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

Ten insurance trade groups have written representatives of states participating in the Nonadmitted Insurance Multistate Agreement (NIMA) in an attempt to get them on board with what is being called the "Kentucky compromise."

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

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

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

"We believe the Kentucky compromise is the option best suited and most likely to bring the various parties and interests together and produce the much-needed uniformity intended by the NRRA," says David Leonard, co-chair of the Legislative Committee for the National Association of Professional Surplus Lines Offices (NAPSLO).

NAPSLO joins the American Insurance Association, the Council of Insurance of Insurance Agents and Brokers, the Independent Insurance Agents & Brokers of America, the National Association of Mutual Insurance Companies, the Property Casualty Insurers Association of America, the Risk and Insurance Management Society, the American Association of Managing General Agents, the National Association of Professional Insurance Agents and the American Bankers Association in writing to the NIMA as they have done with the SLIMPACT states.

According to NAPSLO, SLIMPACT members have supported the compromise, which would "continue to require the allocation of casualty premiums on a state-specific or location-specific basis when a multistate policy's premiums are determined on a state-specific or location-specific basis." But it also allows for allocation of premiums to the home states "if a single premium charge is applied and no location-specific rating occurs in connection with the placement."

The groups say the NIMA system would result in new costs and fees, and require new data reporting just for collecting taxes. It is "demonstrably unworkable for most of the industry," says the letter.

"The industry is concerned the NIMA allocation system would significantly expand the collection and reporting of information solely for tax allocation purposes," adds James Drinkwater, co-chair of NAPSLO's Legislative Committee. This "exacerbates the burdens the NRRA was designed to relieve."

Special Reports /

Industry Groups Turn to NIMA States to Adopt Kentucky Compromise

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