NU Online News Service, May 4, 11:48 a.m.EDT

WASHINGTON—Three states are dropping out of theNonadmitted Insurance Multistate Agreement (NIMA) tax-sharingcompact, but Florida state officials say this will not interferewith the compact's implementation date.

Jack McDermott, a spokesman for the Florida Office of InsuranceRegulation, today confirms that Mississippi, Connecticut and Alaskahave informed compact officials they are dropping out before the scheduled July 1 implementation datefor NIMA.

No reason was given in the states announcement.

Responding to a request for comment, Connecticut InsuranceDepartment spokesman Donna Tommelleo says State InsuranceCommissioner Tom Leonardi and Department Of Revenue ServicesCommissioner Kevin Sullivan say the state has decided to withdrawbecause of concerns about NIMA's viability and the length of timeit has taken to become operational.

However, he says, “this does not affect the implementationschedule, which will proceed on” schedule.

The departures will leave seven states and Puerto Rico asmembers of NIMA.

McDermott is the spokesman for Florida Insurance CommissionerKevin McCarty, who is president of the National Association ofInsurance Commissioners as well as secretary of NIMA.

The Florida Surplus Lines Office, which is also a part ofFlorida state government, is serving as the technology platformprovider and will also provide all clearinghouse administrativeduties.

However, the latest development appears to be consistent withthe concerns voiced last month by Richard A. Brown, a senior lawyerbased in San Francisco who specializes in issues related to theimplementation of the Non-Admitted and Reinsurance Reform Act.

The NRRA went into effect last July. It was aimed at modernizingand reforming the surplus lines regulatory system. A key part wasestablishing the home state of a risk as the exclusive authority totax and regulate the surplus lines insurance industry.

A major piece of the new law allows for the establishment ofcompacts that would serve as a clearinghouse to allow the homestate to pass on to the proper state premium taxes paid on riskslocated in other states.

However, as Brown has noted, even though the NRRA wasimplemented a year ago, no actual tax-sharing between states that was supposed to be acore component of the law has yet to take place.

“Just because the clearinghouse is set up, doesn't mean it willbe operational,” he says. “A lot of details have to be ironed outbefore there is any actual tax sharing.”

NIMA is one of two compacts established by states and industryin an effort to facilitate payment of premium taxes to theappropriate state. The other is the Surplus Lines InsuranceMultistate Compliance Compact or SLIMPACT. It is also struggling to get up and running.

Brown declined further comment on the issue today, saying hewants to study further the potential impact of the threedefections.

Late today, the Council of Insurance Agents & Brokers saidin a statement that after a recent meeting of its board theassociation is reiterating its position that the states should keep100 percent of surplus lines premium tax they collect. Ken A.Crerar president and chief executive officer of the Council sayscurrent efforts to come to tax sharing agreements is only resultingin “confusion and complexity for brokers and their clients.”

“This is the fairest and most cost-effective method of taxationfor all stakeholders, including regulators, consumer and brokers,”he says.

“The misinterpertation of the new law is causing massmarketplace confusion and we are increasingly concerned about theunintended results that are exacerbating the existing complianceburdens and challenges,” he adds.

Updated 3:22 p.m. EDT with comments from the ConnecticutDepartment of Insurance