Bulletin July 16, 2014

Transcription

1 AK Bulletin No (July 16, 2014) This document supersedes ALASKA INSURANCE BULLETINS AND RELATED MATERIALS BULLETINS Bulletin July 16, 2014 TO: ALL SURPLUS LINES INSURERS AND INSURANCE PRODUCERS AND SURPLUS LINES BROKERS LICENSED IN THE STATE OF ALASKA AND OTHER INTERESTED PARTIES FROM: Lori Wing-Heier Director of Insurance DATE: July 16, 2014 RE: ELIGIBLE SURPLUS LINES INSURERS IN THE STATE OF ALASKA Effective July 21, 2011, the Non-admitted and Reinsurance Reform Act of 2010 (NRRA) identified the eligibility requirements Alaska may impose on a company to be an eligible surplus lines insurer. An insurer will be removed from the list if it does not meet all of the NRRA and domestic state requirements. Foreign surplus lines insurers must provide Alaska with a current copy of the domicile state's certificate of authority or compliance annually. Under the authority of AS , I am issuing the attached list of eligible surplus lines insurers. You may check the status of any insurer at any time at Web/jsp/sbsreports/CompanySearchLookup.jsp The three statuses Alaska uses to identify eligible surplus lines insurers are: White Listed: Foreign companies that meet the NRRA and domestic state requirements. IID Listed: Alien companies that are on the NAIC's Quarterly Listing of Alien Insurers. Listing Approved: Alien companies that are not on the NAIC's Quarterly Listing of Alien Insurers but are approved by Alaska. All alien insurers that are on the NAIC's Quarterly Listing of Alien Insurers are eligible to write non-admitted business in the State of Alaska. This list is available on our website at commerce.alaska.gov/dnn/ins/surpluslines.aspx. Alien insurers that are not on the NAIC's Quarterly Listing of Alien Insurers and want to write business in Alaska must apply for approval as stated in AS to be an eligible surplus lines insurer. Publishing this eligible list does not place any liability on the State of Alaska, Division of Insurance. Bulletin B supercedes Bulletin B

2 AK Bulletin No WL AK Bulletin END OF DOCUMENT

3 THE STATE 01 ALASKA GOVERNOR SEAN PARNELL Department of Commerce, Community, and Economic Development DIVISION OF INSURANCE Juneau Office P.O. Box Juneau, Alaska Main: Fax: TDD: BULLETIN TO: RE: ALL LICENSEES AND SURPLUS LINES INSURANCE COMPANIES IN THE STATE OF ALASKA AND OTHER INTERESTED PARTIES RECENT CHANGES IN THE REGULATIONS OF THE ALASKA DIVISION OF INSURANCE The division has adopted regulations modifying the surplus lines requirements to conform to Alaska statute changes due to the. federal Nonadmitted and Reinsurance Reform Act of The regulations include modifications to the diligent search requirements, additional requirements for the notice of nonrenewal and premium increase, and fees for the new portable electronic limited producer licenses. All affected parties must comply with the new regulatory requirements as of September 4, 2014, the effective date of these regulations. The regulations may be viewed on the division's website at: I dnn/portals/7 /pub/sl-regs. pdf This bulletin provides an overview of some of the important changes in the regulations and is for informational purposes only and is not intended to be an exhaustive or interpretive analysis of the regulatory changes. Review all the sections of these regulations on the division website to ensure your compliance with them when transacting insurance business in this state. The topics covered in this bulletin are: 3 AAC 21. Insurer - Financial Payment of taxes and fee 3 AAC 25. Surplus Lines 3 AAC 31. Miscellaneous - Fees 3 AAC 21. All reference to surplus lines annual tax payments were eliminated and replaced with quarterly payment requirements. 1

