Florida Governor Rick Scott’s Action on Nonadmitted and Reinsurance Reform Act Surplus Lines Compliance Bill (CS/CS/CS/SB 1816) Required Before June 1
May 18, 2011
In addition to signing CS/CS/CS/SB 408 yesterday, May 17, 2011, Florida Governor Rick Scott received CS/CS/CS/SB 1816 relating to Surplus Lines Insurance.
The Governor must act on this bill by June 1, otherwise it will become law without his signature. If enacted, CS/CS/CS/SB 1816 will be effective upon becoming law.
CS/CS/CS/SB 1816, which would create s.626.9362, F.S. and substantially amend s. 626.931, 626.932, 626.9325 and 626.938, F.S., authorizes the Florida Department of Financial Services (“DFS”) and the Florida Office of Insurance Regulation (“OIR”) to enter into a cooperative reciprocal agreement with another state or group of states to collect and allocate nonadmitted insurance taxes for multi-state risks pursuant to the Nonadmitted and Reinsurance Reform Act of 2010 (“NRRA”), part of the federal Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
Under the NRRA, Florida will no longer have jurisdiction to collect taxes and fees on surplus lines policies that cover risks in Florida and other states unless Florida is the “home state” of the insured. Should the State fail to effect measures to address the NRRA, a significant loss of tax revenue could result. However, the NRRA authorizes states to enter into cooperative reciprocal agreements with one another for home states to collect taxes on multi-state risks and then allocate tax revenue to the state where the insured risks are located. Essentially, CS/CS/CS/SB 1816 is designed to enable Florida to comply with the NRRA.
Currently, many states are considering and adopting a particular compact or a competing agreement, both of which address the NRRA’s provisions. The Surplus Lines Insurance Multi-State Compliance Compact (“SLIMPACT”) has been supported by the National Conference of Insurance Legislators (“NCOIL”), while the Nonadmitted Insurance Multi-State Agreement (“NIMA”) has been adopted by the National Association of Insurance Commissioners (“NAIC”). CS/CS/CS/SB 1816 does not enact SLIMPACT and while its preamble recognizes that the NAIC has adopted an agreement that states can use to implement the NRRA, the bill authorizes DFS and OIR to enter into a cooperative reciprocal agreement and provides certain terms that may be included therein, without specifically limiting the agreement that may be entered to NIMA, or requiring that any such agreement be entered.
Under the provisions of CS/CS/CS/SB 1816, any cooperative agreement that the state may enter must be implemented by the Florida Surplus Lines Service Office, which the legislation authorizes to collect the total tax imposed on a multi-state risk nonadmitted insurance policy premium. Specifically, CS/CS/CS/SB 1816, would provide for the application of the surplus lines tax to the entire premium if the state is the home state of the insured as defined in the NRRA. The tax rate is limited to the tax rate where an insured risk is located.
The bill would also grant rulemaking authority to the OIR and the DFS for the administration of these agreements. CS/CS/CS/SB 1816 also would allow for a service fee of up to 0.3 percent of gross premium on transactions processed by an NRRA-related clearinghouse for the purpose of funding clearinghouse operations.
Further, if signed by the Governor, the bill would amend current law to establish that insureds not using a surplus lines agent to procure surplus lines coverage must pay the surplus lines premium tax and the service fee within 45 days following each calendar quarter in which the insurance was procured. Current law requires payment within 30 days after the insurance is procured.
CS/CS/CS/SB 1816 was originally sponsored by Senator Mike Fasano and co-sponsored by Senator Garrett Richter.
To access complete information on CS/CS/CS/SB 1816, click here.
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