Illinois announces increase in stamping fee

On Wednesday, the Surplus Line Association of Illinois announced the stamping fee will increase from .1% to .2% for all policies effective January 1, 2015 and thereafter. If an endorsement is issued after January 1, 2015, the stamping fee should be calculated at the rate in effect at the inception of the policy. Therefore, for endorsements on policies issued prior to January 1, 2015, the stamping fee should be calculated at .1% but endorsements on policies issued on or after January 1, 2015, the fee should be calculated at .2%.

For additional information or questions, contact the Surplus Line Association of Illinois. 

Insurance Journal issues review of surplus lines tax sharing

A recent Insurance Journal article discusses the continued differences between the few states that participate in tax sharing as part of the Non-Admitted Insurance Multi-State Agreement (NIMA) versus the majority of states that retain 100% of the surplus lines taxes collected as the home state. NAPSLO’s recent analysis illustrating the insignificant financial impact, especially when compared to the burden and increased costs incurred by brokers and consumers, was highlighted in the article. NAPSLO remains hopeful that additional data from NIMA states will be made available for further analysis, but remains confident additional data will support our initial findings. 

NAPSLO continues to believe that the only viable and uniform national solution for surplus lines premium taxation is the home state approach and that all states should tax 100% of the surplus lines premium on a policy at their home state rate and retain 100% of the taxes they collect. 

NAPSLO internship program in the news

The NAPSLO internship program is featured in a recent story in Insurance Business America, where it is cited as an industry best. You can read the full story here.

NAPSLO summer internships are paid and awarded to college students interested in an insurance career. Interns spend nine weeks with NAPSLO member firms learning all aspects of the surplus lines insurance industry. Interns receive a competitive salary from their host firms and NAPSLO provides a stipend, covers travel, housing and various other related expenses. Interns also compete for additional internships in London and Bermuda that takes place the following summer.

The application deadline for the 2015 NAPSLO Internship Program will be October 15, 2014. A  brochure is available on-line for more information about the program.

TRIA takes step forward to advance in the U.S. House of Representatives along with NARAB II

Today the House Financial Services Committee voted to advance H.R. 4871 the TRIA Reauthorization Reform Act of 2014 for consideration by the full membership of the U.S House of Representatives. NAPSLO previously reported on the proposed legislation here and here. NAPSLO is especially pleased and applauds Chairman Randy Neugebauer for successfully offering an amendment that will include the National Association of Registered Agents and Brokers (NARAB II) as part of this legislation.  NAPSLO strongly supports NARAB II.

The next step for the TRIA legislation is consideration and final vote in both chambers. NAPSLO is hopeful TRIA will be reauthorized in the coming months and that NARAB II will continue to be attached. NAPSLO will continue to provide updates as this legislation progresses. 

House Introduces TRIA Reauthorization, Schedules Markup of Legislation

 The National Association of Professional Surplus Lines Offices (NAPSLO) commends the continued progress from Congress on the reauthorization of the Terrorism Risk Insurance Act. Earlier this month, the Senate Banking Committee approved its reauthorization proposal. In recent days, the House Financial Service Committee released legislation which would extend the program for five additional years while making a series of reform to the program. NAPSLO appreciates the Committee's outreach and collaboration with industry as this process has progressed, and also appreciates the Subcommittee’s work on reforms contained in the NARAB II legislation.  NAPSLO continues to support the attachment of NARAB II to the final TRIA reauthorization legislation.

As the process moves forward, NAPSLO continues to urge swift action on the part of Congress to reauthorize TRIA before the program expires at the end of 2014.  A markup has been scheduled for Thursday, June 19 and NAPSLO looks forward to continuing to work with Congress to address this program’s reauthorization. 

The Council of Insurance Agents & Brokers (The Council) invites NAPSLO members to participate in free FATCA webinar

FATCA will become effective on July 1, 2014 and with it comes new compliance requirements for NAPSLO members. You can view recent updates from NAPSLO regarding FATCA here. The Council has developed a portal to assist brokers and insurers in confirming FATCA status of a non-U.S. entity.

