S 929 ISCommentsClose CommentsPermalink

To streamline the regulation of nonadmitted insurance and reinsurance, and for other purposes.CommentsClose CommentsPermalink

March 20, 2007

Mr. MARTINEZ (for himself and Mr. NELSON of Florida) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban AffairsCommentsClose CommentsPermalink

To streamline the regulation of nonadmitted insurance and reinsurance, and for other purposes.CommentsClose CommentsPermalink

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,CommentsClose CommentsPermalink

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) Short Title- This Act may be cited as the `Nonadmitted and Reinsurance Reform Act of 2007'.CommentsClose CommentsPermalink





(b) Table of Contents- The table of contents for this Act is as follows:CommentsClose CommentsPermalink





Sec. 1. Short title; table of contents.CommentsClose CommentsPermalink





Sec. 2. Effective date.CommentsClose CommentsPermalink

TITLE I--NONADMITTED INSURANCE

Sec. 101. Reporting, payment, and allocation of premium taxes.CommentsClose CommentsPermalink





Sec. 102. Regulation of nonadmitted insurance by insured's home State.CommentsClose CommentsPermalink





Sec. 103. Participation in national producer database.CommentsClose CommentsPermalink





Sec. 104. Uniform standards for surplus lines eligibility.CommentsClose CommentsPermalink





Sec. 105. Streamlined application for commercial purchasers.CommentsClose CommentsPermalink





Sec. 106. GAO study of nonadmitted insurance market.CommentsClose CommentsPermalink





Sec. 107. Definitions.CommentsClose CommentsPermalink

TITLE II--REINSURANCE

Sec. 201. Regulation of credit for reinsurance and reinsurance agreements.CommentsClose CommentsPermalink





Sec. 202. Regulation of reinsurer solvency.CommentsClose CommentsPermalink





Sec. 203. Definitions.CommentsClose CommentsPermalink

TITLE III--RULE OF CONSTRUCTION

Sec. 301. Rule of Construction.CommentsClose CommentsPermalink

SEC. 2. EFFECTIVE DATE.

Except as otherwise specifically provided in this Act, this Act shall take effect upon the expiration of the 12-month period beginning on the date of enactment of this Act.CommentsClose CommentsPermalink

TITLE I--NONADMITTED INSURANCE

SEC. 101. REPORTING, PAYMENT, AND ALLOCATION OF PREMIUM TAXES.

(a) Home State's Exclusive Authority- No State other than the home State of an insured may require any premium tax payment for nonadmitted insurance.CommentsClose CommentsPermalink





(b) Allocation of Nonadmitted Premium Taxes-CommentsClose CommentsPermalink





(1) IN GENERAL- The States may enter into a compact or otherwise establish procedures to allocate among the States the premium taxes paid to an insured's home State described in subsection (a).CommentsClose CommentsPermalink





(2) EFFECTIVE DATE- Except as expressly otherwise provided in such compact or other procedures, any such compact or other procedures--CommentsClose CommentsPermalink





(A) if adopted on or before the expiration of the 330-day period that begins on the date of the enactment of this Act, shall apply to any premium taxes that, on or after such date of enactment, are required to be paid to any State that is subject to such compact or procedures; andCommentsClose CommentsPermalink





(B) if adopted after the expiration of such 330-day period, shall apply to any premium taxes that, on or after January 1 of the first calendar year that begins after the expiration of such 330-day period, are required to be paid to any State that is subject to such compact or procedures.CommentsClose CommentsPermalink





(3) REPORT- Upon the expiration of the 330-day period referred to in paragraph (2), the NAIC may submit a report to the Committee on Financial Services and Committee on the Judiciary of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate identifying and describing any compact or other procedures for allocation among the States of premium taxes that have been adopted during such period by any States.CommentsClose CommentsPermalink





(4) NATIONWIDE SYSTEM- The Congress intends that each State adopt a nationwide or uniform procedure, such as an interstate compact, that provides for the reporting, payment, collection, and allocation of premium taxes for nonadmitted insurance consistent with this section.CommentsClose CommentsPermalink





(c) Allocation Based on Tax Allocation Report- To facilitate the payment of premium taxes among the States, an insured's home State may require surplus lines brokers and insureds who have independently procured insurance to annually file tax allocation reports with the insured's home State detailing the portion of the nonadmitted insurance policy premium or premiums attributable to properties, risks or exposures located in each State. The filing of a nonadmitted insurance tax allocation report and the payment of tax may be made by a person authorized by the insured to act as its agent.CommentsClose CommentsPermalink

SEC. 102. REGULATION OF NONADMITTED INSURANCE BY INSURED'S HOME STATE.

