Today, the GAO released its report to Congress titled “Effects of the Nonadmitted and Reinsurance Reform Act of 2010.” NAPSLO is pleased with the GAO’s report and applauds its effort to understand and explain the significance of the NRRA and its positive impact on the surplus lines industry. The report also compliments the role and financial stability of the surplus lines industry.
As mandated by the NRRA, the purpose of the GAO’s study was to (1) examine the effects, if any, on the price and availability of insurance coverage in the surplus lines market and (2) examine actions states have taken to implement the NRRA. NAPSLO served as a resource to the GAO during the development of this report.
Key GAO findings include:
- The surplus lines industry is financially strong and works well as a safety valve for risks the admitted market will not cover.
- The NRRA has had little, if any, effect on the prices or availability of coverage, as the NRRA was not intended to affect these areas. The GAO notes that any changes in price and availability, or flow of business between the admitted and nonadmitted markets, would be due to normal insurance business cycles rather than the NRRA.
- The NRRA and resulting changes in states’ laws have simplified the compliance process for brokers and insurers writing multistate risks. Consistent with our advocacy on behalf of the NAPSLO membership, the home state provision has produced significant benefits for the surplus lines industry by reducing the need for brokers and insurers to comply with differing sets of rules, disclosures and requirements. The GAO notes that market participants interviewed agreed that the home state provision has brought needed clarity to the market.
- The NRRA has simplified the collection of premium taxes for multistate risks, but the states are not yet uniform in their treatment of surplus lines premium tax post-NRRA.
- Not all states have fully implemented the NRRA, and industry concerns remain related to the non-uniform implementation of the NRRA’s eligibility provisions.
NAPSLO members with questions should contact either Keri Kish, NAPSLO Director of Government Relations, or Brady Kelley, NAPSLO Executive Director, at 816.741.3910.