NU Online News Service, Jan. 12, 11:07 a.m.EST

WASHINGTON—Nebraska has dropped out of the NonadmittedInsurance Multistate Agreement, or NIMA, the compact for parcelingout surplus line premiums to the appropriate state supported by theNational Association of Insurance Commissioners.

In its decision to withdraw from NIMA,Nebraskacites conflictsbetween the period offered to surplus lines brokers and insuredsthat place nonadmitted insurance business to report such businessunder NIMA and the state's laws.

As a result, all quarterly surplus lines filings and taxpayments shall be filed directly with the state insurancedepartment, the department says in a statement filed on its websiteMonday.

At the same time,Iowa's legislature appears to be working onlegislation that would allow the state to keep all premiumsreceived from surplus lines transactions.

According to several sources, the proposed bill contains nomechanism for sharing those premiums with the state where the riskis located, according to several sources.

Officials of the National Association of Surplus Lines Offices,Ltd., and other officials believe that isIowa's plan. NAPSLO andothers are hopeful that a compromise with regard to the tax-sharingprovisions can be reached.

If Iowa does pass such legislation, it would join California,Texas and Illinois as the states whose laws or rules implementingthe federal surplus lines reform and modernization law contain nopremium-sharing mechanism.

Joel Wood, senior vice president for government affairs with theCouncil of Insurance Agents & Brokers, says thatNebraska'sdecision “may be a sign of things to come.”

Wood says that implementation of the clearinghouse has beendelayed yet another half-year.

Wood and NAPSLO officials say that because of the delay inimplementing the NIMA clearinghouse, a number of the NIMAmember-states have recently issued bulletins and clarifyingguidance regarding the reporting and payment of taxes.

“Big states have not gotten on the [coordinating] bandwagon,”Wood says.

He says the percentage of premiums among the NIMA states—as wellas Surplus Lines Multistate Compliance Compact (SLIMPACT) states—isnot anywhere close to the critical mass necessary for the promisesof a streamlined system for clients, insurers and brokers to berealized.

He says the intent of the Nonadmitted and Reinsurance Reform Actprovisions of the Dodd-Frank law were to make the system morerational.

“At this point, we believe a more achievable rational approachmight be for states to collect 100 percent of the premium taxes formultistate risks headquartered in their jurisdictions,” Woodsays.

“That said, we welcome working with all of the regulators whoare striving to come up with a multistate allocation system,” Woodsays. “With theNebraskadecision, the momentum might be swingingaway from that movement.”

The decision leaves NIMA with 10 states andPuerto Ricoasmembers, the same number as SLIMPACT states.

Brady Kelley, NAPSLO executive director, agrees with Wood that,“Nebraska's withdrawal may indicate further delays in NIMA'soperations.

“NAPSLO's goal has been the uniform, clear and efficientimplementation of the NRRA among the states, consistent with theintent of the NRRA, and we have been working hard with the statesin this regard,” Kelley says.

Most insurers and producers support SLIMPACT as a far morecomprehensive way of ensuring premium collections on non-admittedinsurance products are appropriately shared with the state wherethe risk exists.