NAIC Surplus Lines Implementation Task Force Adopts Clearinghouse Plan of Operation Outline and Proposed Model Nonadmitted and Reinsurance Reform Act Advisory Bulletin at June 10, 2011 Meeting

Jun 13, 2011


At its June 10, 2011 teleconference, the National Association of Insurance Commissioners (“NAIC”) Surplus Lines Implementation Task Force (“Task Force”) unanimously voted to adopt two key measures related to the Nonadmitted and Reinsurance Reform Act of 2010 (“NRRA”).

Regulatory representatives from Louisiana, Alaska, Delaware, Florida, Illinois, Indiana, Nevada, New York, Oklahoma, Pennsylvania, South Dakota, Texas and Utah participated in the meeting and voted on the measures during the 90-minute call.

Part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the NRRA provides that only an insured’s “Home State” may require a premium tax payment for nonadmitted insurance.  Effective July 21, 2011, it also authorizes states to establish procedures to allocate nonadmitted insurance premium taxes among themselves.

The Task Force first adopted a Model Advisory Bulletin (“Bulletin”) designed to outline nationwide regulatory changes that are expected to affect surplus lines brokers placing business in various states pursuant to the “NRRA.” Comments submitted by the Council of Insurance Agents and Brokers, Lloyd’s America, the National Association of Professional Surplus Lines Offices, the New York Insurance Department and the Property Casualty Insurers of America were taken into consideration in formulating the Bulletin’s final draft.

During discussion, John Bauer, NAIC’s Chief Counsel for Regulatory Affairs, summarized proposed revisions and characterized them as clarifying or contextual.  He noted that a section on specific multiple state arrangements was deleted and replaced with a more general section relating to the allocation of premium tax payments.

Also discussed was whether a definition of “principal place of business” should be included.  The Task Force ultimately agreed to include optional language in the Bulletin that provides a definition for those states that want it.

Mr. Bauer said he would distribute a final copy to Task Force members after all revisions are incorporated.

The Task Force then adopted the Plan of Operation (“Plan”) outline for the NAIC’s  Nonadmitted Insurance Multi-State Agreement (“NIMA”) proposed Clearinghouse, which will be responsible for the receipt, allocation and distribution of multi-state surplus lines premium taxes.  Recommended for use by NIMA participating states, the outline was created by the Task Force Clearinghouse Plan of Operation Subgroup (“Subgroup”) after months of discussion. 

Alaska Insurance Director and Subgroup Chairman Linda Hall led the discussion on the Plan outline, explaining that the biggest issue Subgroup members struggled with involved the governance section.

“The Subgroup decided the Plan of Operation was not the place to put it,” Chairman Hall explained.  “We also removed the licensing verification for the same kind of reason.  It’s not required under NIMA and the states should retain their regulatory role in that regulation.”

Some Plan outline language was eliminated that would have allowed remote access to certain software by state regulators and/or stamping office personnel to enter  information pertaining to tax rates, stamping office fees and the determination of refunds and penalties, she noted, saying “We put a lot of work into this outline and really tried to stay within the parameters of the NIMA outline and recommend that the NIMA participating states adopt it.”

The Task Force also adopted a proposed Clearinghouse Access Agreement that had been approved by the Subgroup.

Louisiana Insurance Commissioner and Task Force Chairman Jim Donelon acknowledged the hard work and long hours that had gone into finalizing the documents.

“We are close to the finish line, and the finish line is the deadline.  We don’t have time to waste,” Chairman Donelon said.

With no further business before the Task Force, the meeting was adjourned.

The meeting materials, which include draft copies of the approved documents, are attached for review.





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