4 3 AAC 25. The time frame for when a producing broker must provide a surplus lines broker with documentation of a diligent search of the admitted market has changed to not later than 15 days after the binding of the insurance contract. Information regarding an exempt commercial purchaser was added to the documentation section for diligent search. The producing broker shall include in the diligent search documentation a description of the kind of insurance that is adequate for the director to determine whether insurance coverage is available in the admitted market to cover the kind of insurance The requirement that the Alaska policyholder notice must be part of a binder and cover note has been eliminated. It remains a requirement that the policy must contain the notice and it is the surplus lines broker's responsibility to ensure the notice is part of the policy. Clarification is made that subsequent endorsements and company audits related to a policy are considered evidence of insurance. The report of surplus lines transaction form no longer needs to be signed by a surplus lines broker, just the quarterly report. New forms will be available September 4, 2014 on the division website. Monthly reports have been eliminated and replaced with Quru.ierly reports. The eligibility requirements for surplus lines insurers are now in line with the Nonadmitted and Reinsurance Reform Act of AAC 31. A fee is added for initial application or biennial renewal for a portable electronics limited producer license. A clarification is made that only alien surplus lines insurers not on the Quarterly Listing of Alien Insurers under AS (c) (7) will owe a fee to be on the surplus lines white list. If you have any questions regarding the information in this bulletin, please contact Rebecca Nesheim at (907) or rebecca.nesheim@alaska.gov. Dated August 13, 2014 Lori Wing-Heier Director 2

5 AK Bulletin No (US), 2015 WL (US) AK Bulletin No (January 14, 2015) This document supersedes ALASKA INSURANCE BULLETINS AND RELATED MATERIALS BULLETINS Bulletin January 14, 2015 TO: ALL SURPLUS LINES INSURERS AND INSURANCE PRODUCERS AND SURPLUS LINES BROKERS LICENSED IN THE STATE OF ALASKA AND OTHER INTERESTED PARTIES FROM: Lori Wing-Heier Director of Insurance DATE: January 14, 2015 RE: ELIGIBLE SURPLUS LINES INSURERS IN THE STATE OF ALASKA Effective July 21, 2011, the Non-admitted and Reinsurance Reform Act of 2010 (NRRA) identified the eligibility requirements Alaska may impose on a company to be an eligible surplus lines insurer. An insurer will be removed from the list if it does not meet all of the NRRA and domestic state requirements. Foreign surplus lines insurers must provide Alaska with a current copy of the domicile state's certificate of authority or compliance annually. Under the authority of AS , I am issuing the attached list of eligible surplus lines insurers. You may check the status of any insurer at any time at The three statuses Alaska uses to identify eligible surplus lines insurers are: WHITE LISTED: Foreign companies that meet the NRRA and domestic state requirements. IID LISTED: Alien companies that are on the NAIC's Quarterly Listing of Alien Insurers. Listing Approved: Alien companies that are not on the NAIC's Quarterly Listing of Alien Insurers but are approved by Alaska. All alien insurers that are on the NAIC's Quarterly Listing of Alien Insurers are eligible to write nonadmitted business in the State of Alaska. This list is available on our website at commerce.alaska.gov/dnn/ins/surpluslines.aspx. Alien insurers that are not on the NAIC's Quarterly Listing of Alien Insurers and want to write business in Alaska must apply for approval as stated in AS to be an eligible surplus lines insurer. Publishing this eligible list does not place any liability on the State of Alaska, Division of Insurance.

