NU Online News Service, July 3, 10:36 a.m., EDT
Nevada has become the latest state to withdraw from the Nonadmitted Insurance Multistate Agreement (NIMA), leaving only five states and Puerto Rico as members.
The decision prompted the Council of Insurance Agents and Brokers to declare the effort of the states to establish a uniform allocation system for surplus lines premium taxes “a clear failure.”
But, says Joel Wood, CIAB senior vice president for government affairs, Nevada’s exit from NIMA moves the industry closer to the legislative intent of the Nonadmitted and Reinsurance Reform Act of 2010: “Only one set of rules governing a nonadmitted multistate risk”
“For that, we are grateful,” Wood says.
Wood’s statement was obtained through a bulletin sent to CIAB members.
The bulletin says Nevada gave 60 days notice of termination June 29, but that because Nevada withdrew from NIMA prior to NIMA’s Surplus Lines Clearinghouse effective date of July 1, the state is not required to participate in any such allocation.
The five remaining NIMA states are Florida, Louisiana, Utah, South Dakota and Wyoming. The system is being managed by Florida Surplus Lines Service Office.
NIMA is a revenue-sharing agreement designed to implement the tax-sharing provisions of NRRA, which was passed as part of the Dodd-Frank Act in July 2010 and went into effect July 21, 2011.
Under NRRA, the insured’s home state is the only jurisdiction over multistate surplus lines transactions and the only state that can require a tax to be paid by the broker.
Jack McDermott, a spokesman at the Florida Office of Insurance for commissioner Kevin McCarty, confirms that Nebraska has sent a notice saying it will drop out.
“It is correct that we received notice from Nevada of their withdrawal [from NIMA].” McDermott says.
“However, the clearinghouse was launched as expected on July 1. And, it is our hope that Nevada and other states may reconsider their decisions once thay have seen NIMA’s success in implementing provisions of the NRRA.”
In comments to CIAB members, Wood calls the Nevada action “significant and welcome.”
Wood also says that a competing interstate compact, the proposed SLIMPACT, has not reached the requisite 10 participating states to be effectuated.
Wood explains in the bulletin that Florida is the only large jurisdiction that has chosen not to simply collect 100 percent of the surplus lines premium taxes for multistate placements.
“All other large states and many others have chosen to take the less cumbersome route of taking 100 percent of the tax,” Wood says.
According to data compiled by the National Association of Professional Surplus Lines Offices, 32 states representing 72 percent of nationwide premium volume have no plans to participate in tax-sharing agreements.