(a) Home State Authority- Except as otherwise provided in this section, the placement of nonadmitted insurance shall be subject to the statutory and regulatory requirements solely of the insured's home State.CommentsClose CommentsPermalink





(b) Broker Licensing- No State other than an insured's home State may require a surplus lines broker to be licensed in order to sell, solicit, or negotiate nonadmitted insurance with respect to such insured.CommentsClose CommentsPermalink





(c) Enforcement Provision- Any law, regulation, provision, or action of any State that applies or purports to apply to nonadmitted insurance sold to, solicited by, or negotiated with an insured whose home State is another State shall be preempted with respect to such application.CommentsClose CommentsPermalink





(d) Workers' Compensation Exception- This section may not be construed to preempt any State law, rule, or regulation that restricts the placement of workers' compensation insurance or excess insurance for self-funded workers' compensation plans with a nonadmitted insurer.CommentsClose CommentsPermalink

SEC. 103. PARTICIPATION IN NATIONAL PRODUCER DATABASE.

After the expiration of the 2-year period beginning on the date of the enactment of this Act, a State may not collect any fees relating to licensing of an individual or entity as a surplus lines broker in the State unless the State has in effect at such time laws or regulations that provide for participation by the State in the national insurance producer database of the NAIC, or any other equivalent uniform national database, for the licensure of surplus lines brokers and the renewal of such licenses.CommentsClose CommentsPermalink

SEC. 104. UNIFORM STANDARDS FOR SURPLUS LINES ELIGIBILITY.

A State may not--CommentsClose CommentsPermalink





(1) impose eligibility requirements on, or otherwise establish eligibility criteria for, nonadmitted insurers domiciled in a United States jurisdiction, except in conformance with section 5A(2) and 5C(2)(a) of the Non-Admitted Insurance Model Act; andCommentsClose CommentsPermalink





(2) prohibit a surplus lines broker from placing nonadmitted insurance with, or procuring nonadmitted insurance from, a nonadmitted insurer domiciled outside the United States that is listed on the Quarterly Listing of Alien Insurers maintained by the International Insurers Department of the NAIC.CommentsClose CommentsPermalink

SEC. 105. STREAMLINED APPLICATION FOR COMMERCIAL PURCHASERS.

A surplus lines broker seeking to procure or place nonadmitted insurance in a State for an exempt commercial purchaser shall not be required to satisfy any State requirement to make a due diligence search to determine whether the full amount or type of insurance sought by such exempt commercial purchaser can be obtained from admitted insurers if--CommentsClose CommentsPermalink





(1) the broker procuring or placing the surplus lines insurance has disclosed to the exempt commercial purchaser that such insurance may or may not be available from the admitted market that may provide greater protection with more regulatory oversight; andCommentsClose CommentsPermalink





(2) the exempt commercial purchaser has subsequently requested in writing the broker to procure or place such insurance from a nonadmitted insurer.CommentsClose CommentsPermalink

SEC. 106. GAO STUDY OF NONADMITTED INSURANCE MARKET.

(a) In General- The Comptroller General of the United States shall conduct a study of the nonadmitted insurance market to determine the effect of the enactment of this title on the size and market share of the nonadmitted insurance market for providing coverage typically provided by the admitted insurance market.CommentsClose CommentsPermalink





(b) Contents- The study shall determine and analyze--CommentsClose CommentsPermalink





(1) the change in the size and market share of the nonadmitted insurance market and in the number of insurance companies and insurance holding companies providing such business in the 18-month period that begins upon the effective date of this Act;CommentsClose CommentsPermalink





(2) the extent to which insurance coverage typically provided by the admitted insurance market has shifted to the nonadmitted insurance market;CommentsClose CommentsPermalink





(3) the consequences of any change in the size and market share of the nonadmitted insurance market, including differences in the price and availability of coverage available in both the admitted and nonadmitted insurance markets;CommentsClose CommentsPermalink





(4) the extent to which insurance companies and insurance holding companies that provide both admitted and nonadmitted insurance have experienced shifts in the volume of business between admitted and nonadmitted insurance; andCommentsClose CommentsPermalink





(5) the extent to which there has been a change in the number of individuals who have nonadmitted insurance policies, the type of coverage provided under such policies, and whether such coverage is available in the admitted insurance market.CommentsClose CommentsPermalink





(c) Consultation With NAIC- In conducting the study under this section, the Comptroller General shall consult with the NAIC.CommentsClose CommentsPermalink





(d) Report- The Comptroller General shall complete the study under this section and submit a report to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate regarding the findings of the study not later than 30 months after the effective date of this Act.CommentsClose CommentsPermalink

SEC. 107. DEFINITIONS.