6 NAICCODE ELIGIBLE INSURANCE COMPANY NAME ACCEPTANCE CASUAL TY INSURANCE COMPANY 248S6 ADMIRAL INSURANCE COMPANY AGENT ALLIANCE INSURANCE COMPANY AIG SPECIALTY INSURANCE COMPANY AIX SPECIAL TY INSURANCE COMPANY ALLIANZ UNDERWRITERS INSURANCE COMPANY ALLIED WORLD ASSURANCE COMPANY {US) INC F/K/A DARWIN SELECT INSURANCE COMPANY ALLIED WORLD SURPLUS LINES INSURANCE COMPANY F/K/A DARWIN SELECT INSURANCE COMPANY ALTERRA EXCESS & SURPLUS INSURANCE COMPANY AMERICAN EMPIRE SURPLUS LINES INS COMPANY AMERICAN MODERN SURPLUS LINES INSURANCE COMPANY AMERICAN NATIONAL LLOYDS INSURANCE COMPANY AMERICAN SAFETY INDEMNITY COMPANY AMERICAN SOUTHERN INSURANCE COMPANY AMERICAN WESTERN HOME INSURANCE COMPANY APPALACHIAN INSURANCE COMPANY ARCH EXCESS & SURPLUS INSURANCE COMPANY ARCH SPECIAL TY INSURANCE COMPANY ASPEN SPECIALTY INS CO ASSOCIATED INDUSTRIES INSURANCE COMPANY, INC ASSOCIATED INTERNATIONAL INS CO ATAIN SPECIALTY INSURANCE COMPANY ATLANTIC CASUALTY INSURANCE COMPANY AXIS SURPLUS INSURANCE COMPANY BERKLEY ASSURANCE COMPANY BERKLEY REGIONAL SPECIALTY INSURANCE COMPANY BRACKEN HILL SPECIALTY INSURANCE COMPANY, INC. F/K/A HISCOX SPECIALTY INSURANCE COMPANY, INC BURLINGTON INSURANCE COMPANY CANOPIUS US INSURANCE, INC. F/K/A OMEGA US INSURANCE, INC CAPITOL SPECIALTY INSURANCE CORPORATION CATLIN SPECIALTY INSURANCE COMPANY CENTENNIAL CASUALTY COMPANY CENTURY SURETY COMPANY CHUBB CUSTOM INSURANCE COMPANY CINCINNATI SPECIALTY UNDERWRITERS INSURANCE COMPANY CLARENDON AMERICA INSURANCE COMPANY COLONY INSURANCE COMPANY COLUMBIA CASUALTY COMP.ANY COMPANION SPECIALTY INSURANCE COMPANY

7 NAICCODE ELIGIBLE INSURANCE COMPANY NAME COVINGTON SPECIALTY INSURANCE COMPANY CRUM & FORSTER SPECIALTY INSURANCE COMPANY DISCOVER SPECIALTY INSURANCE COMPANY EMPIRE INDEMNITY INSURANCE COMPANY ENDURANCE AMERICAN SPECIALTY INSURANCE CO ESSEX INSURANCE COMPANY EVANSTON INSURANCE COMPANY EVEREST INDEMNITY INSURANCE COMPANY EXECUTIVE RISK SPECIALTY INSURANCE COMPANY FAIR AMERICAN SELECT INSURANCE COMPANY FIREMANS FUND INS COMPANY OF OHIO FIRST MERCURY INSURANCE COMPANY FIRST SPECIAL TY INSURANCE CORPORATION FOUNDERS INSURANCE COMPANY GEMINI INSURANCE COMPANY GENERAL SECURITY INDEMNITY COMPANY OF ARIZONA GENERAL STAR INDEMNITY COMPANY GEOVERA SPECIALTY INSURANCE COMPANY GOLDEN BEAR INSURANCE COMPANY GOTHAM INSURANCE COMPANY GREAT AMERICAN E & S INSURANCE COMPANY GREAT AMERICAN FIDELITY INSURANCE COMPANY GREAT AMERICAN PROTECTION INSURANCE COMPANY GUILFORD INSURANCE COMPANY GULF UNDERWRITERS INSURANCE COMPANY HALLMARK SPECIALTY INSURANCE COMPANY F/K/A VALIANT SPECIALTY INSURANCE COMPANY HAMILTON SPECIALTY INSURANCE COMPANY HCC SPECIALTY INSURANCE COMPANY HERMITAGE INSURANCE COMPANY HOMELAND INSURANCE COMPANY OF NEW YORK HOUSTON CASUAL TY COMPANY HOUSTON SPECIALTY INSURANCE COMPANY HSB SPECIAL TY INSURANCE COMPANY HUDSON EXCESS INURANCE COMPANY HUDSON SPECIALTY INSURANCE COMPANY ILLINOIS UNION INSURANCE COMPANY INDIAN HARBOR INSURANCE COMPANY INTERSTATE FIRE AND CASUALTY COMPANY IRON HORSE INSURANCE COMPANY IRE>NSHORE-SPECIALTY INSURANCE COMPANY JAMES RIVER INSURANCE COMPANY

