Tuesday, November 16, 2010

Industry Groups Say They Won't Support NIMA

In a letter to the Chair of the Surplus Lines Implementation Task Force, NAPSLO and five other insurance trade associations notified the Task Force they would not support the legislative proposals known as the Nonadmitted Insurance Multi-State Agreement (NIMA) or its predecessor, the Surplus Lines Insurance Multi-State Agreement (SLIMA).

The two surplus lines tax collection compacts are being considered by state insurance regulators as part of efforts to come into compliance with the Nonadmitted Reinsurance and Reform Act, scheduled to become effective on July 21, 2011.

NAPSLO, the American Insurance Association (AIA), Risk and Insurance Management Society, Inc., (RIMS); the National Association of Mutual Insurance Companies (NAMIC), the American Association of Managing General Agents (AAMGA), and the Excess Line Association of New York (ELANY) sent a letter on Monday to James Donelon, Louisiana Insurance Commissioner and chair of the Surplus Lines Implementation Task Force, stating the organizations would not supports the tax compact proposals.

The NIMA proposal was approved by the Task Force on Oct. 26, 2010 however the group said they could not support the proposal for four reasons: NIMA frustrates the spirit and letter of the NRRA; it violates the NRRA requirement that "no state other than the home state . . . may require any premium tax payments for nonadmitted insurance"; it would create unnecessary and burdensome data reporting by brokers; and it fails to create a clearinghouse infrastructure.

“The clear intent of the Nonadmitted and Reinsurance Reform Act (NRRA) was to create a streamlined tax system that involved uniform requirements, forms and procedures. NIMA not only fails to establish uniform requirements, forms and procedures, but instead continues, by contract, the burdensome system that Congress sought to eliminate with the NRRA,” the letter said.

Many of the industry trade organizations are urging support of the Surplus Lines Insurance Multi-State Compliance Compact (SLIMPACT) as an interstate compact which would comply with the new federal law and also ease the regulatory burdens on E&S brokers when placing multistate risks.

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