NAPSLO, The Council, AAMGA Urge States to Bring Laws Into Compliance with NRRA

NAPSLO, the American Association of Managing General Agents (AAMGA), and The Council of Insurance Agents & Brokers (The Council), released a joint letter Tuesday urging state legislators and insurance regulators to work as swiftly as possible to bring their codes and regulations into compliance with the Nonadmitted & Reinsurance Reform Act, which is scheduled to go into effect July 21, 2011.

According to the letter, “failure to act will result in confusion for regulators and licensees alike, arising from the existence of inapplicable, inaccurate and unenforceable code and regulation.”

The NRRA language was included as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was signed into law on July 21, 2010.

“In a short eight months, many of the existing state laws and regulations addressing placements of non‐admitted insurance will be preempted by federal law,” the letter stated.

The three industry trade groups outlined six potential areas where NRRA compliance will require states to address their laws:

• Ensuring surplus lines premium tax is applicable on surplus lines policies only in the home state of the insured;
• Producer licensing and surplus lines placement laws can apply only when the state is the “home state” of the insured;
• Eligibility criteria for U.S.-based (foreign) surplus lines insurers must be amended to require the insurer to be licensed in the domiciliary state and meet the greater of $15 million or the state's capitalization requirement;
• Eligibility criteria for alien surplus lines insurers must be amended so any insurer listed on the NAIC / IID Quarterly Listing is eligible;
• The NRRA definition of an “exempt commercial purchaser” must be incorporated into state law; and
  
• States must allow surplus lines brokers to participate in the National Insurance Producer Database.

Each of the states would need to conduct a comprehensive review of its code and regulations to identify inconsistencies with the NRRA, the authors wrote.

NAPSLO, the AAMGA and The Council said they would help regulators and legislators realize the uniform and more efficient standards mandated by the NRRA as they draft and pass appropriate, consistent and efficient legislation and regulatory revisions.

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Industry Groups Say They Won't Support NIMA

In a letter to the Chair of the Surplus Lines Implementation Task Force, NAPSLO and five other insurance trade associations notified the Task Force they would not support the legislative proposals known as the Nonadmitted Insurance Multi-State Agreement (NIMA) or its predecessor, the Surplus Lines Insurance Multi-State Agreement (SLIMA).

The two surplus lines tax collection compacts are being considered by state insurance regulators as part of efforts to come into compliance with the Nonadmitted Reinsurance and Reform Act, scheduled to become effective on July 21, 2011.

NAPSLO, the American Insurance Association (AIA), Risk and Insurance Management Society, Inc., (RIMS); the National Association of Mutual Insurance Companies (NAMIC), the American Association of Managing General Agents (AAMGA), and the Excess Line Association of New York (ELANY) sent a letter on Monday to James Donelon, Louisiana Insurance Commissioner and chair of the Surplus Lines Implementation Task Force, stating the organizations would not supports the tax compact proposals.

The NIMA proposal was approved by the Task Force on Oct. 26, 2010 however the group said they could not support the proposal for four reasons: NIMA frustrates the spirit and letter of the NRRA; it violates the NRRA requirement that "no state other than the home state . . . may require any premium tax payments for nonadmitted insurance"; it would create unnecessary and burdensome data reporting by brokers; and it fails to create a clearinghouse infrastructure.

“The clear intent of the Nonadmitted and Reinsurance Reform Act (NRRA) was to create a streamlined tax system that involved uniform requirements, forms and procedures. NIMA not only fails to establish uniform requirements, forms and procedures, but instead continues, by contract, the burdensome system that Congress sought to eliminate with the NRRA,” the letter said.

Many of the industry trade organizations are urging support of the Surplus Lines Insurance Multi-State Compliance Compact (SLIMPACT) as an interstate compact which would comply with the new federal law and also ease the regulatory burdens on E&S brokers when placing multistate risks.

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