8 NAIC CODE ELIGIBLE INSURANCE COMPANY NAME KINSALE INSURANCE COMPANY KNIGHT SPECIALTY INSURANCE COMPANY LANDMARK AMERICAN INSURANCE COMPANY LEXINGTON INSURANCE COMPANY LIBERTY SURPLUS INSURANCE CORPORATION MAIDEN SPECIALTY INSURANCE COMPANY MAXUM INDEMNITY COMPANY MESA UNDERWRITERS SPECIALTY INSURANCE COMPANY MID-CONTINENT EXCESS & SURPLUS INSURANCE COMPANY MOUNT VERNON FIRE INSURANCE COMPANY MOUNT VERNON SPECIALTY INSURANCE COMPANY MT HAWLEY INSURANCE COMPANY NATIONAL FIRE & MARINE INSURANCE COMPANY NAUTILUS INSURANCE COMPANY NAVIGATORS SPECIALTY INSURANCE COMPANY NOETIC SPECIALTY INSURANCE COMPANY NORTH AMERICAN CAPACITY INS COMPANY NORTH LIGHT SPECIALTY INSURANCE COMPANY NORTHFIELD INSURANCE COMPANY PACIFIC INSURANCE COMPANY LIMITED l0673 PENN-STAR INSURANCE COMPANY PMSLIC INSURANCE COMPANY PRIME INSURANCE COMPANY PRINCETON EXCESS AND SURPLUS LINES INSURANCE COMPANY PROASSURANCE SPECIALTY INSURANCE COMPANY PROTECTIVE SPECIAL TY INSURANCE COMPANY QBE SPECIALTY INSURANCE COMPANY RELIAMAX SURETY COMPANY ROCKHILL INSURANCE COMPANY SAFECO SURPLUS LINES INSURANCE COMPANY SATURN INSURANCE INCORPORATED SAVERS PROPERTY AND CASUALTY INSURANCE CO SCOTISDALE INSURANCE COMPANY SCOTISDALE SURPLUS LINES INSURANCE COMPANY SENECA SPECIALTY INSURANCE COMPANY SPARTA SPECIALTY INSURANCE COMPANY ST PAUL SURPLUS LINES INSURANCE COMPANY STARR SURPLUS LINES INSURANCE COMPANY STEADFAST INSURANCE COMPANY TDC SPECIALTY INSURANCE COMPANY TOKIO MARINE SPECIALTY INSURANCE COMPANY

9 NAICCODE ELIGIBLE INSURANCE COMPANY NAME TORUS SPECIALTY INS CO TRAVELERS EXCESS & SURPLUS LINES COMPANY TUDOR INSURANCE COMPANY UNITED NATIONAL INSURANCE COMPANY UNITED SPECIAL TY INSURANCE COMPANY VOYAGER INDEMNITY INSURANCE COMPANY WESTCHESTER SURPLUS LINES INSURANCE COMPANY WESTERN HERITAGE INSURANCE COMPANY WESTERN WORLD INSURANCE COMPANY XL SELECT INSURANCE COMPANY CHANGES TO LIST OF ELIGIBLE SURPLUS LINES INSURERS SINCE BULLETIN B The following companies have been added to the list of eligible surplus lines insurers: NAIC CODE ELIGIBLE INSURANCE COMPANY NAME GUIDE ONE NATIONAL INSURANCE COMPANY OLD REPUBLIC UNION INSURANCE COMPANY The following company has been dropped from the list of eligible surplus insurers: NAIC CODE INSURANCE COMPANY NAME HERMITAGE INSURANCE COMPANY

