As the National Association of Professional Surplus Lines Offices (NAPSLO) prepares for its annual convention in San Diego Oct. 10-13, issues surrounding the implementation of the federal surplus-lines reform law will be very much on the minds of the excess and surplus-lines executives in attendance.
The law, the Nonadmitted and Reinsurance Reform Act (NRRA), was part of the Dodd-Frank financial-services reform law. It stipulates that the home state of an insured has exclusive authority to require payment of premium tax for nonadmitted insurance.
Richard Bouhan, NAPSLO's retiring executive director, has said previously that the industry benefits by seeing "a system where there is one-state compliance, one-state taxation, national standards for company eligibility and national exempt-commercial-purchaser rules."
The intent of the law is for states to implement a clearinghouse process to share premium taxes between the insured's home state and other states where the risk is insured. However, as the law came into effect on July 21, states still could not agree upon one of two rival models designed to implement the law.
NAPSLO and other industry trade groups, as well as state legislative groups such as the National Conference of Insurance Legislators (NCOIL), favor the Surplus Lines Insurance Multistate Compliance Compact (SLIMPACT-Lite). But the National Association of Insurance Commissioners developed and supports the Nonadmitted Insurance Multistate Agreement (NIMA).
At NAPSLO's Mid-Year Leadership forum, held in Naples, Fla. in March, Bouhan and NAPSLO Director of Government Relations Steve Stephan said the worst-case scenario would be if some states adopted SLIMPACT while others adopted NIMA.
And as the year has progressed, that concern has become a reality as states begin to fall into separate SLIMPACT and NIMA camps.
What's more, other states, including some of the larger states with respect to surplus-lines premiums, have passed statutes and regulations implementing the law—but did not establish any method to share premium taxes.
Mike Ardis, spokesman for NAPSLO, notes that the Kentucky Department of Insurance has developed a compromise proposal, and commissioners in SLIMPACT states have signaled support for this approach in a recent straw-poll vote. "So we hope that NIMA people will follow that also," Ardis says.
He explains that the issue of multistate taxation has come up at NAPSLO meetings for several years, and with passage of the law, "everybody's hoping it will make it easier and more efficient to pay tax on multistate risks."
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