NAIC Surplus Lines Clearinghouse Plan of Operations Subgroup Report: February 10, 2011

 

On February 10, 2011, the National Association of Insurance Commissioners (“NAIC”) Surplus Lines Implementation Task Force Clearinghouse Plan of Operation Subgroup (“Subgroup”) met for the second time to discuss creating a plan of operation for a Clearinghouse required by the proposed Nonadmitted Insurance Multi-State Agreement (“NIMA”) and review a draft outline of related topics.  The proposed Clearinghouse would facilitate the collection and distribution of surplus lines taxes for those states that may adopt NIMA.

NIMA is designed to address state-based surplus lines reform mandated by the Non-admitted and Reinsurance Reform Act in Title V of H.R. 4173, also known as the Dodd-Frank Act of 2010 (“Dodd-Frank”).

Regulatory representatives from Florida, Delaware, Illinois, Nevada, New York, South Dakota, Texas and Indiana participated in the meeting, which focused on the proposed elements of the plan of operation and whether Subgroup efforts should concentrate on the construction of a Request for Proposal (“RFP”) for the Clearinghouse operation.

The draft outline included sections on licensing and account identification, recordkeeping, maintenance of state-specific data, and assessment and receipt of tax payments.  Initial discussions centered on licensing and account identification issues, then switched to the need to produce an RFP after several Subgroup members suggested it might be difficult to move forward without one.  However, Subgroup chairman Linda Hall felt that premature issuance of an RFP might inadvertently serve to dictate the direction of the Clearinghouse plan of operation.

When a meeting participant asked whether the Clearinghouse would have daily interaction with every participating state in order to ensure that licensing updates would be current, more questions arose about what the responsibilities of the Clearinghouse should be.

“I was thinking it really isn’t up to the Clearinghouse to verify whether a company is licensed in the state or not,” said Ann Fletcher, a representative from the State of Delaware. “The broker or the agency is going to report it, the home state is going to audit it, and they are going to decide whether or not it’s a contestable filing or not.”

Chairman Hall cautioned the Subgroup members about getting too specific in regard to the plan of operation, a sentiment that was echoed by other Subgroup members.

 “I am not sure what we are asking the Clearinghouse to do,” said Bob Wagner, general counsel for the Illinois Department of Insurance.  “It seems to me it’s best to ask the Clearinghouse to do as little as possible – just take the money.”

Florida Subgroup member Steve Parton agreed, adding, “We have to be careful about getting too much specificity in these matters as opposed to setting out the guidelines we think we want.”

After support for an RFP was requested by several Subgroup members, including the Florida representatives, Chairman Hall requested each regulator who had heretofore been compiling information for use in a specific section of the proposed plan of operations to instead work on assembling specifics that could be used in an RFP.

John Bauer, chief counsel for regulatory affairs for the NAIC, confirmed that no parallel subgroup is working on an RFP for Clearinghouse operations.

“I think we need to move on this fairly quickly and I think lots of you did work on these sections and that you now need to kind of back up and change,” Chairman Hall said.  Because of the change in strategic direction, the Subgroup did not address any other draft topics included on the meeting agenda.

Chairman Hall urged Subgroup members to consider what they would like the Clearinghouse to accomplish and how that would fit in to finding an appropriate vendor.

Subgroup members agreed to begin assembling specifics on the different outline sections for an RFP, and meet again on February 17 to discuss their progress.

With no further business before the Subgroup, the meeting was adjourned.

The agenda is attached, along with meeting materials that specify various aspects of the proposed plan that must be developed.

The Subgroup meets today, February 17, 2011 to continue its planning.  A Colodny Fass representative will attend the meeting and provide a report.

 

Should you have any questions or comments, please contact Colodny Fass.

 

 

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