10 Bulletin B supersedes Bulletin B Dated January 14, 2015

11 Division of Insurance Sean Parnell, Governor Susan K. Bell, Commissioner Linda S. Hall, Director BULLETIN B TO: ALL INSURERS ELIGIBLE TO WRITE NONADMITTED INSURANCE IN THE STATE OF ALASKA, ALL LICENSED SURPLUS LINES BROKERS, ALL INSUREDS INDEPENDENTLY PROCURING NONADMITTED INSURANCE AND OTHER INTERESTED PARTIES RE: NEW ALASKA SURPLUS LINES REQUIREMENTS CONTAINED IN HB 164 This bulletin will outline new Alaska requirements for surplus lines and the transition requirements necessary to establish new processes and procedures. These requirements arise out of changes to Alaska s surplus lines laws that were enacted in the last legislative session under sections of SCS CSHB 164 (L&C), which became effective on July 21, Eligibility requirements for Surplus Lines Insurers The director will continue to maintain a list of eligible surplus lines insurers. The Nonadmitted and Reinsurance Reform Act of 2010 (NRRA) restricts the requirements Alaska may impose on a company to be an eligible nonadmitted insurer. The director will approve a foreign insurer s request for eligibility if the insurer maintains capital and surplus of $15,000,000 and provides a copy of its annual statement including all supplementary reports, exhibit, and schedules required by the National Association of Insurance Commissioners (NAIC); and provides a certification that it is authorized to write such insurance in its domiciliary jurisdiction. A non-united States insurer (alien) is considered eligible to write insurance on an unauthorized basis in Alaska if it is listed on the quarterly listing of alien insurers maintained by the NAIC. Alien insurers that are not on the quarterly listing and want to write business in Alaska must apply for approval to be listed on the eligible surplus lines insurer list. The director may approve an alien insurer s request for eligibility if the nonadmitted insurer establishes satisfactory evidence of good report and financial integrity; maintains capital and surplus of $15,000,000; maintains a trust of $2,500,000 deposited in a U.S. financial institution; submits a completed application form , the required fee of $1,000, and consents to service of process and forwarding designation (forms and ); and submits designation of persons to contact (form ). 550 W. 7 th Avenue, Suite 1560, Anchorage, Alaska Telephone: (907) Fax: (907) Text Telephone: (907) insurance@alaska.gov Website:

12 Licensing Requirements for Surplus Lines Brokers If Alaska is the insured s home state, the surplus lines broker must be licensed in Alaska in order to sell, solicit, or negotiate nonadmitted insurance with respect to a particular placement. Required Filings and Payments by Surplus Lines Brokers Policies effective before July 21, 2011 New and renewal policies with an effective date before July 21, 2011 will be subject to the laws of Alaska and other jurisdictions in place before July 21, If the policy is multistate, then just the Alaska portion of the risk will be reported in Alaska regardless of the home state of the insured. Any modification to such a policy during the policy period, such as endorsements and premium audits, will remain under the requirements of the previous laws of Alaska and other jurisdictions. Transition For transactions effective or occurring July 1, 2011 July 20, 2011, a monthly report is required to be filed by August 31, For those brokers required to file and pay tax quarterly under the previous law, the second quarter tax report for months April, May, and June will still be due August 31, In order to transition into the new statutory requirements, the division requests that surplus lines brokers file the 2011 annual premium tax report required under 3 AAC on or before November 15, 2011 instead of March 1, 2012 and report only those transactions occurring from January 1, 2011 through July 20, Payment of premium tax and filing fees should be received in the division s bank account on or before November 15, 2011 by the Automated Clearing House (ACH) method. For transactions occurring before July 21, 2011 that are not previously filed or are inaccurately filed, the previous statutory and regulatory procedures will still be applicable, including penalties for late filed transactions. Policies effective on or after July 21, 2011 New and renewal policies with an effective date on or after July 21, 2011, and any modifications to them, will be subject only to the laws of Alaska if Alaska is the home state of the insured. Under SCS CSHB 164 (L&C), the reporting requirements under AS have changed from monthly to quarterly reporting and the taxes and fees imposed under AS and now must be paid quarterly. SCS CSHB 164 (L&C) also enacted AS (d) which authorizes the director to participate in agreements with other states formed for the purpose of collecting and disbursing surplus lines taxes. On July 21, 2011, Alaska officially executed the Nonadmitted Insurance Multi-State Agreement (NIMA) to become a participating state. A participating state is one that signed the NIMA agreement to share premium tax on policies with multistate exposures with the other NIMA states. Under NIMA, the quarterly surplus lines tax filings and payments must be filed by the surplus lines brokers on the due date below for the following quarters: Months in Quarterly Report Due Date January, February, March May 15 April, May, June August 15 July, August, September November 15 October, November, December February 15 2

