The outline for a compromise over a uniform mechanism toimplement the surplus-lines and reinsurance-modernization lawemerged during the National Association of Insurance Commissioner’sfall meeting on Oct. 28.

The insurance industry and regulators seem to be nearing anagreement on the use of the compromise surplus-lines premiumtax-allocation formula developed by the state of Kentucky—theconcept most widely supported by industry.

They are wrestling with creating the most efficient way toimplement the Nonadmitted and Reinsurance Reform Act (NRRA), a partof the 2010 Dodd-Frank Act.

The law, which became effective July 21, says the insured’s homestate will be the only one with jurisdiction over multistatesurplus-lines transactions, and the only one that can require a taxbe paid by the broker.

The devil has been the inability to get the states to initializea simple method for disbursing premiums owed to states where theactual risk exists.

Even if state officials and the industry agreed on the groundrules for a uniform interstate compact, it would not deal with thefact that several large states (California and Texas, for example)have either passed legislation or adopted regulations that do notpermit the sharing of surplus-lines taxes they collect as the stateof domicile with the state where the risk is located.

Meanwhile, states that have adopted the Nonadmitted InsuranceMultistate Agreement (NIMA) have postponed implementation untilJan. 1 because the clearinghouse that would collect and distributepremiums on their behalf is not yet functional.

The NIMA member states decided in a closed-door meeting Nov. 4to take steps to incorporate NIMA as a means of limiting theliability of states involved in the system.

NIMA is the compact NAIC officials are supporting, and addressesonly the collection and allocation of surplus-lines taxes. TheNational Conference of Insurance Legislators (NCOIL) supports theSurplus Lines Multistate Compliance Compact (SLIMPACT), which woulddo more to bring uniformity to surplus lines regulation in general,according to NAPSLO.

Nicole Allen, senior VP/strategic resources, said the Council isencouraged by the NIMA states’ discussion of the Kentuckycompromise, and would strongly urge them to find common ground withthe SLIMPACT states on an allocation formula.