On June 26^th at 11:00 a.m. EDT, they will hold a free webinar to demonstrate the new portal and all NAPSLO members are invited to participate. NAPSLO encourages its members to participate in the webinar and learn how to use the portal. Access is free through December 31, 2014. For more information and to register, visit The Council here.

U.S. House of Representatives committee expected to file TRIA Reform Act soon

The House Financial Services Committee is expected to file the TRIA Reform Act of 2014 in the very near term. A copy of a “Discussion Draft” of the bill has started circulating with Members of the Committee and has been provided to industry stakeholders, although it has not been made public at this time. NAPSLO is currently reviewing the draft and its impact on the surplus lines insurance industry.

NAPSLO previously reported that the Senate Banking Committee approved a TRIA reauthorization bill that made few changes to the current TRIA program. The proposed House bill goes further and would make several substantive changes to the program. Some key substantive changes are in the following areas:

• Extension: The TRIA program would be extended for a period of five years, through December 31, 2019.

• Certification of TRIA Event:  The current program’s $5 million threshold for terrorism events has been eliminated, and the Treasury Secretary would be required to certify an event as an act of terrorism within 90 days of the event.

• Bifurcation of NBCR and Non-NBCR Terrorism Events: The program coverage and triggers will be split and handled differently for Nuclear, Biological, Chemical and Radiological (NBCR) events and non-NBCR events. We believe this is a strong signal the House is evolving the TRIA program to one that may only cover NBCR events after December 31, 2019. NBCR is defined in accordance with the ISO form definition. While NAPSLO has encouraged the Committee to include cyber terrorism within a category of the program’s coverages and triggers that will apply to NBCR events, cyber terrorism would be considered a non-NBCR event in the proposed program.

• Program Trigger: For NBCR events, the program trigger will remain $100 million in insured losses; however, for non-NBCR events, the triggers will increase from $100 million to $500 million in insured losses over the course of the five years ($200 million in 2016; $300 million in 2017; $400 million in 2018 and $500 million in 2019). There is also a minimum threshold of $50 million in insured losses  in order for any event to be considered and aggregated as multiple acts of terrorism to reach the program’s trigger.

• Co-Payments: For NBCR events, the program’s federal co-payment will remain at 85% but the non-NBCR co-payment will reduce to 80% incrementally over the five year extension period (84% in 2016; 83% in 2017; 82% in 2018 and 80% in 2019).

• Federal Recoupment: The Treasury’s mandatory recoupment rate will increase from 133% to 150% of government payments for losses under the aggregate retention amount. The industry’s aggregate retention will increase from $27.5 billion to the lesser of the sum of insurer deductibles and the aggregate amount of insured losses during the program year.

• Small Insurer Opt-Out: Requires the Treasury Secretary to develop regulations that would allow small insurers to opt-out of the “mandatory offer” of the program.

The above is not an exhaustive list of the proposed changes in the bill, but highlights the House’s approach to the reauthorization of the TRIA program. It clearly demonstrates the Committee’s intent to reduce reliance upon the Government and increase reliance on the private insurance market to cover terrorism risks. NAPSLO will continue to review the bill and report on the progress as both chambers address the reauthorization of the TRIA program.   

U.S. Senate begins process to advance reauthorization of the Terrorism Risk Insurance Act (TRIA)

Today, the Senate Banking Committee voted 22-0 to advance S. 2244, a bipartisan bill supporting the reauthorization of TRIA. The legislation would (1) extend TRIA for a period of seven years; (2) phase in over five years an increase in insurers’ co-pay from 15 to 20%, with the government still covering 80% of each company’s additional losses; and (3) raise the mandatory recoupment threshold to $37.5 billion, so that when the insurance industry’s aggregate uncompensated losses are below $37.5 billion the government will be required to recoup its TRIA payments outlaid to insurers. The bill moves next to the Senate floor for debate and a vote by the full Senate is expected prior to August.

