NAPSLO Exec: NRRA Benefits Evident; Tax-Sharing Agreement Not Likely

NU Online News Service, March 23, 2:58 p.m. EDT

The benefits of the surplus-lines-modernization law enacted in 2010 are already being felt through greater efficiency in the marketplace and likely lower premiums for customers, according to an official of the National Association of Professional Surplus Lines Offices.

Brady Kelley, NAPSLO executive director, made those observations in comments on the surplus-lines industry before the Networks Financial Institute’s Insurance Reform Summit, held Wednesday inWashington.

Kelley acknowledged that the law is not being implemented as originally envisioned, and as a result it is not the uniform solution that Congress intended.

The law allowed the states to set up tax-sharing arrangements where the home state that is the recipient of the premiums under the new law is supposed to allocate part of the premium taxes to the state where the risk is located.

But, as it is playing out, states constituting the majority of premiums have determined that establishing a system to allocate premiums as envisioned is not cost-effective.

Kelley, however, doesn’t believe that is necessarily a bad thing.

“The benefit of this law is home-state regulation and taxation of a surplus-lines policy,” he said.

He explained that, prior to this law, “you had multi states with jurisdiction over a single policy.

“We are now migrating toward one state that is the home state, a single set of rules and regulatory oversight of the transaction,” Kelley said.

He contended that the NRRA has had the effect of “making the system more efficient for the industry and the customer.”

He said a more efficient regulatory system could lead to lower compliance costs, which could result in lower premiums.

 “Our goal is for a single set of compliance rules nationwide,” Kelley said. “That was the intent and purpose of the federal law. It opens up the door for nationwide uniformity to occur in the future.”

Kelley said he believes that the “potential for tax-sharing arrangements are diminishing as the states continue to implement the federal law.”

He cited statistics showing that 24 states representing 63 percent of surplus-lines premiums have already implemented an approach where the home state retains 100 percent of the tax.

“Many of the states took this approach in their first attempt to implement the federal law,” Kelley said. “That seems to be the trend.”

He said NAPSLO believes this new trend will continue.

The law, the Nonadmitted and Reinsurance Reform Act (NRRA) went into effect in July 2011. It was enacted by Congress as part of the Dodd-Frank financial-services-reform law.

The states’ view of a compromise was to establish compacts to act as clearinghouses for proper allocations of premiums to the states.

Two rival compacts were established, but neither has been able to attract enough states as participants to launch operations.

Comments

Resource Center

View All »

Complimentary Case Study: Helping achieve your financial goals By:...

Find out how a Special Investigation Union used TLOxp to save the company money and...

Do Your Clients Hold The Right CDL License?

Learn about the various classes of CDL Licenses and the industries that are impacted by...

Integrated Content & Communications: A Key Business Issue For Insurers

Insurers are renewing their focus on top line growth, and many are learning that growth...

High Risk Insurance Coverage in the E&S Market

Experts discuss market conditions, trends and projected growth in a rapidly changing niche.

Top E-Signature Security Requirements

This white paper covers the most important security features to look for when evaluating e-signatures...

EPLI Programs Crafted Just For Your Clients

Bring us your restaurant clients, associations and other groups and we’ll help you win more...

Is It Time To Step Up And Own An Agency?

Download this eBook for insight on how to determine if owning an agency is right...

Claims - The Good The Bad And The Ugly

Fraudulent claims cost the industry and the public thousands of dollars in losses. This article...

Leveraging BI for Improved Claims Performance and Results

If claims organizations do not avail themselves of the latest business intelligence (BI) tools, they...

Top 10 Legal Requirements for E-Signatures in Insurance

Want to make sure you’ve covered all your bases when adopting e-signatures? Learn how to...

Looking for Markets?

Search Kirschner’s Insurance Directory to help service your hard to place risks.

497 Risk Categories | 70,000 P&C Insurance Markets

kirschners
Specialty Markets Insight eNewsletter

Receive updates and analyses on hard to place and challenging coverages. Sign Up Now!

Advertisement. Closing in 15 seconds.