Monday, April 30, 2012

Important Message Regarding NIMA

NAPSLO has received notice of several states’ withdrawals from the Nonadmitted Insurance Multi-State Agreement (NIMA). Specifically, as reported in a Q&A on surplus lines taxes from the State of Hawaii on April 26th, the States of Connecticut, Mississippi and Alaska have submitted notice of withdrawal from NIMA.

NAPSLO will be reaching out to the remaining NIMA members (Florida, Hawaii, Louisiana, Nevada, Puerto Rico, South Dakota, Utah and Wyoming) to seek additional information and guidance for NIMA’s targeted July 1, 2012 effective date.

Friday, April 20, 2012

Oklahoma Enacts New Law to Clarify NRRA Rules

Oklahoma recently enacted new legislation to clarify a number of issues with the surplus lines code and require the state’s tax rate to be used for multi-state policies written after the July 21, 2011 effective date of the NRRA, clarifying legislation passed in 2011.

The new law, HB 2458, signed by the Governor on April 16, also contains a provision stating the Oklahoma Insurance Commissioner is not required to join a tax sharing system and that the Oklahoma tax rate shall apply unless the state decides to join a multi-state tax sharing system. The bill also made it clear that a number of provisions apply only when Oklahoma is the “home state” of the insured.

Oklahoma passed NRRA related legislation in 2011 that incorporated some NRRA terms, included some NIMA definitions and authorized the Commissioner to enter into NIMA or some other tax sharing system. The 2012 law adds some NRRA terms and definitions but fails to include the NRRA definitions of affiliate, affiliated group, control, premium tax, qualified risk manager, and state. This bill and the 2011 legislation incorporated the NIMA definitions of home state for group policyholder, principal place of business and principal residence. The 2012 bill contains a provision that indicates it “relates back to the effective date of the implementation of the Nonadmitted and Reinsurance Reform Act.”

HR 2458 retains the requirement that an Oklahoma surplus lines license is required only when Oklahoma is the home state of the “insurer” and that the procuring broker be licensed in the “insurer’s home state.” These requirements are inconsistent with the NRRA that limits any licensing requirement for surplus lines exclusively to the “insured’s” home state.

The legislation also imposes a direct premium tax on “domestic surplus lines insurers” (until Oklahoma joins a tax-sharing arrangement) while simultaneously requiring that surplus lines brokers “collect and pay” surplus lines tax “on any broker-procured surplus lines insurance.” This appears to create double taxation on surplus lines policies issued by Oklahoma domestic surplus lines insurers, for which NAPSLO will continue to seek clarification.

Comprehensive information on 2012 legislation in Oklahoma and other states is available on NAPSLO's website, in addition to a number of NRRA resources.

Thursday, April 19, 2012

Update on New York Regulation 194

In a March 8, 2012 decision, the State of New York Supreme Court, Appellate Division, Third Judicial Department ruled that New York’s Regulation 194 is a reasonable exercise of the New York Insurance Superintendent’s broad power to implement New York insurance law. The purpose of this notification is to ensure NAPSLO members are aware of the court's ruling and the available resources regarding Regulation 194.

Since 2005, several states have adopted laws requiring all producers to disclose the amount of compensation they receive from an insurer and to obtain the customer’s acknowledgement concerning such compensation. New York Regulation 194 goes further in requiring all producers to disclose their role in the transaction as well as the factors that determine or may alter their compensation.

During its development, NAPSLO and other associations representing wholesale brokers and MGAs suggested that Regulation 194 should not apply to wholesalers. As a result, New York agreed to exempt certain producers, such that Regulation 194 would not apply to a producer who does not have direct sales or solicitation contact with the purchaser. This exemption has been maintained throughout the debate of Regulation 194, which became effective January 1, 2011.

Answers to Frequently Asked Questions regarding Regulation 194 can be found on the New York Department of Insurance website. Circular letter No. 18, released on November 5, 2010, sets forth the Department's expectations regarding compliance by insurance producers, and authorized insurers with Regulation 194. While the FAQs state that Regulation 194 applies to excess lines brokers, the FAQ material subsequently states that regulation’s disclosure requirements do not apply to “a wholesaler or managing general agent, whose primary contact is with the selling agent or broker, and who has no contact with the purchaser that involves sales or solicitation.”   However, if the wholesale producer or MGA has direct sales or solicitation contact with the buyer, then the wholesaler or MGA must provide the disclosures required by the Regulation.

