To put the issue into perspective, total surplus lines premiums reported to the 14 states with state stamping offices was $25 billion in 2015, representing a 3.6% increase over the $24.2 billion in 2014.

Approximately 3.6 million filings were made with the stamping offices in 2015, up 6.4% from 2014.

The largest state for surplus lines premiums is California. The San Francisco-based Surplus Line Association of California processed about 580,000 surplus lines policies filed in the state of California, totaling about $6.1 billion in premiums. Approximately 15%of all commercial policies written in California are in the surplus lines market.

The California group said 2015 was a record year for processed surplus line premiums in California.

Benjamin McKay, executive director of the California group, said it is a membership association including more than 5,000 licensed brokers. It is a nonprofit which also serves as the statutory surplus line advisory organization to the California Department of Insurance.

“We hadn’t processed $6 billion in premiums since before the financial downturn began in 2006,” McKay said. The California group processed $5.99 billion in premiums in 2014, he said.

Uniform approach

The CIAB said that, with the withdrawal of Florida from the clearinghouse, the Nonadmitted Insurance Multi-State Agreement (NIMA) loses its largest market and “brings us one step closer to finally realizing the long-delayed goal of the Nonadmitted and Reinsurance Reform Act for a single, uniform, approach to the taxation of multistate surplus lines placements.”

NAPSLO also said so in a similar statement.

Florida is the second NIMA jurisdiction to withdraw from the tax-sharing agreement in the past six months, and leaves South Dakota, Utah, Wyoming, and Puerto Rico as the only remaining members in the tax-sharing scheme. Tennessee remains an associate member.

The organization that administers NIMA is based in Tallahassee, Fla. Amy Bogner, deputy director of communications for the Florida Office of Insurance Regulation, said Florida will continue to use the clearinghouse services on a single-state-only basis via an independent contract separate from the NIMA arrangement.

The withdrawal announcement was made by the Florida Surplus Lines Service Office (FSLSO), which handled the administration of NIMA.

Todd Kiser, NIMA chairman and Utah insurance commissioner, was not available for comment.

Steve Gooch, a spokesman for the Utah department, said Kiser and other NIMA officials are “evaluating” the next step.

However, CIAB and NAPSLO officials cautioned that even after the withdrawal from NIMA, Florida will continue to tax multistate surplus lines premium based on the rate of the state where the risk or exposure is located.

“There is more to do, therefore, to bring Florida in line with the overwhelming majority of states where surplus lines taxes are calculated at the home state's tax rate on 100% of the premium and retained 100% by the home state,” the CIAB said in its note to members.

The note said that the CIAB “strongly believes” that calculation of surplus lines premiums at the home state’s tax rate on 100% of the premiums, and retained 100% by the home state, “is the fairest, most logical, approach for the calculation and payment of multistate surplus lines premium, and the only way to get to true uniformity across the country.”

The note said that the CIAB “will continue to press” Florida and the other allocation states — Hawaii, Massachusetts, New Hampshire and Vermont — “to join the rest of the country in the single calculation approach.”

"We know from experience that not every idea works for every state," added California’s McKay. "Using a compact system to create uniformity is often a good idea, but in this case, it has struggled to gain the necessary buy-in.”

Through the process, McKay said, it has become clear that home state creates the most uniformity.

“We certainly appreciate the work everyone involved in NIMA has put in, but from our perspective, it is time to put our collective energy toward new initiatives."

Amy Bogner, deputy director of communications with the Florida Office of Insurance Regulations, said the withdrawal was caused by circumstances. She said that as a member of NIMA since 2011, “Florida was fully committed along with the other member states to the benefits envisioned by this multistate agreement, to include the reporting, payment, collection and allocation of premium taxes for non-admitted insurance.”

However, she said, despite the achievement of these benefits, nationwide participation in NIMA, especially among large states, did not occur as expected and lead the state to withdraw.

“We appreciate the efforts and participation of all the other NIMA member states in this joint venture and look forward to the continued relationship with the FSLSO.

Related: NIMA offering states limited 'associate membership' at no cost