The House is expected to introduce a separate version of a bill to reauthorize TRIA in the very near term. That bill will go through a similar process as the Senate, where it first is approved by the House Financial Services Committee and then debated and adopted by the full House. The House will either pass its version, which will then need to be compromised with the Senate version, or simply take up the Senate bill. Either way, both the House and Senate will need to pass identical legislation for the proposal to become law. Most observers do not expect the final TRIA bill to be passed and sent to the President for signature until September at the earliest. NAPSLO will continue to provide updates as TRIA reauthorization progresses.  

Congress introduces key legislative reform for definition of private flood insurance

NAPSLO is pleased to support the Flood Insurance Market Parity and Modernization Act of 2014 (HR 4558), sponsored by Rep. Dennis Ross (R-FL) and Rep. Patrick Murphy (D-FL) and S. 2381, sponsored by Sen. Dean Heller (R-NV) and Sen. Jon Tester (D-MT). If passed, this critical legislation revises the federal definition of private flood insurance to ensure surplus lines insurers are eligible to provide private market solutions to consumers in need of solutions to unique and complex flood risks.

Although nonadmitted insurance companies are currently allowed to provide private flood insurance, revising the definition of private flood insurance to clarify their eligibility to provide insurance in the insured’s home state, in accordance with the Nonadmitted and Reinsurance Reform Act of 2010, ensures policyholders access to high-quality nonadmitted market alternatives.

Earlier this year, Sen. Heller introduced a similar amendment during the flood debate of S. 1296, the Homeowner Flood Insurance Affordability Act. NAPSLO provided extensive input and education on that Amendment. Although it was narrowly defeated 50-49 in the Senate, and was not ultimately included in the final version of the House bill that passed as the same Act, an up swell of support for the Amendment developed in both Chambers, especially by the new stand-alone bills’ sponsors.

NAPSLO met with Representative Ross and Senator Heller, as well as Senator Tester’s office, in Washington, D.C. during our May Legislative Fly-In to urge support for this much needed legislation. We applaud all four Members of Congress on their introduction of this common-sense legislation and look forward to providing support as the bill moves through the legislative process.

NAPSLO weighs in on NIMA updates

The Nonadmitted Insurance Multi-State Agreement (NIMA) announced the addition of two new associate member states, Tennessee and Wisconsin, last week. For more about the associate members and the anticipated impact on tax-sharing in the industry, you can read the full-story online here.

NAPSLO in the news

As part of our ongoing initiative to message the value of surplus lines and the wholesale distribution system in the insurance marketplace, NAPSLO proactively assists trade publications with editorial stories on the industry and the Association.

These stories have recently been published and focus on both the value of wholesale distribution and the importance of business succession planning and how NAPSLO’s career awareness initiatives can help members with that growing need.

• Business Insurance, "High capacity drives continued soft market in excess and surplus lines" - March 16, 2014

• National Underwriter, "Future Shock: Recruiting the Insurance Industry’s Next Generation" - April 20, 2014

• Best's Review - "Agent/Broker Success" -  March 2014

You can find a full list of NAPSLO in the News stories on the NAPSLO website here. 

IMPORTANT COMPLIANCE UPDATE FOR MEMBERS: The Foreign Account Tax Compliance Act (FATCA) and its impact on surplus lines

On July 1, 2014, the Internal Revenue Service (IRS) regulations for the Foreign Account Tax Compliance Act (FATCA) will become effective. Parts of the regulations will impact the surplus lines industry. NAPSLO developed a Q&A Memo to assist NAPSLO members in better understanding potential new compliance obligations under the regulations. The Q&A Memo provides detailed information on FATCA, the impact to the surplus lines insurance industry and the new responsibilities for the U.S. broker.

