Illinois Becomes 49th State to Pass NRRA Compliance Legislation

Illinois became the 49th state to enact Nonadmitted and Reinsurance Reform Act enabling legislation with the signing of HB1577. The bill, signed by the Governor on August 14, authorizes the state to tax the gross premium on a surplus lines policy when Illinois is the home state of the insured but does not authorize tax sharing.

The bill includes most of the significant NRRA definitions and defines affiliate, affiliated group, exempt commercial purchaser, home state, qualified risk manager and state. This bill does not limit the scope of the law to policies where Illinois is the home state of the insured and taxes the gross premium when it is the home state of the insured.

The bill includes NRRA eligibility terms but goes beyond the NRRA in continuing to require that the broker use insurers that have standards of solvency and management that are adequate for the protection of policyholders or the broker is to provide a warning to the policyholder if the insurer does not meet such standards.

Illinois did not implement NRRA legislation in 2011 but issued a bulletin saying the state would tax 100% of the premium if Illinois were the home state in the policy. Comprehensive information on 2012 legislation in Illinois and other states is available on NAPSLO's website, in addition to a number of NRRA resources. To date the only Michigan and the District of Columbia have not passed NRRA compliance legislation.