Friday, August 19, 2011

Delaware Enacts NRRA Bill Requiring 100% of Premium to be Taxed; Establishes Procedure to Enter Compact

The Delaware Governor has signed into law Nonadmitted and Reinsurance Reform Act (NRRA) compliance related legislation that would authorize the state to collect 100% of the tax on the U.S. premium and allows the state to join a compact or tax sharing agreement.

Delaware is among the latest states to enact NRRA related implementation legislation. During the session NAPSLO provided draft legislation and offered comments.

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 bringing their laws into compliance.

Delaware's SB109 provides authorization for participation in an interstate cooperative compact or agreement, however it requires the insurance commissioner to establish a NRRA Implementation Revenue Study committee to study the fiscal impact of entering into a compact.

The law provides that 100% of the premium for all policies written on home state insureds, whether single-state or multi-state, is considered Delaware premium for tax purposes; provides for the payment of premium tax on independently procured nonadmitted insurance; and provide for penalties for noncompliance with tax filing requirements.

SB 109 further adds definitions for "home state," "affiliated group" and "control," adopts the NRRA exempt commercial purchaser exemption, and amends insurer eligibility requirements.

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