NCSL Supports Amending State Insurance  Law to Conform to the Nonadmitted and Reinsurance Reform Act (NRRA) and Enacting the Surplus Lines Insurance Multistate Compliance Compact (SLIMPACT)

(Click to view SLIMPACT)

 

 WHEREAS, the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law by President Obama on July 21, 2010; and

WHEREAS, the Nonadmitted and Reinsurance Reform Act of 2009 (NRRA) was incorporated into and signed into law as part of the Dodd-Frank Act; and

WHEREAS, the NRRA, by its various provisions will preempt or supercede portions of the excess and surplus lines law as they exist today in each of the United States when most of the NRRA’s provisions becomes effective on July 21, 2011; and

WHEREAS, only the Home State of the insured will be authorized to tax a surplus lines transaction on and after July 21, 2011, and the states will not be able to allocate the tax revenue unless the states adopt an interstate compact or other uniform, national tax allocation procedures, leaving precious little time for states to act; and

WHEREAS, an interstate compact (SLIMPACT) was drafted with input from state insurance regulators, state legislators, industry trade organizations and others over the course of 2006 and 2007, which provides a tax allocation system by which the states can allocate taxes consistent with the NRRA; and

WHEREAS, the adoption of SLIMPACT will streamline regulatory requirements by providing for: uniform premium tax allocation formulae; a clearinghouse to facilitate the correct calculation and reporting of premium taxes due to the compacting states; and improved coordination of regulatory resources and expertise between state insurance departments and other state agencies, as well as state surplus lines stamping offices; and

WHEREAS, the adoption of SLIMPACT will protect and facilitate the collection of premium tax revenue on surplus lines and independently procured insurance placements by the compacting states; and

WHEREAS, the failure of the states to modernize this important area of insurance regulation will add momentum to proponents of a greater federal role in the regulation of insurance industry; and

WHEREAS, additional federal initiatives could impinge on the state’s authority to regulate insurance, and ultimately affect the state’s ability to collect insurance premium tax; and

WHEREAS, the excess and surplus lines insurance statutes in all states must be amended to conform to the mandatory provisions and definitions contained in the NRRA, in order to expressly set forth the current law clearly and unambiguously; and

WHEREAS, licensed excess and surplus lines brokers need to change their operating procedures, technology systems and compliance protocols in order to operate properly under the laws as amended due to the enactment of the NRRA; and

WHEREAS, licensed excess and surplus lines brokers need as much lead time as is reasonably possible to make changes to their operating procedures, technology systems and compliance protocols in advance of July 21, 2011; and

NOW, THEREFORE BE IT RESOLVED that the National Conference of State Legislatures (NCSL), in an effort to preserve states’ sovereignty in the regulation of the business of insurance, urges state legislatures to draft, introduce and seek passage of legislation to implement the mandatory provisions of the NRRA, in order to assure a timely implementation and smooth transition for all persons and licensees who will be materially impacted by the required statutory changes, and;

BE IT FURTHER RESOLVED that NCSL supports the adoption of SLIMPACT by all state legislatures in order to protect state tax revenues and meet the NRRA requirements to establish such tax revenue protection.

BE IT FURTHER RESOLVED that NCSL, concerned that the deadline for compliance set forth in the NRRA affords states only one legislative session to act, supports an extension of the effective date of the NRRA to July 21, 2012.
 

Expires August 2011