Alaska Approves Legislation to Enter NIMA-type Agreement to Share Premium Taxes

Alaska has enacted legislation which provides authority for the Director to enter into a NIMA-type agreement with other states to share premium taxes.

Alaska is among the latest of states to pass NonAdmitted and Reinsurance Reform Act (NRRA) related implementation legislation. During the session NAPSLO provided draft legislation, supplied comments on legislation and Director of Government Relations Steve Stephan and Executive Director Richard Bouhan testified during hearings.

The NRRA mandates that beginning July 21, 2011 the insured's home state will be the only state with jurisdiction over surplus lines transactions and the only state that can require a tax be paid by the broker. As a result states are working to bring their laws into compliance

Alaska's bill provides authority for the Director to enter into a NIMA-type agreement with other states to share premium taxes. Allocation would be done according to a schedule set forth by regulation, and the tax rates of each state would apply to multistate exposures. There are also requirements for allocating premium when a policy covers more than one classification. Brokers would be required to file quarterly allocation reports, even though the NRRA only permits annual reports. Alaska would retain any premium tax not allocated and paid to another state when Alaska is the home state.

The bill incorporates the exempt commercial purchaser (ECP) exemption from the NRRA and adopts the NRRA's uniform eligibility requirements for U.S. domestic and non-U.S. insurers (retaining alternative criteria for non-U.S. insurers besides International Insurers Department listing), but the Director would retain existing statutory authority to declare an insurer ineligible based on any number of factors including quality of management, financial condition, capital and surplus of a parent company, underwriting profit, investment income trends, trade and claims practices, reserving practices, company record and reputation within the industry, all of which eligibility requirements are preempted by the NRRA. The Director would be authorized to participate in an interstate agreement to develop alternative nationwide uniform eligibility requirements for U.S. domestic insurers.