Nebraska Bows Out of the Nonadmitted Insurance Multistate Agreement

Jan 12, 2012

The following article was published in PropertyCasualty360º on January 12, 2012:

Nebraska bows out of NIMA

Nebraska has dropped out of the Nonadmitted Insurance Multistate Agreement, or NIMA, the compact for parceling out surplus line premiums to the appropriate state supported by the National Association of Insurance Commissioners.

In its decision to withdraw from NIMA,Nebraska cites conflicts between the period offered to surplus lines brokers and insureds that place nonadmitted insurance business to report such business under NIMA and the state’s laws.

As a result, all quarterly surplus lines filings and tax payments shall be filed directly with the state insurance department, the department says in a statement filed on its website Monday.

At the same time,Iowa’s legislature appears to be working on legislation that would allow the state to keep all premiums received from surplus lines transactions.

According to several sources, the proposed bill contains no mechanism for sharing those premiums with the state where the risk is located, according to several sources.

Officials of the National Association of Surplus Lines Offices, Ltd., and other officials believe that is Iowa’s plan. NAPSLO and others are hopeful that a compromise with regard to the tax-sharing provisions can be reached.

If Iowa does pass such legislation, it would join California, Texas and Illinois as the states whose laws or rules implementing the federal surplus lines reform and modernization law contain no premium-sharing mechanism.

Joel Wood, senior vice president for government affairs with the Council of Insurance Agents & Brokers, says thatNebraska’s decision “may be a sign of things to come.”

Wood says that implementation of the clearinghouse has been delayed yet another half-year.

Wood and NAPSLO officials say that because of the delay in implementing the NIMA clearinghouse, a number of the NIMA member-states have recently issued bulletins and clarifying guidance regarding the reporting and payment of taxes.

“Big states have not gotten on the [coordinating] bandwagon,” Wood says.

He says the percentage of premiums among the NIMA states—as well as Surplus Lines Multistate Compliance Compact (SLIMPACT) states—is not anywhere close to the critical mass necessary for the promises of a streamlined system for clients, insurers and brokers to be realized.

He says the intent of the Nonadmitted and Reinsurance Reform Act provisions of the Dodd-Frank law were to make the system more rational.

“At this point, we believe a more achievable rational approach might be for states to collect 100 percent of the premium taxes for multistate risks headquartered in their jurisdictions,” Wood says.

“That said, we welcome working with all of the regulators who are striving to come up with a multistate allocation system,” Wood says. “With theNebraskadecision, the momentum might be swinging away from that movement.”

The decision leaves NIMA with 10 states and Puerto Ricoas members, the same number as SLIMPACT states.

Brady Kelley, NAPSLO executive director, agrees with Wood that, “Nebraska’s withdrawal may indicate further delays in NIMA’s operations.

“NAPSLO’s goal has been the uniform, clear and efficient implementation of the NRRA among the states, consistent with the intent of the NRRA, and we have been working hard with the states in this regard,” Kelley says.

Most insurers and producers support SLIMPACT as a far more comprehensive way of ensuring premium collections on non-admitted insurance products are appropriately shared with the state where the risk exists.

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