Both the National Council of Insurance Legislators and National Association of Insurance Commissioners have been working on disparate approaches to the regulation of surplus lines insurance. At a NCOIL hearing recently Congresswoman Judy Biggert (IL) again reached out to the NAIC in hopes of achieving a unified approach to regulation of surplus lines insurance.
At the recent hearing Rep. Greg Wren (AL), NCOIL Treasurer, recommitted NCOIL to collaborate with NAIC after U.S. House Subcommittee on Insurance, Housing, and Community Opportunity
Subcommittee Chair Biggert asked, “Why doesn’t NAIC work with the SLIMPACT model instead of creating another model, NIMA?”
What is SLIMPACT
SLIMPACT stands for The Surplus Lines Insurance Multi-State Compliance Compact and its most fundamental provisions of SLIMPACT are designed to:
- clarify the law and ease the regulatory burdens on Excess &Surplus brokers when placing multistate risks,
- allow each compacting state to collect taxes on all nonadmitted risks where risk exposures are present in the compacting state(s), and
- save E&S brokers, over time, hundreds of millions of dollars in frictional costs associated with current efforts to comply and pay taxes state by state on each multistate risk the broker places.
E&S brokers will be required to comply and file E&S transactions and data only in the home state of the insured on any one multistate risk. An E&S broker needs to be licensed only in the insured’s home state when placing a multistate risk. SLIMPACT also provides authority for compacting states to agree on Uniform Standards to make compliance requirements more uniform among the compacting states when two thirds of the compacting states agree on a particular uniform standard.
Surplus lines insurance is a segment of the insurance market that allows consumers to buy property and casualty insurance through the state regulated insurance market, where policyholders, agents, brokers and insurance companies all have the ability to design specific insurance coverages and negotiate pricing based on the risks to be secured.
NCOIL and NAIC
Also, NCOIL President George Keiser (ND) wrote to NAIC President Susan Voss (IA), stating a desire to reach common ground with the NAIC stating, "As you can remember, responding to regulator concerns that SLIMPACT was overly prescriptive, NCOIL slimmed down SLIMPACT language by deleting certain uniform standards. Another concern expressed by NAIC regulators that SLIMPACT would not be functional soon enough has been put to bed—as SLIMPACT has nine members and counting. “NCOIL looks forward to NAIC response in the very near future,” said Rep. Keiser upon sending the letter, in a press release on the NCOIL website.
Rep. Keiser has said that (NCOIL) "state legislators believe its uniform standards respond to NRRA intent to simplify and streamline the surplus lines regulatory process and meet the state constitutional concerns expressed by compact legal experts."
Rep. Keiser also stated, "We believe SLIMPACT is honing in on an allocation method upon which all interested parties, including the NAIC, can agree. Rep. Keiser did add the caveat that “NCOIL believes only SLIMPACT meets the criteria established in the NRRA, and will provide uniformity, simplicity, relative revenue neutrality, etc., for the states.
In July, Tennessee joined eight other states and became the latest to enact a Surplus Lines Insurance Multi-State Compliance Compact (SLIMPACT). Governor Bill Haslam’s signature moved SLIMPACT one large step closer towards national uniformity in surplus lines taxation and regulation. As the state became the ninth to sign onto the vital insurance compact, others continue to consider SLIMPACT, and compacting states prepared for action.
NCOIL Secretary Rep. Charles Curtiss, who along with Sen. Bill Ketron advanced SLIMPACT through the General Assembly, said: "SLIMPACT provides Tennessee a mechanism to ensure that we receive the premium tax monies in the future that we are due today." While Congress may not have considered state legislative schedules when members approved the Dodd-Frank Act and gave most states little more than six months to enact landmark reform, the states—and several of our respective national organizations, as well as insurance industry and producer interests—have rallied behind SLIMPACT to the tune of nine states and counting. We look forward to expanding the compact across the states and to building the Commission from the ground up.
The NCOIL Secretary added, “As the life insurance compact celebrates its five-year anniversary now with 40 member jurisdictions, we hope SLIMPACT—based on the IIPRC—will soon celebrate its inauguration with a tenth state in the three short months since Kentucky enacted legislation. Much like the successful life compact does for asset-backed insurance products, SLIMPACT will bring important efficiencies for the surplus lines market—including a single, uniform policyholder notice and national foreign insurer eligibility requirements.”
“NCOIL, the National Conference of State Legislatures, and The Council of State Governments have been working to get SLIMPACT up and running,” Rep. Curtiss continued, “and we plan to begin convening conference calls of compacting states next week to work on necessary rules and procedures.
The state of Ohio already has a law on the books authorizing the Superintendent to enter into SLIMPACT, while other states permit insurance regulators to enter into a compact for tax purposes. Others, including Michigan and New York continue to consider SLIMPACT.
