The Nonadmitted Insurance Multistate Agreement (NIMA), the surplus-lines revenue-sharing agreement supported by five states and Puerto Rico, began Phase 2 of its implementation schedule on Oct. 1.

NIMA began operation July 1. It is being run by the Florida Surplus Lines Office, with Tiffany Maruniak serving as the clearinghouse's manager.

Brokers are now able to submit data to the clearinghouse via the Surplus Lines Information Portal (SLIP). SLIP utilizes the Surplus Lines Automation Suite (SLAS) platform to collect policy data and calculate surplus-lines taxes and fees on behalf of the NIMA participating states.

Additionally, NIMA states can review and regulate policy information submitted by brokers in real time using the Regulatory Administration Platform. This provides them with up-to-date, transaction-level information for multistate surplus-lines coverage written in their state.

Under Phase 2, NIMA will provide its members:

  • Information on invoicing for taxes on data reported during the third quarter of 2012
  • Electronic payment of invoices in SLIP
  • A broker's ability to generate reports in SLIP
  • A state regulator's ability to generate reports using the Regulatory Administration Platform
  • The netting and allocating of reported taxes

The clearinghouse is currently the only mechanism that fully implements the Nonadmitted and Reinsurance Reform Act (NRRA), a law enacted as part of the 2010 Dodd-Frank financial-services-reform law.

NRRA establishes the insured's home state as the only state with jurisdiction over multistate surplus-lines transactions and the only state that can require a tax to be paid by the broker.

Under the system, the home state is supposed to provide the state where the risk is situated with its share of the premiums, but in practice only the NIMA members are fully complying.

According to data compiled by the National Association of Professional Surplus Lines Offices (NAPSLO), 35 states today (accounting for nearly 75 percent of nationwide premiums) are retaining 100 percent of the taxes because these states have not adopted a compact or agreement for tax-sharing purposes.

Another compact, the Kentucky-based Surplus Lines Multistate Compliance Compact (SLIMPACT), has also been proposed but is not yet operational.

The nine states that have signed up for  SLIMPACT are also currently collecting 100 percent of the premium tax, increasing the home-state approach to 44 states, constituting more than 80 percent of nationwide premiums.

Those states implementing NIMA represent just 17 percent of nationwide premium.

Since Jan. 1 of this year, six states (Alaska, Connecticut, Hawaii, Mississippi, Nebraska and Nevada) have withdrawn from NIMA, leaving Florida, Louisiana, Puerto Rico, South Dakota, Utah and Wyoming as the only jurisdictions that have adopted a uniform system to implement the premium-tax-sharing component of the NRRA.

For the third quarter, $31.75 million in premium has been reported for multistate policies where the home state of the insured is a NIMA-participating state. Of the premium reported, 51 percent was paid to a state that is a member of the NIMA agreement, according to NIMA's Surplus Lines Clearinghouse Report.

Forty-nine percent was allocated, but not paid, to the other 44 states and/or U.S. territories not participating in the NIMA agreement, the report said.

According to the report, $1.435 million in taxes, fees and assessments were processed during the one quarter that the NIMA agreement has been in place.

Rick Brown, a lawyer in San Francisco who is used by trade groups for his expertise on surplus-lines tax and assessment issues, speculates that some 85 percent or more of those taxes and fees are almost certainly allocable to Florida.

Brown observes that the states that have withdrawn from NIMA and the many states that never chose to join "seem to have decided that the economics and simplicity of home-state taxation outweigh possible benefits of signing up for the NIMA clearinghouse."

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