Further, the regulation does not apply to (1) the placement of reinsurance; (2) the placement of insurance with a captive insurance company pursuant to Article 70 of the New York Insurance Law; or (3) renewals, except that if the purchaser requests more information about the producer's compensation less than 30 days prior to a renewal or less than 30 days after a renewal, the insurance producer must disclose to the purchaser in a prominent writing the required disclosures within five business days.

Kentucky Updates NRRA Related Legislation

Kentucky has enacted SB 295 to update its surplus lines code to add provisions to conform to the  Nonadmitted and Reinsurance Reform Act (NRRA). Specifically, H 295 adds NRRA definitions of  admitted insurer, affiliate, exempt commercial purchaser and home state to Kentucky's surplus lines code.

H 295 also uses NRRA criteria for surplus lines insurer eligibility but did not include NRRA definitions of affiliated group, control, premium tax, qualified risk manager or state.  Kentucky passed SLIMPACT in 2011 and H295 was necessary to update the surplus lines code to be consistent with the NRRA.

In addition to the NRRA terms, the law, signed by the Governor on April 11, has additional reforms in that it eliminates the underlying license requirement for a nonresident surplus lines broker. It also limits the bond requirement to be applicable only to resident surplus lines brokers.

The new law does not mention tax sharing but the 2011 legislation adopted SLIMPACT, which authorized tax sharing should SLIMPACT becomes operational. SLIMPACT is not yet operational because it requires a minimum of 10 states and only 9 have passed SLIMPACT at this time. This bill also does not address the use of the other state's tax rates for a multi-state risk but the SLIMPACT Commission has indicated it intends to use the other states rates, at least for property insurance.

Kentucky law previously allowed the Commissioner to declare a surplus lines insurer ineligible, but an amendment in H 295 indicated the Commissioner shall mail notice of ineligibility if the Commissioner believes that a surplus lines insurer no longer meets the standards.  It is not clear if the bill limits the Commissioner's ability to declare an insurer ineligible for any reason other than failure to comply with NRRA eligibility standards.

Comprehensive information on 2012 legislation in Kentucky and other states is available on NAPSLO's website, in addition to a number of NRRA resources.

Colorado Passes NRRA Compliance Legislation

Colorado became the third state in 2012 to pass Nonadmitted and Reinsurance Reform Act enabling legislation among states that did not act in 2011. Colorado H 1215 contains many of the NRRA provisions, taxes the gross premium instead of an allocated share, and authorizes the Commissioner to enter into a tax sharing agreement with other states.

The bill, signed by the Governor on April 13, does not mention key NRRA reforms such as single-state compliance, single-state broker licensing or specifically mention single-state tax payments. However, it taxes at the Colorado rate unless the Commissioner elects to join a tax sharing compact or agreement, in which case the compact or agreement will establish the allocation methodology.

The bill authorizes the Commissioner to enter into a tax sharing agreement if its purposes are limited to facilitating the allocation of premium taxes, adopting uniform requirements for the collection and allocation of premium taxes and coordinating the reporting of premium taxes.

The bill defines affiliate, affiliated group, control, home state and nonadmitted insurance consistent with the NRRA, but does not contain definitions from the NRRA regarding  exempt commercial purchasers and qualified risk managers. It does provide that an insurer must meet NRRA eligibility requirements or separately apply for and be placed on the states list of eligible insurers.

Colorado did not implement NRRA legislation in 2011, such that it has taxed only the in-state portions of a risk after the effective date of the NRRA. Comprehensive information on 2012 legislation in Colorado and other states is available on NAPSLO's website, in addition to a number of NRRA resources.

Wednesday, April 18, 2012

We Are Hiring! NAPSLO Has Director of Government Relations Opening in Kansas City

The National Association of Professional Surplus Lines Offices, Ltd. (NAPSLO) currently has an opening for a Director of Government Relations in its Kansas City, Missouri headquarters office.

