streamlined and modernized in the following respects:

All States should participate in the NAIC’s national insurance producer
database for the licensure of surplus lines brokers and the renewal of such
licenses

The States should develop and adopt a uniform set of eligibility criteria for
non-admitted insurers

The States’ regulation of surplus lines transactions with respect to
sophisticated commercial purchasers should be streamlined
TITLE IX – REINSURANCE
This title requires the States, within three years, to develop and implement updated
laws and regulations to promote uniformity in the reinsurance marketplace. These
updated laws and regulations will:

Create a more efficient and effective system for filing of financial statements
by reinsurers

Ensure State recognition of uniform reinsurer financial statements

Ensure State recognition of uniform solvency regulation with deference to the
insurance regulator of the home State of a reinsurer
TITLE X – ANTIFRAUD NETWORK
This title streamlines the antifraud coordination efforts of State and Federal
regulators, reduces inefficiencies of financial services regulation, assists financial
regulators in detecting patterns of fraud, and modernizes the fight against fraud in
all of its evolving manifestations and permutations. To these ends, this title
stipulates that:

The financial regulators shall establish a coordinated network of their
computer systems to share appropriate anti-fraud information

An Antifraud Subcommittee be created to establish the coordinated network
if the regulators do not do it on their own within the specified time period

An agency supervisory privilege be created to allow State and Federal
financial regulators to share regulatory information while retaining ultimate
control over dissemination of the shared information

Agencies be able to maintain any existing confidentiality protections on
shared information

Agencies not be subject to liability for the sharing of information among
regulators if acting within the scope of their office and in good faith

The financial regulators will have access to certain criminal background
information on financial professionals

The financial regulators will coordinate the anti-fraud network with their
foreign counterparts to combat terrorism

Certain conforming and updating changes be made to the Investment
Advisors Act of 1940 and the Securities Act of 1933
TITLE XI – VIATICAL TRANSACTIONS
This title improves consumer protection laws governing the sale of viaticals and
clarifies the division of viatical regulation among the various State and Federal
regulators. To this end, within three years:

The States shall implement the NAIC’s 2001 Viatical Settlements Model Act
or laws or regulations that address the same critical consumer protection
issues

If a State does not adopt appropriate viatical consumer protection provisions,
that the NAIC model act shall apply in that State to govern viatical
settlements

The Securities and Exchange Commission and the North American Securities
Administrators Association shall jointly study and report to the Congress on
the most effective and efficient manner of preventing viaticals fraud with
respect to creating more uniform treatment under State and Federal
securities laws

The States shall facilitate a more efficient regulatory system governing
viatical settlements by implementing uniform or reciprocal laws governing
licensure of producers authorized to solicit and sell viaticals
TITLE XII – MISCELLANEOUS INSURANCE
This title addresses miscellaneous insurance lines. Specifically:

The States are intended to develop and implement uniform standards for
internal and external reviews of appropriate insurance plans within three
years

The States shall develop and implement an interstate compact for single
point of filing and coordinated review of lines of insurance other than those
addressed in titles V through VII, and this title provides advance consent for
that compact

The State insurance regulators, the NAIC, appropriate Federal entities, and
law enforcement agencies are encouraged to establish a task force focused on
addressing insurance scams
TITLE XIII – RECEIVERSHIP
This title encourages the States to develop and coordinate uniform laws regarding
receivership of insurers. Specifically, within three years, the States will have
developed laws designed to:

Protect the interests of insureds, claimants, creditors, and the public

Create uniformity among State insurance receivership laws in the United
States while maintaining the administration of receiverships within each
State system

Create efficiency in the administration of insurer receiverships

Establish a system that equitably apportions any unavoidable loss
TITLE XIV – FINANCIAL SURVEILLANCE
This title encourages the States to implement best practices rules for financial
surveillance to enhance insurance solvency regulations. Specifically, the States will
be required to:

Implement a coordinated and substantially uniform procedure for holding
periodic meetings, as appropriate, between the appropriate insurance
regulatory officials of an insurer’s home State and the executive management
of an insurer for the purposes of reviewing business strategies, financial
results, capital adequacy, and other critical financial solvency issues

Review corporate management policies among insurers and develop model
uniform standards for promoting best practices standards

Implement a coordinated and substantially uniform procedure for
encouraging insurer self-audits that would be kept confidential under State
law

Adopt and implement in a uniform manner the Model Act on Administrative
Supervision

Adopt and implement the NAIC accounting practices and procedures manual
or its equivalent, with respect to the accounting required of operating
insurers

Use and require standard accounting practices except in certain
extraordinary circumstances to maintain the financial solvency of an insurer

Implement uniform financial surveillance practices regarding affiliated
insurers, such as coordination of on-site supervision, standardization of
information exchange, and full implementation of the NAIC lead-State
surveillance framework
TITLE XV – STATE-NATIONAL INSURANCE COORDINATION PARTNERSHIP
This title will create a coordinated State-National partnership to promote
uniformity and efficiency in government policies that affect the insurance
marketplace. The Partnership will be balanced between State and National entities,
without any regulatory power or supervisory authority. The Partnership’s duties
are identifying whether certain uniformity requirements under this Act have been
met, helping to resolve actual conflicts over government insurance policies and this
Act, and facilitating coordination of financial and international trade issues that
affect insurance. Specifically, the Partnership:

Will be an independent establishment composed of 7 members, including
an insurance commissioner from each of a small, medium, and large
State, as well as a designees from the Securities and Exchange
Commission, the Department of the Treasury, and the Board of Governors
of the Federal Reserve System, and a 7th member nominated by the State
insurance commissioners and appointed by the President to act as Chair
and break tie votes, with equal balance as to political party membership
and rotating meetings. The Partnership will have two separate liaisons
to coordinate international insurance representation of the United States
and analyze the effects of national financial policy on the insurance
marketplace

Will have no regulatory authority, but will promote uniformity, assess
compliance with this Act, mediate and resolve conflicts among
government agencies, and conduct appropriate arbitrations of interagency conflicts

Will not have a permanent office and will be allowed only one liaison per
member and minimal clerical staff to ensure the Partnership remains
only a coordinating entity

Will review petitions regarding actual conflicts over uniformity
requirement or insurance regulation and where appropriate, offer nonbinding arbitration, issue interpretations, or participate in expedited
court proceedings

May seek expedited court consideration of conflicts it has reviewed with
at least equal weight given to its interpretations
TITLE XVI – CREATING COMPETITIVE INSURANCE MARKETS
This title creates nationwide competitive insurance pricing. After the expiration of a
two year period, no state may require the approval or prior review of any rate
charged for an insurance policy by an insurer.

A flex-band phase will be incorporated for covered lines to phase in
competitive rating. The flex band will be based upon the increase or decrease
in the aggregate rate for all such coverages. It will not apply on an individual
insured basis, and only one rate filing may be made by an insurer during any
12 month time period. The flex band will 7 percent during the first 12 month
period, and 12 percent during the second 12 month period

Credit insurance, title insurance, mortgage insurance, gap insurance,
medical malpractice insurance will be excluded from the covered lines of
insurance

Nothing in this section preempts States from requiring the informational
filing of rates

Nothing in this section preempts States from establishing or recognizing
rating or advisory organizations

Nothing in this section preempts State statutes, rules, regulations or orders
that prohibits the use of race, color, religion, creed, ethnicity, or national
origin as an underwriting or rating factor or classification
TITLE XVII – SCOPE
This title discusses the fact that the “McCarran-Ferguson Act” of 1945, as amended
by this Act, remains the law of the United States.