FATCA was adopted by Congress in an effort to prevent tax evasion by U.S. citizens, U.S. residents and corporations through the use of offshore accounts and is directed at foreign financial institutions and financial intermediaries. FATCA does apply to U.S. source insurance premiums to the extent such premiums are classified as “withholdable payments” and therefore does have potential impact on the surplus lines industry.

The full memorandum on FATCA, as well as a summary overview of the key points regarding FATCA obligations, is available here.

NAPSLO strongly recommends that each NAPSLO member consider implementing FATCA compliance procedures. We believe this should be simple and not overly burdensome. While compliance can be very simple, the importance of compliance should not be underestimated; it is indeed critical that you comply with this new federal regulation. Your non-U.S. partners should be very willing to provide the necessary forms to demonstrate their FATCA status upon your request and hopefully will readily provide them. It would be prudent to simply add this new step into your general checklist of requirements when securing a policy with non-U.S. partners.

NAPSLO continues to monitor requests and discussions with the IRS to exempt the surplus lines/property & casualty industry from the FATCA compliance process. However, as noted in the Q&A Memo, at this time the IRS has declined to provide an exemption. In an effort to reduce the compliance burden on U.S. brokers, the Council of Insurance Agents and Brokers (CIAB) is considering hosting a clearinghouse or similar assistance for brokers to more readily access W-8BEN-E and W-8IMY forms shared by non-U.S. insurers and brokers. NAPSLO has arranged for NAPSLO members to have access to this solution, if developed. Also, as we mentioned above, the IRS may eventually provide access to the non-U.S. entities’ forms as well.

If you have any questions or need additional assistance related to FATCA, please contact Keri Kish at keri@napslo.org or 816.799.0855. 

Lloyd's Interface for Wholesale Market Noted as Advance by E&S Joint Working Group

The E&S Joint Working Group (ESJWG), formed by NAPSLO, AAMGA, ACORD, and ACT, recently demonstrated a new wholesale business interface for U.S. partners of Lloyd’s of London at the AAMGA Automation and Technology Conference in March in Orlando.

The interface, developed with the support of ESJWG and demonstrated at the conference by Risk Placement Services, Arthur J. Gallagher, BinderCloud and Lucitech, generates an ACORD XML file after the coverholder (general agent) issues the policy. The system includes built-in error checking of data before transmission to Lloyd's. The binder data is held in the bordereaux queue and generates the ACORD XML to provide an immediate billing status on all policies issued.

The interface provides gains in efficiency with validation completed at the time a transaction is processed and time is saved preparing month-end reports, while parties in the transaction get immediate access to data.

The Lloyd's subgroup of ESJWG worked on the project as part of seeking efficiencies and standards for managing general agents (MGAs) and wholesalers working with the London market. The subgroup’s next initiatives include increased data validation at time of binding; buildout of a user interface for error messages; and premium and claims reporting on a real time basis.

The complete news release and the separate progress report covering efforts by the Carrier and Retail Agent/General Agent subgroups are available to download. The ESJWG is an alliance of carriers, agents, and vendors working with NAPSLO and other industry groups to improve the electronic efficiencies for retail agents, general agents, wholesale brokers and carriers.

The Washington Office of Insurance Commissioner Expands NIPR Applications to Surplus Lines Brokers

The Washington Office of Insurance Commissioner (OIC) announced the expansion of the online application process through the National Insurance Producer Registry (NIPR) in the state.  The OIC now permits new insurance license applications and renewals for resident surplus lines brokers and non-resident surplus lines brokers. You can access the NIPR service directly here. The expansion also applies to full lines for resident producers. 

With this announcement, Washington becomes the final state to accept surplus lines applications and renewals through NIPR. Now a broker applying for a new or renewal surplus lines license in multiple states may do so simultaneously for any and all states. When enacted, section 523 of the Nonadmitted and Reinsurance Reform Act (NRRA) of 2010 required all states to participate in a uniform national database for application and renewal of surplus lines broker licenses. NAPSLO is pleased all states are now participating in this national database, bringing our industry one step closer to the uniformity envisioned by the NRRA. 

