The Maine Governor has signed into law a bill that authorizes the Maine Tax Assessor, after consulting with the Department of Professional and Financial Regulation, Bureau of Insurance, to enter into a tax sharing agreement.
Maine is the 33rd state to enact Nonadmitted and Reinsurance Reform Act (NRRA) related implementation legislation. During the session NAPSLO provided draft legislation, offered comments on legislation, and participated in working group meetings to discuss improvements to the legislation.
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.
Maine's bill generally authorizes the Maine Tax Assessor, after consulting with the Department of Professional and Financial Regulation, Bureau of Insurance, to enter into a tax sharing agreement. The Assessor may not enter into a tax sharing agreement unless he or she completes a fiscal analysis of the impact of the agreement on the state's receipt of premium tax. The Assessor must also conclude, after consultation with certain industry representatives, that entering into the agreement is in the state's financial best interest, does not significantly increase administrative burden and cost to the state, surplus lines insurers and insureds, and is consistent with the NRRA requirements.
Maine's bill provides that all gross direct insurance premiums paid to nonadmitted insurers are subject to taxation under the Maine nonadmitted insurance laws if Maine is the insured's home state. The bill further provides that "for any nonadmitted insurance premiums that are subject to taxation by this State and interstate allocation of taxes…, the rate of taxation on each participating state's share of the premium must be that state's applicable nonadmitted insurance premium tax rate." The bill clarifies that all nonadmitted insurance premium tax other than for surplus lines insurance must be paid by the insured. These provisions apply to taxes on all premiums received on or after July 1, 2011.
This new legislation provides that Maine nonadmitted insurance laws apply "exclusively to transactions when [Maine] is the home state of the applicant or insured. It also adopts the NRRA definition of "home state" and clarifies the exempt commercial purchaser (ECP) exemption by adopting the explicit language from the NRRA.
Finally, the bill incorporates the NRRA insurer eligibility requirements, but retains the superintendent's authority to place on a white list those insurers that appear to be sound financially and have satisfactory claims practices. Maine continues to require producers to place business with only those insurers appearing on the list (if any such list has been published).