For purposes of this title, the following definitions shall apply:CommentsClose CommentsPermalink





(1) ADMITTED INSURER- The term `admitted insurer' means, with respect to a State, an insurer licensed to engage in the business of insurance in such State.CommentsClose CommentsPermalink





(2) EXEMPT COMMERCIAL PURCHASER- The term `exempt commercial purchaser' means any person purchasing commercial insurance that meets the following requirements:CommentsClose CommentsPermalink





(A) The person employs or retains a qualified risk manager to negotiate insurance coverage.CommentsClose CommentsPermalink





(B) The person has paid aggregate nationwide commercial property and casualty insurance premiums in excess of $100,000 in the immediately preceding 12 months.CommentsClose CommentsPermalink





(C) The person meets at least one of the following criteria:CommentsClose CommentsPermalink





(i) The person possesses a net worth in excess of $20,000,000.CommentsClose CommentsPermalink





(ii) The person generates annual revenues in excess of $50,000,000.CommentsClose CommentsPermalink





(iii) The person employs more than 500 full time or full time equivalent employees per individual insured or is a member of affiliated group employing more than 1,000 employees in the aggregate.CommentsClose CommentsPermalink





(iv) The person is a not-for-profit organization or public entity generating annual budgeted expenditures of at least $30,000,000.CommentsClose CommentsPermalink





(v) The person is a municipality with a population in excess of 50,000 persons.CommentsClose CommentsPermalink





(3) HOME STATE- The term `home State' means the State in which an insured maintains its principal place of business or, in the case of an individual, the individual's principal residence.CommentsClose CommentsPermalink





(4) INDEPENDENTLY PROCURED INSURANCE- The term `independently procured insurance' means insurance procured directly by an insured from a nonadmitted insurer.CommentsClose CommentsPermalink





(5) NAIC- The term `NAIC' means the National Association of Insurance Commissioners, or any successor entity.CommentsClose CommentsPermalink





(6) NONADMITTED INSURANCE- The term `nonadmitted insurance' means any property and casualty insurance permitted to be placed directly or through a surplus lines broker with a nonadmitted insurer eligible to accept such insurance.CommentsClose CommentsPermalink





(7) NON-ADMITTED INSURANCE MODEL ACT- The term `Non-Admitted Insurance Model Act' means the provisions of the Non-Admitted Insurance Model Act, as adopted by the NAIC on August 3, 1994, and amended on September 30, 1996, December 6, 1997, October 2, 1999, and June 8, 2002.CommentsClose CommentsPermalink





(8) NONADMITTED INSURER- The term `nonadmitted insurer' means, with respect to a State, an insurer not licensed to engage in the business of insurance in such State.CommentsClose CommentsPermalink





(9) QUALIFIED RISK MANAGER- The term `qualified risk manager' means, with respect to a policyholder of commercial insurance, a person who meets all of the following requirements:CommentsClose CommentsPermalink





(A) The person is an employee of, or third party consultant retained by, the commercial policyholder.CommentsClose CommentsPermalink





(B) The person provides skilled services in loss prevention, loss reduction, or risk and insurance coverage analysis, and purchase of insurance.CommentsClose CommentsPermalink





(C) The person possesses at least two of the following credentials:CommentsClose CommentsPermalink





(i) An advanced degree in risk management issued by an accredited college or university.CommentsClose CommentsPermalink





(ii) At least 5 years of experience in one or more of the following areas of commercial property insurance or commercial casualty insurance:CommentsClose CommentsPermalink





(I) Risk financing.CommentsClose CommentsPermalink





(II) Claims administration.CommentsClose CommentsPermalink





(III) Loss prevention.CommentsClose CommentsPermalink





(IV) Risk and insurance coverage analysis.CommentsClose CommentsPermalink





(iii) At least one of the following designations:CommentsClose CommentsPermalink





(I) A designation as a Chartered Property and Casualty Underwriter (in this clause referred to as `CPCU') issued by the American Institute for CPCU/Insurance Institute of America.CommentsClose CommentsPermalink





(II) A designation as an Associate in Risk Management (ARM) issued by American Institute for CPCU/Insurance Institute of America.CommentsClose CommentsPermalink





(III) A designation as a Certified Risk Manager (CRM) issued by the National Alliance for Insurance Education & Research.CommentsClose CommentsPermalink





(IV) A designation as a RIMS Fellow (RF) issued by the Global Risk Management Institute.CommentsClose CommentsPermalink





(V) Any other designation, certification, or license determined by a State insurance commissioner or other State insurance regulatory official or entity to demonstrate minimum competency in risk management.CommentsClose CommentsPermalink





(10) PREMIUM TAX- The term `premium tax' means, with respect to surplus lines or independently procured insurance coverage, any tax, fee, assessment, or other charge imposed by a State on an insured based on any payment made as consideration for an insurance contract for such insurance, including premium deposits, assessments, registration fees, and any other compensation given in consideration for a contract of insurance.CommentsClose CommentsPermalink





(11) SURPLUS LINES BROKER- The term `surplus lines broker' means an individual, firm, or corporation which is licensed in a State to sell, solicit, or negotiate insurance on properties, risks, or exposures located or to be performed in a State with nonadmitted insurers.CommentsClose CommentsPermalink





(12) STATE- The term `State' includes any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, Guam, the Northern Mariana Islands, the Virgin Islands, and American Samoa.CommentsClose CommentsPermalink

TITLE II--REINSURANCE

SEC. 201. REGULATION OF CREDIT FOR REINSURANCE AND REINSURANCE AGREEMENTS.