The primary goals of this open position are to: (1) implement an effective government relations and legislative advocacy program to achieve the Association’s federal and state legislative and regulatory goals as directed by the Board of Directors, Executive Committee, Legislative Committee and management; (2) provide high-quality support of all NAPSLO member inquiries and assist NAPSLO members in their regulatory compliance efforts at the state and national level by disseminating relevant information and developing a comprehensive network of compliance contacts from within the NAPSLO membership, establishing NAPSLO as a premier regulatory compliance resource; (3) enhance the level of support to the NAPSLO PAC and raise awareness of its benefits to the membership; (4) augment the effectiveness and teamwork of the NAPSLO staff by providing strong leadership, membership service, strategic planning and project management skills; and (5) enrich the quality and quantity of NAPSLO’s work product, information and services to members.

A more complete description of the Director of Government Relations position is available for download.

 To apply for this position, please submit your resume to

Wednesday, April 11, 2012

E&S School Registration Deadline is May 7

Registration is now underway for the 2012 NAPSLO E&S School, scheduled to take place June 11-14 at the Eric P. Newman Education Center in St Louis.

The deadline to register for the school is May 7 and the cost of the school is $1,200. Registration materials can be downloaded from the NAPSLO website.

The E&S School's curriculum will focus on nine segments: Cops - Regulation and oversight of the E&S industry; Distribution System - The complexity, purpose and variations in the E&S market; E&S Marketing - The basics of marketing; Market Dynamics - The study of changing environments and leadership in the E&S market; MGAs and Brokers - How MGAs and Brokers maintain, market and manage business with an emphasis on Internet technology; Risk Takers - Characteristics of surplus lines and admitted markets; The Confusement of the Business - Definitions, acronyms and professionalism in the E&S market; The Lloyd’s Market - An overview of the role and practices of Lloyd’s in the marketplace; and Where’s The Money? - The importance of reviewing financial statements and accounting procedures.

A focal point of the school will be the Perspectives from the Top by Gail Soja, President of Chubb Custom Insurance Company. In addition, there will be an Executive Panel featuring Wendy Houser, Managing Director of Wholesale Marketing, Markel Corporation; Lana Parks, CPCU, CIC, President, The Parks Group; and Mark Patterson, Executive Vice President, Partners Specialty Group, LLC.

Tuesday, April 10, 2012

Wisconsin Enacts NRRA Related Bill

With the signing of Senate Bill 378, Wisconsin is the second state to pass Nonadmitted and Reinsurance Reform Act legislation among states that did not take action in 2011. The Wisconsin Governor signed into law the bill on Friday, April 6, and the bill incorporates several provisions of the NRRA, including exclusive home state regulation provisions consistent with the NRRA.

The bill does not authorize tax sharing with other states, instead requiring taxing the gross premium when Wisconsin is the home state of the insured. The bill also incorporates most NRRA terms and contains amendments to rectify the holding in the Gillen case in providing that arbitration/appraisal provisions in a policy form do not need to be filed by a surplus lines insurer.

This law includes NRRA eligibility criteria but goes beyond the NRRA to require alien insurers to meet "additional requirements regarding the use of the list established by rule of the Commissioner." This bill does includes the NIMA definitions of principal residence which provides that if 100% of the risk is outside of this state then the home state is the state to which the greatest percentage of the insured's taxable premium for that insurance contract is allocated. It also contains the NIMA definition of principal place of business (insured maintains its headquarters and where the insured's high level officers direct, control and coordinate business activities).

Wisconsin did not pass NRRA related legislation in 2011 and taxed only the in-state portions of the risk after the effective date of the NRRA. Comprehensive information on 2012 legislation in Wisconsin and other states is available on NAPSLO's website, in addition to a number of NRRA resources.

Tuesday, April 03, 2012

Registration Deadline Extended to April 13 for NAPSLO's Executive Leadership School

The registration deadline for the NAPSLO Executive Leadership School, set for April 23-26 at the University of Virginia Darden School of Business in Charlottesville, has been extended to April 13 as a limited number of spots remain.

Established in 2009, NAPSLO's Executive Leadership School is a three-day MBA Executive Level program reviewing business and insurance topics by faculty at one of America’s leading universities.

Tuition for the school is $2,995 and the brochure and registration materials are available to download from the NAPSLO Website.

The Executive Leadership School is designed for senior-level members who wish to broaden their perspectives on important social, political, and economic issues influencing the insurance industry. Participants enhance their leadership skills to more effectively manage change at the personal, team, and organizational levels, and will return to their organizations with the tools and mindsets to think and act more strategically.