13 Accordingly, surplus lines brokers should make the appropriate tax filings and payments by these dates as required by the cooperative agreement, notwithstanding the dates listed in AS (a). For purposes of imposing fees or penalties for late filings or late payment of taxes, the dates in AS will be used to determine the amount of any such fees or penalties. Individually licensed surplus lines brokers who work on behalf of a firm are not required to file the quarterly report. The firm must include all business written on its quarterly report. This report will include all transaction details written for the quarter. If no business is written for the quarter, no report is required to be filed. The first quarterly report due after the new law is effective is the third quarter report for all transactions occurring from July 21, 2011 September 30, 2011, which should be filed by all surplus lines brokers by November 15, Payment of the premium tax and fees should be received in the division s bank account on or before November 15, 2011 by ACH and the amount due will be the actual tax and fees as shown on the tax report. A late filing penalty may be assessed on any quarterly reports received late. A late payment penalty may be assessed on any late payments. Calculation of premium tax and filing fees beginning July 21, 2011 For new and renewal policies, when Alaska is the insured s home state, with an effective date on or after July 21, 2011, the tax and fees paid to Alaska will be calculated as follows: Total premium tax and fees to be collected on each multistate policy = (home state s tax rate x portion of premium allocated to home state) + (home state s tax rate x premium allocated to nonparticipating state if insurer is nonadmitted in that state) + (participating states tax rate x premium allocated to each participating state if insurer is nonadmitted in that state). Location of new forms Until a clearinghouse is available per the NIMA agreement for the submission of information, the division has created interim forms for submission of information. Once a clearinghouse is operational, another bulletin will be provided with submission details and requirements. From the division s home page: click on Surplus Lines just above the picture, then Surplus Lines Broker Premium Report Forms. There will be two sections, one for forms relating to reporting transactions effective before July 21, 2011 and one for transactions effective on or after July 21, Definition of Home State In the new law, AS (14) defines home state as follows: home state, for purposes of determining the home state of an insured in a multistate placement of nonadmitted insurance, is defined as follows: (A) except as provided in (B) of this paragraph, home state means, with respect to an insured, (i) the state in which an insured maintains its principal place of business or, in the case of an individual, the individual s principal residence; or 3

14 (ii) if 100 percent of the insured risk is located out of the state referred to in (i) of this subparagraph, the state to which the greatest percentage of the insured s taxable premium for that insurance contract is allocated (B) if two or more insured from an affiliated group are named insureds on a single policy, home state under (A) of this paragraph is based on the member of the affiliated group that has the largest percentage of premium attributed to it under the insurance contract; (C) for purposes of (A) of this paragraph, the principal place of business of an insured is the state where the insured maintains its headquarters and where the insured s high-level officers direct control and coordinate the business activities of the insured. If you have questions regarding the survey or instructions, contact Rebecca Nesheim by phone, (907) or Joseph Boyle by phone, (907) or by at rebecca.nesheim@alaska.gov or joseph.boyle@alaska.gov Dated: July 22, 2011 Linda S. Hall Director 4