(a) Credit for Reinsurance- If the State of domicile of a ceding insurer is an NAIC-accredited State, or has financial solvency requirements substantially similar to the requirements necessary for NAIC accreditation, and recognizes credit for reinsurance for the insurer's ceded risk, then no other State may deny such credit for reinsurance.CommentsClose CommentsPermalink





(b) Additional Preemption of Extraterritorial Application of State Law- In addition to the application of subsection (a), all laws, regulations, provisions, or other actions of a State other than those of the State of domicile of the ceding insurer are preempted to the extent that they--CommentsClose CommentsPermalink





(1) restrict or eliminate the rights of the ceding insurer or the assuming insurer to resolve disputes pursuant to contractual arbitration to the extent such contractual provision is not inconsistent with the provisions of title 9, United States Code;CommentsClose CommentsPermalink





(2) require that a certain State's law shall govern the reinsurance contract, disputes arising from the reinsurance contract, or requirements of the reinsurance contract;CommentsClose CommentsPermalink





(3) attempt to enforce a reinsurance contract on terms different than those set forth in the reinsurance contract, to the extent that the terms are not inconsistent with this title; orCommentsClose CommentsPermalink





(4) otherwise apply the laws of the State to reinsurance agreements of ceding insurers not domiciled in that State.CommentsClose CommentsPermalink

SEC. 202. REGULATION OF REINSURER SOLVENCY.

(a) Domiciliary State Regulation- If the State of domicile of a reinsurer is an NAIC-accredited State or has financial solvency requirements substantially similar to the requirements necessary for NAIC accreditation, such State shall be solely responsible for regulating the financial solvency of the reinsurer.CommentsClose CommentsPermalink





(b) Nondomiciliary States-CommentsClose CommentsPermalink





(1) LIMITATION ON FINANCIAL INFORMATION REQUIREMENTS- If the State of domicile of a reinsurer is an NAIC-accredited State or has financial solvency requirements substantially similar to the requirements necessary for NAIC accreditation, no other State may require the reinsurer to provide any additional financial information other than the information the reinsurer is required to file with its domiciliary State.CommentsClose CommentsPermalink





(2) RECEIPT OF INFORMATION- No provision of this section shall be construed as preventing or prohibiting a State that is not the State of domicile of a reinsurer from receiving a copy of any financial statement filed with its domiciliary State.CommentsClose CommentsPermalink

SEC. 203. DEFINITIONS.

For purposes of this title, the following definitions shall apply:CommentsClose CommentsPermalink





(1) CEDING INSURER- The term `ceding insurer' means an insurer that purchases reinsurance.CommentsClose CommentsPermalink





(2) DOMICILIARY STATE- The terms `State of domicile' and `domiciliary State' means, with respect to an insurer or reinsurer, the State in which the insurer or reinsurer is incorporated or entered through, and licensed.CommentsClose CommentsPermalink





(3) REINSURANCE- The term `reinsurance' means the assumption by an insurer of all or part of a risk undertaken originally by another insurer.CommentsClose CommentsPermalink





(4) REINSURER-CommentsClose CommentsPermalink





(A) IN GENERAL- The term `reinsurer' means an insurer to the extent that the insurer--CommentsClose CommentsPermalink





(i) is principally engaged in the business of reinsurance;CommentsClose CommentsPermalink





(ii) does not conduct significant amounts of direct insurance as a percentage of its net premiums; andCommentsClose CommentsPermalink





(iii) is not engaged in an ongoing basis in the business of soliciting direct insurance.CommentsClose CommentsPermalink





(B) DETERMINATION- A determination of whether an insurer is a reinsurer shall be made under the laws of the State of domicile in accordance with this paragraph.CommentsClose CommentsPermalink





(5) STATE- The term `State' includes any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, Guam, the Northern Mariana Islands, the Virgin Islands, and American Samoa.CommentsClose CommentsPermalink

TITLE III--RULE OF CONSTRUCTION

SEC. 301. RULE OF CONSTRUCTION.

Nothing in this Act or the amendments to this Act shall be construed to modify, impair, or supersede the application of the antitrust laws. Any implied or actual conflict between this Act and any amendments to this Act and the antitrust laws shall be resolved in favor of the operation of the antitrust laws.CommentsClose CommentsPermalink