Surplus Lines Insurance Multi-State Compliance Compact Commission Elects Interim Chair, Informally Adopts Kentucky Proposal for Premium Tax Allocation

Aug 19, 2011


The Surplus Lines Insurance Multi-State Compliance Compact (“SLIMPACT”) Commission (“Commission”) met via Webinar on August 19, 2011, during which members elected Kentucky Insurance Commissioner Sharon Clark as Commission Interim Leader.  By straw vote, the Commission also opted to accept Kentucky’s allocation formula for surplus lines insurance premium tax.

Commission meetings are co-hosted by the Council of State Governments (“CSG”), the National Conference of Insurance Legislators (“NCOIL”) and the National Conference of State Legislatures (“NCSL”).


Update on Commission Member Appointments

Crady deGolian, Director of The CSG’s National Center for Interstate Compacts, said that eight of the nine SLIMPACT member states have made official appointments of voting members to the Commission, who are, as follows:

  • Alabama: Richard Ford
  • Indiana: Cynthia Donovan
  • Kansas: Commissioner Sandy Praeger
  • Kentucky: Commissioner Sharon Clark
  • New Mexico: Superintendent John Franchini
  • Rhode Island: Superintendent Joe Torti
  • Tennessee: Commissioner Julie Mix McPeak
  • Vermont: Susan Donegan

Johnny Palsgraaf, an attorney for the North Dakota Insurance Department, said that his state’s appointment is in progress and an update from the North Dakota Governor’s office is pending.  Because of this, North Dakota will abstain from any votes taken at Commission meetings until an official appointment is made.


NCOIL Letter to SLIMPACT Commission Members, Designees

North Dakota State Representative and NCOIL President George Keiser addressed the Commission about a letter he submitted on behalf of NCOIL to the Commission, in which he urged the process of adopting bylaws and other elements of SLIMPACT to proceed.

“There is some sense of frustration on behalf of policymakers in various states that have adopted SLIMPACT,” Representative Keiser said. “…What we’re asking you to do is move forward.”

At previous meetings, it was discussed that, because fewer than 10 states have joined SLIMPACT, the Commission lacks authority under Article XIII of SLIMPACT to formally vote on and adopt certain items, including rules.   Representatives of several member states have supported waiting on final adoptions until a tenth state compacts or contracts with SLIMPACT.

“I know there is some hesitancy on the part of some members to take any form of action, simply because we have nine states and not a tenth state,” he continued.  “If we were to have adopted that same position relative to the Interstate Compact that the National Association of Insurance Commissioners worked with NCOIL in moving forward, we would have delayed all action for a couple of years.”

Representative Keiser said that NCOIL expects to see some progress made-at least on a preliminary basis-on the adoption of bylaws and other elements of SLIMPACT so that, when a tenth state joins, SLIMPACT will quickly become fully operational.  He suggested that anything adopted now can be amended later by the Commission.


Discussion/Election of Interim Commission Leadership

NCOIL Executive Director Susan Nolan asked for discussion or nominations for an Interim Commission Chair, a subject she had introduced at the Commission’s July 29 meeting.

Richard Ford of Alabama moved that Commissioner Sharon Clark of Kentucky should be appointed as Interim Chairperson.  Vermont seconded the motion, which passed unanimously. 


Consideration of Draft Commission Bylaws/Rulemaking Rules

Commissioner Clark next wanted to determine which states were prepared to take votes at the meeting before discussion of any further agenda items. 

Ms. Nolan said that, because it has not reached the 10-member threshold, the Commission had the option of taking a formal vote on the bylaws, but not on rulemaking rules and allocation formulas.

In response to Ms. Nolan’s statement, Rhode Island Superintendent Joe Torti said, “Our legal interpretation is different.  We do not believe we can take a vote [on the bylaws] until we have 10 members.”

“I strenuously disagree,” responded Rick Masters of the CSG, who read the requirement for a tenth Compacting State verbatim from Article XIII of SLIMPACT.

“I don’t think there is any question as a matter of English grammar or law that you have the authority, after adopting this compact, to adopt bylaws and organize yourself.  I do agree that beyond that, as to adopting rules or creating a clearinghouse, that you must have 10,” he stated.

Superintendent Torti stated that Rhode Island does not believe a Commission has been officially created and asked to hear from other states on their legal interpretations.

Cindy Donovan of Indiana said that, to her understanding, the Commission could probably vote on bylaws, but anything beyond that would require 10 member states.

Ms. Nolan and Commissioner Clark called for a vote on which states would be comfortable voting on the bylaws during the meeting.

With Kansas, Rhode Island, Tennessee and Vermont all voting no, Commissioner Clark determined that a final vote on bylaws should not be taken.

She then posed the question of whether the states would be prepared to take a non-binding straw vote on the proposed bylaws.  All of the states voted yes, with Rhode Island and Tennessee asking to review the final bylaws to clarify exactly what would be voted upon.

Superintendent Torti said that Rhode Island would like to see specific language in the bylaws about the Commission’s authority to collect taxes under SLIMPACT.

It was stated that Article V of the bylaws contains a list of the Executive Director’s duties, one of which is to collect taxes.  Concern was expressed that, if the Executive Director position were to become vacant, for example, a provision that the Commission can collect taxes would not technically exist.  To counter this possibility, a section providing that a home state will take action against a recalcitrant taxpayer could be included in the bylaws.

Commissioner Clark delayed the straw vote on the bylaws and asked the State of Rhode Island to submit language for consideration at the next Commission meeting. 

Once again, consideration of the rulemaking rules was tabled due to lack of a tenth member state.


Review of Draft Contracting States Agreement

A draft Contracting States agreement to be used if a state wants to contract with SLIMPACT had been prepared for Commission review. 

Although the Commission cannot currently adopt the agreement, Ms. Nolan said the document is relevant in that states might be willing to contract in the near future.

In response to a question from Superintendent Torti, Mr. Masters said that Arkansas and Texas have had discussions about a possible contracting relationship.  Ms. Nolan added that other states are on “fact-finding missions” about the contracting option, which Mr. Masters said he believes is authorized under Article XIII of SLIMPACT.


Discussion of Allocation Formula Proposals

Commissioner Clark then asked which states were prepared to take a straw vote on accepting an allocation proposal.  With the exception of Kansas and Tennessee, all states voted in favor of doing so.

An Indiana representative moved to adopt the Kentucky proposal, which Alabama seconded.  The motion carried by a unanimous vote.  Interested parties then had the opportunity to comment on this development.

David Kodama, Director of Policy Analysis for the Property Casualty Insurers Association of America said, “We would extend our appreciation for the results of the vote.  Thank you.”

Philip Ballinger, Executive Director of the Surplus Lines Stamping Office of Texas, said, “I think the straw vote reflects a great move forward in simplicity and uniformity.”


Next Steps

Commissioner Clark said that the next steps for the Commission are to review the draft Contracting States agreement and also the additional language that Rhode Island would like to propose for consideration in the bylaws.  She said she would work with Mr. deGolian on the next meeting date.

With no further business at hand, the meeting was adjourned.

Copies of the agenda, draft bylaws, draft Contracting States agreement, interested party letters and other meeting materials are attached.


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



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