NU Online News Service, Oct. 24, 1:56 p.m.EST

Ten insurance trade groups have written representatives ofstates participating in the Nonadmitted Insurance MultistateAgreement (NIMA) in an attempt to get them on board with what isbeing called the “Kentucky compromise.”

At stake is how surplus lines premium taxes are allocated formultistate placements. States revised their insurance laws tocomply with the Nonadmitted and Reinsurance Reform Act (NRRA)—butit gave states the option to adopt tax-sharing agreements.

The result has been two competing tax-sharing agreements—NIMAand the Surplus Lines Multistate Compliance Compact Commission(SLIMPACT). Also as a result, the compacts have possibly strayedfrom the act's original intent to simplify and streamline thesurplus lines tax payment and regulatory system, say many in theindustry.

The Kentucky compromise is meant to bring NIMA states togetherwith those in support of SLIMPACT.

“We believe the Kentucky compromise is the option best suitedand most likely to bring the various parties and interests togetherand produce the much-needed uniformity intended by the NRRA,” saysDavid Leonard, co-chair of the Legislative Committee for theNational Association of Professional Surplus Lines Offices(NAPSLO).

NAPSLO joins the American Insurance Association, the Council ofInsurance of Insurance Agents and Brokers, the IndependentInsurance Agents & Brokers of America, the National Associationof Mutual Insurance Companies, the Property Casualty InsurersAssociation of America, the Risk and Insurance Management Society,the American Association of Managing General Agents, the NationalAssociation of Professional Insurance Agents and the AmericanBankers Association in writing to the NIMA as they have done withthe SLIMPACT states.

According to NAPSLO, SLIMPACT members have supported thecompromise, which would “continue to require the allocation ofcasualty premiums on a state-specific or location-specific basiswhen a multistate policy's premiums are determined on astate-specific or location-specific basis.” But it also allows forallocation of premiums to the home states “if a single premiumcharge is applied and no location-specific rating occurs inconnection with the placement.”

The groups say the NIMA system would result in new costs andfees, and require new data reporting just for collecting taxes. Itis “demonstrably unworkable for most of the industry,” says theletter.

“The industry is concerned the NIMA allocation system wouldsignificantly expand the collection and reporting of informationsolely for tax allocation purposes,” adds James Drinkwater,co-chair of NAPSLO's Legislative Committee. This “exacerbates theburdens the NRRA was designed to relieve.”