National Association of Insurance Commissioners Surplus Lines Implementation Task Force Continues Non-Admitted Insurance Compact Debate

National Association of Insurance Commissioners (“NAIC”) Surplus Lines Implementation Task Force (“Task Force”) will hold a teleconference tomorrow, October 5, 2010, to continue its review of newly redrafted proposed legislation designed to address surplus lines implementation provisions in the Non-Admitted and Reinsurance Reform Act (“NRRA”).  The NRRA is part of the recently passed Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Comments on this newest proposal, entitled the “Nonadmitted Insurance Compact (‘NIC’),”along with the meeting agenda, are accessible through the hyperlinks below:

• Agenda
• SLITF written comments 1 Oct 10
• SLITF written comments 4 Oct 10

The NIC sets forth the following goals:

• To protect the Premium Tax revenues of the Compacting States through facilitating the payment and collection of Premium Tax on Non-Admitted Insurance; and to protect the interests of the Compacting States by supporting the continued availability of such insurance to consumers; and to provide for allocation of Premium Tax for Non-Admitted Insurance of Multi-State Risks among the States in accordance with uniform Allocation Formulas to be developed, adopted, and implemented by the Commission.
• To establish a Clearinghouse for receipt and dissemination of Premium Tax and Clearinghouse Transaction Data related to Non-Admitted Insurance of Multi-State Risks, in accordance with Rules to be adopted by the Commission.
• To coordinate reporting of Clearinghouse Transaction Data on Non-Admitted Insurance of Multi-State Risks among Compacting States and Contracting States.
• To establish the Nonadmitted Insurance Commission.
• To perform these and such other related functions as may be consistent with the purposes of the Nonadmitted Insurance Commission.

States’ collection of premium taxes, compacting issues and definitions set forth by the NRRA have been among the topics debated extensively at recent meetings of the Task Force.  Chaired by Louisiana Insurance Commissioner Jim Donelon, the Task Force was created at the NAIC’s recent 2010 National Summer meeting in order to develop and oversee implementation of state-based NRRA solutions.

Statutory changes made by the proposed NIC would include:

• The addition of a new definition of “home state”
• Amendment of the definition of “reciprocal state” as referenced by the NRRA
• Alignment of insurer eligibility requirements with those of the NRRA
• Provisions for statutory authorization to collect and disburse taxes based on home state rate and other states’ rates
• Clarification of licensing requirements applicable to situations in which the state is the home state of the insured
• Provisions for the adoption of quarterly filing requirements
• Changes for independently procured insurance taxes to be commensurate with those of surplus lines taxes
• Statutory authorization to participate in the NIC Commission as a Contracting State
• An optional section that authorizes insurance commissioners or other state officials to enter an agreement with the NIC Commission for the purposes of collecting, allocating and disbursing premium taxes attributable to the placement of nonadmitted insurance pursuant to the NRRA

A draft copy of the proposed NIC, a summary of its accompanying statutory changes and additional comments on the Task Force’s ongoing NRRA implementation debate from the National Association of Professional Surplus Lines Organizations and the Excess Line Association of New York are available by clicking on the hyperlinks below:

• Discussion draft – compact legislation
• Discussion draft – accompanying statutory changes
• ELANY comments re. SLIMPACT
• NAPSLO comments re. SLIMPACT

Should you have any comments or questions, please contact Colodny Fass.