Dodd-Frank Financial Services Regulatory Reform: NAIC Initiatives
Non-admitted and Reinsurance Reform Act of 2010 (NRRA):
The NAIC Executive Committee charged a Surplus Lines Implementation Task Force at the Summer National Meeting in August 2010 with developing state-based solutions for addressing the surplus lines part of the Nonadmitted and Reinsurance Reform Act (NRRA).
NOTE: As a result of the restructuring of task forces in 2012, the Surplus Lines Implementation Task Force was disbanded and its charge transferred to the Surplus Lines (C) Task Force.
Most of the NRRA’s provisions will go into effect in July 2011, and states effectively have until June 2011 to become part of a nationwide solution. Regulators want to ensure states continue to receive premium taxes based on the risk or exposure located in a given state.
Early in its deliberations, the Task Force agreed that certain legislative changes need to be made for states to participate fully in a nationwide system for premium tax allocation and disbursement:
Insurance regulators have reached out to stamping offices, revenue departments and other state agencies affected by the NRRA and a proposed national system for premium tax allocation and collection.
After considering various approaches, the Task Force opted to develop an interstate agreement, presently known as the Nonadmitted Insurance Multi-State Agreement (NIMA) which states could enter into through enabling legislation and other statutory changes to allow full participation in the agreement.
Among NIMA’s key features:
NIMA is not a broad regulatory compact and it does not go far as some regulators and industry may have preferred, but it does provide a means for preserving something close to the status quo where premium taxes are concerned. This was considered crucial to Task Force members, and there is a legitimate concern about the ability of all states to enter into a formal interstate compact in the short time frame allowed by the NRRA.
The Task Force recently established a subgroup to develop a plan of operation for the clearinghouse established through NIMA. This group is putting together the details of what regulators and other state officials need a clearinghouse to do for those states that join NIMA and that work will likely lead into development of a RFP (or something like it) so a system can be procured that will work for joining states. There is also a small group of lawyers working on a model contract to be entered into by the states and the clearinghouse.
The Task Force understands NIMA is one part of state implementation of a surplus lines regulatory reform. The Task Force believes NIMA allows states to address the pressing issue of preserving surplus lines premium tax revenue within the very short period of time provided by Congress. As for other areas of surplus lines regulatory reform, the work of the Task Force will be ongoing.
While a handful of regulators have supported SLIMPACT, most regulators believe SLIMPACT and the revised SLIMPACT-Lite proposal go too far. Specifically: