National Association of Insurance Commissioners Surplus Lines Implementation Task Force Non-Admitted Insurance Multi-State Agreement Debate To Continue on December 1, 2010

 

To ensure language in the proposed Non-admitted Insurance Multi-State Agreement (“NIMA”) is precise, the National Association of Insurance Commissioners (“NAIC”) Surplus Lines Implementation Task Force (“Task Force”) will continue its work during a teleconference scheduled for December 1 at 4:30 p.m. (ET).

Meanwhile, at its 2010 Annual Meeting on November 21, the National Conference of Insurance Legislators approved a revised version of the Surplus Lines Insurance Multi-State Compliance Compact, dubbed “SLIMPACT-Lite.”  (To view a summary of the NCOIL meeting, click here.)

Both NIMA and SLIMPACT-Lite are designed to implement state-based solutions for addressing surplus lines reform mandated by the recently passed Non-admitted and Reinsurance Reform Act in Title V of H.R. 4173, which is also known as the Dodd-Frank Act of 2010 (“Dodd-Frank”).

While the actions of the NCOIL and the NAIC are not binding, each of the individual states ultimately will need to review and separately adopt a position to address the surplus lines provisions of Dodd-Frank.

During its most recent conference call on November 16, 2010, the National Association of Insurance Commissioners (“NAIC”) Surplus Lines Implementation Task Force (“Task Force”) reviewed detailed accounts of suggested changes submitted by the states of New York and Nevada. 

The Delaware representative, who also submitted a lengthy list of changes, voiced that state’s disapproval of the NIMA proposal, explaining that it does not believe NIMA meets the Dodd-Frank requirements.

Other states’ representatives who participated in the meeting also suggested changes or expressed support for the current revisions.

During discussion, Task Force members reviewed a table of tax allocation for multi-state risks, which has been inserted into the NIMA draft as “Annex A.”  

Most of the Task Force members also agreed that more clarification is needed for the definitions of “home state,”  “principal place of business” and “principal residence.”

Given additional feedback from regulators and interested parties who have been participating in NIMA’s development during ongoing Task Force meetings, an updated NIMA draft will be released prior to the December 1 teleconference.

The following suggested revisions and comments were among those submitted by Task Force members:

 

New York

• The definition of “principal place of business” should be updated
• The definition of “principal residence” should be updated
• A definition of “clearinghouse,” along with an outline of how it would operate should be included
• Suggested reducing the number of votes needed to amend the NIMA agreement in the future from 100 percent to a two-thirds majority
• Suggested allowing the use of electronic signatures for signing NIMA
• Suggested clarifying the allocation basis for casualty coverage
• Requested that the term “representative/warranties” under the “financial risk” category in the allocation tables should be defined
• Suggested that the term “tax entitlement” should be changed to “calendar tax” in the NIMA allocation formula specified in “Annex B”
• Suggested using New York’s formula to determine the total premium owed on multi-state policies

 

Nevada

• That minor language changes be made in the definition of “purpose”
• That the words “licensed, or” be removed from the definition of “Admitted Insurer”
• That the cost and features of a proposed-for-use computer software program be determined before participating states sign the NIMA agreement

 

Delaware

• NIMA includes no provision for establishing uniform requirements.
• It does not outline how the clearinghouse will be chosen.
• Too many of NIMA’s definitions leave too much “as permitted under law of home state”
• NIMA’s definition of “principal place of business” is too vague.
• A section of NIMA on implementation is missing key details
• No management mechanism is in place for managing NIMA’s administrative aspects.
• Who will write up contracts if each state has a separate contract with the clearinghouse?
• NIMA’s allocation tables are too vague. Collection and allocation procedures lack specific details. Who determines the allocation for a premium tax?
• Tax allocation recommendations do not account for taxes due to non-participating states, which are mentioned only once in NIMA agreement.
• Will a stamping office do the tax allocation work and will that office be paid by the clearinghouse?
• How will admitted versus nonadmitted carriers be handled on multi-state policies?
• Who will be responsible for the clearinghouse bank account and how will the bank be chosen?

 

Texas

• If each state has a separate contract with the clearinghouse, who will write up the contracts?
• No management mechanism is in place for handling the administrative aspects of the agreement.
• Would bylaws be decided upon before or after NIMA is signed?
• NIMA’s allocation tables provide a uniformity that may not exist in reality.
• NIMA’s tax allocation formula does not take non-participating states into consideration.

 

Complete meeting materials and an updated NIMA draft are attached for review.

 

Please note that, effective December 1, 2010, the NAIC will transition to InComm, a new conference call provider. 

Thus, dial-in numbers will change from those used in the past.   After November 30, interested parties are asked to register with InComm by calling (877) 804-2063.  This is a one-time registration process through which InComm will assign an IP code.   This code is required for participation on NAIC conference calls.  

The NAIC has advised that InComm requires two hours to process this one-time registration and assign an IP code, and that interested parties should plan accordingly.

To access the NAIC conference call Web page, click here.

 

 

 

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