NAIC E&S Task Force Adopts 'Bare Bones' Tax Collection Plan

The National Association of Insurance Commissioners will likely adopt a minimal plan to collect surplus lines insurance taxes without tackling the bigger issue of uniform regulation between the states after an association's task force vote last week.

Regulators on the Surplus Lines Implementation Task Force, and other interested parties, met on a conference call Tuesday afternoon to decide on what plan to present to their legislators at the beginning of the year.

Ultimately, the task force decided on a "bare bones" approach, said Louisiana Insurance Commissioner James J. Donelon, chair of the NAIC's Surplus Lines Implementation Task Force. The plan addresses the collection and allocation of premium taxes from the excess and surplus lines industry, but does not deal with the issue of uniformity of regulation that the industry is pushing for. The regulation issues include insurer eligibility and licensing between states, said Mr. Donelon.

The plan getting the task force nod, SLIMA (Surplus Lines Insurance Multi-State Agreement), defers regulation of the surplus lines industry to the home state of the insurer.

Mr. Donelon said the decision was made after a long discussion with 11 members voting to adopt the plan and Virginia abstaining.

He said a proposal from Virginia to adopt the more comprehensive SLIMPACT (Surplus Lines Insurance Multi-State Compliance Compact) plan died after it received no support from any of the other 11 insurance regulators.

Insurance commissioners are working to adopt model legislation that they can present to their legislative body by the beginning of the year in response to the Nonadmitted and Reinsurance Reform Act (NRRA), part of the Dodd-Frank financial reform act.

Mr. Donelon said the task force received letters from a number of interested parties, all of whom supported the adoption of regulations to streamline the regulation of the surplus lines business.

Steve Stephan, director of government relations with the National Association of Professional Surplus Lines Offices, Ltd., told NU that the task force's decision "is not doing anything to streamline the system."

The purpose of NRRA is to make it easier for the E&S industry to do business and not burden wholesale brokers with a myriad of regulations and costs. He said the task force's proposed plan "would allow the existing system to continue to exist. It is going in the opposite direction of what NRRA intended."

Both Mr. Donelon and Mr. Stephan said one party that will carry a lot of weight going forward on this issue is the National Conference of Insurance Legislators, which they say favors a more comprehensive approach to the regulation of surplus lines.

Mr. Stephan said it has always been the position of NCOIL to endorse SLIMPACT, which he said is the right approach.

Mr. Donelon said NCOIL has indicated that it will discuss the implementation of NRRA next month.

"It is conceivable that they would come out with a different recommendation than we did, and it is further conceivable that some states will go [NCOIL's] route and some states will go our route," Mr. Donelon observed.

A final version of the task force's proposal is expected to be posted on the NAIC's website this week, said Mr. Donelon. A vote on the measure will come sometime next week. The final proposal, with amendments will go to the full association next month, he said.