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.