Redrafted Surplus Lines Reform Implementation Proposal Presented At NAIC Task Force September 27 Meeting

Sep 28, 2010



The National Association of Insurance Commissioners (“NAIC”) Surplus Lines Implementation Task Force (“Task Force”) has scheduled an October 5, 2010 meeting to continue discussion on a new proposal designed to address federal surplus lines reform as provided in the Non-Admitted and Reinsurance Reform Act (“NRRA”), which is part of the recently passed Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

The new proposal, entitled the “Nonadmitted Insurance Compact (‘NIC’),”was presented at the September 27 Task Force meeting and combines elements of the Surplus Lines Insurance Multi-State Compliance Compact (also known as “SLIMPACT”) with the Interstate Insurance Product Regulation Compact. 

In regard to the NIC, regulators continued to voice their states’ respective concerns over challenges presented by compacting, as well as whether the NRRA applies to single-state or multi-state risks.  Additional concerns included the potential loss of revenue among the states and what type of repercussions would occur if the NRRA provisions are not implemented by the law’s specified effective date.

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.

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

The September 27 meeting agenda, a draft copy of the proposed NIC and a summary of its accompanying statutory changes are accessible through the hyperlinks below.

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 attached for review.



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