In the 18 months since Congress passed the Nonadmitted and Reinsurance Reform Act (NRRA), the NAPSLO Board, Legislative Committee and staff have been hard at work, with the help of stamping offices and state associations, advocating for the law's proper implementation to state legislatures, insurance commissioners and insurance department staff and the National Assn. of Insurance Commissioners to fully realize the goals of the federal law. To date:

  1. Forty-four states have taken action to implement the NRRA.

    • 24 states representing 63 percent of nationwide premium volume have no current plans for participating in tax sharing arrangements.

• 11 states plus Puerto Rico have signed the Nonadmitted Insurance Multi-State Agreement (NIMA). Representing states with 21.7 percent of nationwide premium, NIMA recently delayed its operational start from Jan. 1 to July 1, and Nebraska provided notice of its withdrawal from NIMA effective March 5.

• 9 states are working to implement the Surplus Lines Insurance Multistate Compliance Compact (SLIMPACT). With 5.23 percent of nationwide premium, SLIMPACT is not yet operational and cannot be operational until July 1, 2013, at the earliest, and only if it achieves a tenth member.

  • The states have not agreed on a consistent tax sharing arrangement or clearinghouse model.
  • The current NIMA tax allocation methodology contains a detailed allocation formula requiring a substantial amount of state-specific data to be collected by the surplus lines broker from the insured. It also requires the broker and insured to provide information for the allocation of casualty insurance policies that is not normally used in the underwriting process or currently gathered in the normal course of business, all for the sole purpose of allocating taxes.
  • Some states have modified their surplus lines tax laws to tax the portion of surplus lines premium allocated to other states at the other states' tax rates, even when they are not participating in any tax sharing arrangement. This creates a matrix for tax allocation and reporting purposes within a number of states which is difficult, costly to administer and inconsistent with NRRA's intent.
  • The cost/benefit of tax sharing is not clear. Most surplus lines transactions represent single-state transactions and based on recent data from the Florida Office of Insurance Regulation and the Maryland Insurance Administration, any ultimate amount of tax sharing will likely be insignificant in relation to the cost of tax sharing.

    • NAPSLO continues its work with the states to promote and attain the uniformity and efficiencies in surplus lines regulation the NRRA is intended to achieve.

    Want to continue reading?
    Become a Free PropertyCasualty360 Digital Reader

    Your access to unlimited PropertyCasualty360 content isn’t changing.
    Once you are an ALM digital member, you’ll receive:

    • Breaking insurance news and analysis, on-site and via our newsletters and custom alerts
    • Weekly Insurance Speak podcast featuring exclusive interviews with industry leaders
    • Educational webcasts, white papers, and ebooks from industry thought leaders
    • Critical converage of the employee benefits and financial advisory markets on our other ALM sites, BenefitsPRO and ThinkAdvisor
    NOT FOR REPRINT

    © 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

    Regulation/Legislation