Friday, July 08, 2011

NCOIL Issues Letter Urging Support of Simple & Efficient Surplus Lines Tax Allocation Formulas

Representatives of the National Council of Insurance Legislators are urging fellow legislators to not allow Surplus Lines Insurance Multi-State Compliance Compact (SLIMPACT) to be molded into NIMA and are encouraging states to pursue allocation formulas that appropriately respond to the concerns that spurred the NRRA.

In a letter from legislators from states that supported SLIMPACT to SLIMPACT Commission Representatives, the sponsors wrote to “strongly urge you to pursue surplus lines tax allocation formulas that will be simple and efficient,” the letter said. “We have grave concerns with formulas — such as those called for under a Nonadmitted Insurance Multi-State Agreement (NIMA)—that would complicate existing practices and that would cause undue burdens for those that have advocated modernization, including insurance industry representatives, brokers, or insureds.”

The state legislators said they do not support SLIMPACT being molded into NIMA and endorsed SLIMPACT as a means to streamline surplus lines taxation and regulation. They added they did not support allocation formulas not “based upon readily available data with simplicity and uniformity for the Surplus Line Licensee as a material consideration.”

The lawmakers express concern that the U.S. Congress could again intervene in surplus lines regulation if the states do not provide the uniformity sought under Dodd-Frank. "The new Federal Insurance Office (FIO) also is likely monitoring state activity and could recommended follow-up federal legislation if we are not successful," the letter said.

“As state officials, like you, we believe that the states must continue to regulate insurance. We are concerned that our inability to streamline an issue as relatively simple as paying tax on a multi-state risk could embolden the efforts of those who argue against state regulation and who would like to see us fail."

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