Mid-Year Leadership Forum General Session to feature two inspiring speakers

If you’re attending the NAPSLO Mid-Year Leadership Forum, March 5-8 in Scottsdale, make plans now to hold time for the General Session on Friday, March 7. This year’s General Session will feature two speakers, both with messages you can apply in your business immediately.

Eric Siegel, Ph.D., is the president of Prediction Impact, Inc. and author of the acclaimed book, Predictive Analytics: The Power to Predict Who Will Click, Buy, Lie, or Die. Siegel is also Executive Editor of the Predictive Analytics Times, and the founder of Predictive Analytics World and Text Analytics World. Widely renowned as an expert in predictive analytics and data mining, he is also a former computer science professor at Columbia University, where he won the engineering school's award for teaching, including graduate-level courses in machine learning and intelligent systems - the academic terms for predictive analytics.

After Columbia, Dr. Siegel co-founded two software companies for customer profiling and data mining, and founded Prediction Impact in 2003, providing predictive analytics services and training to mid-tier through Fortune 100 companies.

Siegel will discuss Predictive Analytics and how it applies to our industry in his address at 9 a.m. on March 7. For more information about Dr. Siegel, visit his website.

After a brief NAPSLO Education and Career Development presentation, guests will be inspired by speaker Erik Weihenmayer at 10 a.m. Despite losing his vision at the age of 13, Erik Weihenmayer has become one of the most accomplished adventurers in the world. Re-defining what it means to be blind, he has opened the minds of people around the world. He is the only blind person who has reached the summit of Mount Everest and the tallest peak on each continent.

In his talk, “Leadership—Guess Who’s a Better Climber in the Dark?,”Weihenmayer describes the time he and his partner, a much better climber, were caught on a dangerous rock face at nightfall and without working headlamps. In spite of his fear, Weihenmayer knew this was his time to lead his friend down to safety. He believes the most important aspect of leadership is how we pass it on to others. “Leadership is contagious,” he says, “We pass it from body to body, from life to life, and we give all the people around us the courage to do great things.”  To learn more about Weihenmayer, visit  his website.

We look forward to seeing you in Scottsdale. 

NAPSLO Submits Testimony to House Committee on Financial Services

The House Committee on Financial Services will hold a hearing tomorrow entitled, “The Federal Insurance Office’s Report on Modernizing Insurance Regulation.” NAPSLO was asked to submit written testimony for this hearing and we’re pleased to offer thoughts on the report. You can read NAPSLO’s complete submitted testimony here.

You can also watch the hearing live online at the Committee’s website under the Live Webcasts link. The hearing begins at 10 a.m. EST.

Important Updates from D.C.

NARAB II

The National Association of Registered Agents and Brokers Act, more commonly known as NARAB II, is inching closer to becoming law. NARAB II would streamline the licensing process for agents and brokers nationwide, eliminating burdensome multistate requirements while preserving important state regulatory authority and consumer protections.  The legislation, which is strongly endorsed by NAPSLO, was incorporated into S. 1926, the “Homeowner Flood Insurance Affordability Act.”

During debate of S. 1926, the Senate considered an amendment offered by Senators Coburn and McCain which would have allowed states to “opt out” of participation in NARAB. NAPSLO and other industry representatives sent a joint letter opposing the Coburn-McCain amendment, explaining that its inclusion would be detrimental to the underlying program. Our efforts proved successful as the Senate defeated the amendment by a convincing vote of 24-75. This was an historic day as it was the first time the body had passed the legislation. Similar legislation passed the House in September by a vote of 397-6.

The underlying flood legislation will now go to the House where it is expected that Republicans will introduce and pass an alternative proposal. NAPSLO has received commitments from House leadership that the NARAB II provisions will also be included in their flood legislation and so once the House has passed its legislation the House and Senate versions will be negotiated to produce a “conferenced” bill. With both chambers supporting the underlying NARAB II provisions, it will become law once that conferenced bill is enacted by both chambers and signed by the President.

