NU Online News Service, June 14, 2:29 p.m.EDT

Hawaii has withdrawn from the Nonadmitted Insurance MultistateAgreement (NIMA), leaving that coalition with only sevenmembers.

However, a spokesman for Florida Insurance Commissioner KevinMcCarty says NIMA will still be launched July 1.

He added that officials remain hopeful that NIMA will ultimatelybe the tax-sharing vehicle through which the National Nonadmittedand Reinsurance Reform Act is administered by the states.

Richard Brown, an insurance lawyer in San Francisco who servesas a consultant and resource center to industry trade groupsinvolved in the surplus-lines business, says the decision was nosurprise.

A key reason clearinghouses aren't winning state support is that“there does not appear to be any appetite by non-NIMA states toshare surplus-lines tax revenues,” Brown says.

This was borne out by data compiled by the National Associationof Professional Surplus Lines Offices. According to the data, 32states representing 72 percent of nationwide premium volume have noplans to participate in tax-sharing agreements.

“As the lack of economic benefits from participation inNIMA has become apparent over the last year, support in theregulatory community for multistate tax sharing has largelyevaporated,” Brown says.

“It is only a matter of time before other NIMA participantswithdraw,” he adds. “Home state taxation under the NRRAworks; clearinghouse solutions do not.”

Joel Wood, senior vice president of government affairs for theCouncil of Insurance Agents and Brokers, adds, “We're now more thantwo years after the enactment of these provisions.” He says it isnow clear “there is no momentum among the large states toparticipate in allocation regimes….”

Wood adds, “We do think it is a hopeful and gratifying sign thatNIMA decided recently to adopt the Kentucky allocation system,which is far, far more user friendly for all thestakeholders—brokers, insurers, and clients.

“This has been an unnecessarily tortuous transition period,”Wood says. “I'm much more optimistic today than I was a year agothat the simplicity Congress sought in the NRRA will beachieved.”

Jack McDermott, a spokesman for the Florida Office of InsuranceRegulation, acknowledged on behalf of McCarty that “creating auniform national surplus lines taxation system is inevitablydifficult, and does require significant compromise.”

He adds, “We remain hopeful that once the clearinghouse becomesoperational on July 1 that other states will acknowledge thesuccess of NIMA, and decide to join at a later date.”

The seven remaining participating members of NIMA are Florida,Louisiana, Nevada, Puerto Rico, South Dakota, Utah and Wyoming.