Florida Surplus Lines Service Office National Clearinghouse Committee Report: May 17, 2011

May 17, 2011


The Florida Surplus Lines Service Office (“FSLSO”) held a National Clearinghouse Committee (“Committee”) meeting today, May 17, 2011, to discuss the possibility of partnering with another entity to provide multi-state tax clearinghouse operational services pursuant to surplus lines-related reform provisions in the Nonadmitted and Reinsurance Reform Act of 2010. 

The meeting agenda is attached.

After approving the minutes from the May 10, 2011 Committee meeting, FSLSO Executive Director Gary Pullen related to Committee members that he had spoken with a representative from the National Association of Insurance Commissioners (“NAIC”) about splitting up the operational and technical duties of running NAIC’s proposed Nonadmitted Insurance Multi-State Agreement Clearinghouse (“Clearinghouse”). 

Committee members agreed they would prefer the FSLSO to only provide technical services to the Clearinghouse, since they were concerned about the legal and financial implications of providing the Clearinghouse with operational services. 

A Request for Proposal from the NAIC on these services is expected to be issued sometime in June 2011.

Mr. Pullen said the NAIC was receptive to the idea of a partnership, but had apparently done little research on the complexities of such an arrangement.

The NAIC requested “a couple of weeks” to discuss the matter with their principals before moving forward, he stated.

Another option for the NAIC would be to find another third party to provide the Clearinghouse operational services, Mr. Pullen suggested.  Yet another alternative would be for the FSLSO to provide operational support for a limited time span-maybe 12 to 18 months-to assist with the Clearinghouse start-up by utilizing FSLSO’s existing expertise and experience.  Under this scenario, the FSLSO would enter into a contract to be reimbursed for its time and staffing for a given period of time.

“The advantage to us at least considering or offering to provide some temporary support is that it would put us in a position where we are most knowledgeable on how those business processes and technology solutions are integrated,” Mr. Pullen said.

If FSLSO doesn’t assist the NAIC in its Clearinghouse start-up operations, it would simply enter into a licensing agreement with whomever is going to handle operational duties and let that entity be in charge, he explained.

“We would receive revenue as a result of that licensing arrangement, but we would not have any direct involvement in actual decisions, operation or creation of this Clearinghouse,” Mr. Pullen said, adding that such an arrangement would eliminate some of the concerns that might arise if the FSLSO instead had to create a subsidiary to run the Clearinghouse.

The downside of that scenario relates to revenue, Mr. Pullen pointed out.  If the operation is profitable, whomever is running the day-to-day Clearinghouse operations also would profit.

After limited discussion, Committee members unanimously agreed it would be beneficial to the FSLSO to be involved in the start up of Clearinghouse operations by offering its staff and experience for a fee.  

Mr. Pullen said the NAIC is expected to report back to the FSLSO in one to two weeks. 

With no further business before the Committee, the meeting was adjourned.




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