Homeowner Flood Insurance Affordability Act

On Thursday, the Senate passed S. 1926 which delays implementation of the risk-based flood insurance rates prescribed by the Biggert-Waters Flood Insurance Reform Act. This has become an extremely political issue as residents in flood-prone areas have been subject to significant rate increases. S. 1926 would delay implementation for up to four years.

NAPSLO’s focus on flood insurance reform has been to ensure surplus lines insurers are eligible to offer private market solutions and alternatives to consumers in need of unique and complex flood risks.

To accomplish this, NAPSLO worked with Senators Heller and Lee on an amendment to clarify the definition of private flood insurance to include policies offered by insurance companies that may be “eligible as a nonadmitted insurer to provide insurance in the State or jurisdiction where the property to be insured is located, in accordance with section 524 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (15 U.S.C. 8204)”. The amendment failed by a narrow 49-50 margin over concerns surrounding standards for private flood insurance policies and consumer protections. NAPSLO continues to work to educate Senators as to the role and regulation of nonadmitted insurers to alleviate these concerns. In addition, we are working heavily with leadership in the House to ensure that the language is included in their alternative flood proposal.

GAO Releases Flood Insurance Report on Strategies for Increasing Private Sector Involvement

Last week, the GAO released a report to Congress on the National Flood Insurance Program focused on ways to reduce the financial burden on the federal government.

The 2014 report notes no new conclusions or recommendations since its earlier June 2011 report. The purpose of the report was to provide strategies for the federal government to increase private market participation in flood insurance. The report indicated that key to private market participation is allowing private insurers to charge what is appropriate and commensurate with the underlying risk. NAPSLO was pleased with the GAO’s continued recommendations and support of private market solutions to the financial challenges facing the NFIP.

The Biggert-Waters Insurance Reform Act of 2012 directed the GAO to consider various strategies for privatizing the NFIP. This report concluded that in order to increase private market participation, private insurers would require (1) the ability to charge actuarially sound rates to ensure profitability, (2) the ability to decline applicants and (3) sufficient consumer participation. Key findings of the report include:

• Eliminate subsidized rates and charge policyholders risk-based rates, limiting the Flood Program to direct means-based subsidies.

• Implement recommended strategies in order to increase the private market participation to reduce the debt of the NFIP.

• The NFIP operates as a residual market of last resort for policies decline by the private sector.

• The Government could consider assuming the role of reinsurer, although the report acknowledges the consumers would have to absorb these costs.

Surplus Lines Stamping Offices Report Continued Premium Growth in 2013

The Surplus Lines Stamping Office of Texas issued a report showing that 14 states with stamping offices saw growth in surplus lines premium during 2013 when compared to 2012. Total surplus lines premium reported to the Stamping Offices was nearly $22.5 billion, representing more than 3.1 million transactions. While the report indicates growth of 15.5% in total, it is heavily influenced by a large amount of prior years’ return premium transactions processed by New York in 2012. In 2012, New York processed a significant volume of return premium for policy years prior to 2012. Therefore, total 2012 New York premium was artificially low, making the percentage increase in New York premium comparing 2012 to 2013 artificially high. When excluding New York for this anomaly, the remaining stamping offices reported a 12.2% increase in 2013 premium compared to 2012. This report is now available by clicking here.

The report of stamping office premium during the first six months of 2013 relative to the same period in 2012 is also available illustrating a 21.2% increase. When excluding New York and its 2012 return premium transaction anomaly, the remaining stamping offices reported a 15.1% increase in premium. To view the six-month report of 2013 to 2012 data, click here.

The report of calendar year 2012 to 2011 comparisons is also available illustrating a 0.9% increase in 2012 premium volume. When excluding New York and its 2012 return premium transaction anomaly, the remaining stamping offices reported an 11.8% increase in premium. To view the report of 2011 to 2012 data, click here.