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18 RDOC :: AK THE STATE of ALASKA GOVERNOR BILL WALKER Department of Commerce, Community, and Economic Development DIVISION OF INSURANCE 550 West Seventh Avenue, Suite 1560 Anchorage. Alaska Main: Fax: BULLETIN B TO: SURPLUS LINES BROKERS AND OTHER INTERESTED PARTIES RE: CHANGES TO EXEMPT COMMERCIAL PURCHASER MINIMUM QUALIFYING AMOUNTS Under Alaska Statute (AS) , the definition of "exempt commercial purchaser" has the meaning given under 15 U.S.C (Nonadmitted and Reinsurance Refonn Act of2010). Under 15 U.S.C. 8206(5)(C)(ii), the definition of exempt commercial purchaser with regard to the minimum qualifying amounts for three categories of exempt commercial purchaser are to increase on January 1,2015. As prescribed in 15 U.S.C.(5)(C)(ii), "the amounts in subclauses (I), (II), and (IV) of clause (C)(i) shall be adjusted to reflect the percentage change for such five-year period in the Consumer Price Index for All Urban Consumers published by the Bureau of labor Statistics of the U.S. Department of labor (CPI-U). The National Association of Insurance Commissioners has adopted the following updates to the CPI-U and Alaska will be using these amounts as set forth herein. The percentage change calculation and adjusted minimum amounts for the affected categories are shown below: Change Calculation CPI-U September * CPI-U September * Adjustment Calculation: = ( ) / Percentage Change =.102 or 10.2% Subclause Category Previous Minimum Adjusted Minimum (Effective 1/1/2015) (I) Net Worth $20,000,000 $22,040,000 (II) Annual Revenues $50,000,000 $55,100,000 (IV) Annual Budgeted Expenditures $30,000,000 $33,060,000 If you have any questions regarding this bulletin, contact Rebecca Nesheim at (907) or rebecca.nesheim@alaska.gov.

19 Dated January 9th, 2015 /s/ Lori Wing-Heier Director Privacy Policy Terms & Conditions Copyright 2015 State Net.

20 Arkansas Insurance Department Mike Beebe Governor Jay Bradford Commissioner August 24, 2011 BULLETIN NO TO: FROM: ALL INSURERS ELIGIBLE TO WRITE NONADMITTED INSURANCE IN THE STATE OF ARKANSAS, ALL LICENSED SURPLUS LINES BROKERS, ALL INSUREDS INDEPENDENTLY PROCURING NONADMITTED INSURANCE, THE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS AND OTHER INTERESTED PARTIES ARKANSAS INSURANCE DEPARTMENT SUBJECT: IMPLEMENTATION OF THE FEDERAL NONADMITTED AND REINSURANCE REFORM ACT IN ARKANSAS The purpose of this bulletin is to outline nationwide regulatory changes that will affect the placement of nonadmitted insurance in Arkansas. The Nonadmitted and Reinsurance Reform Act of 2010 ( NRRA ), 15 U.S.C. 8201, et seq., became effective on July 21, 2011 and provides that only an insured s Home State may require the payment of premium tax for nonadmitted insurance. The NRRA subjects the placement of nonadmitted insurance solely to the statutory and regulatory requirements of the insured s Home State. The term nonadmitted insurance applies only to property and casualty insurance (excluding workers compensation). Home State, Nonadmitted Insurance and all other relevant terms are defined in Ark. Code Ann Arkansas is the insured s Home State if the insured maintains its principal place of business here or, in the case of an individual, the individual s principal residence is here. If Arkansas is considered the insured s Home State, only Arkansas requirements regarding the placement of business will apply. If one hundred percent (100%) of the insured risk is located outside of Arkansas, then the insured s Home State is the state to which the greatest percentage of the insured s taxable premium for that insurance contract is allocated. If more than one insured from an affiliate group are named insureds on a single nonadmitted insurance placement, Arkansas will be considered the Home State for that placement if Arkansas is the Home State of the member of the affiliated group that has the largest percentage of premium attributed to it under such insurance contract. The NRRA permits only the insured s Home State to require the payment of premium tax for nonadmitted insurance. It is the intent of the Department to issue additional bulletins if and when Arkansas begins participating in a tax sharing arrangement with other states. Until additional 1200 West Third Street, Little Rock, AR (501) (501) fax Information (800) Consumer Services (800) Seniors (800) Criminal Inv. (866)

21 bulletins are issued, the Arkansas tax rate should be applied to new and renewal policies with an effective date on or after July 21, 2011, when Arkansas is the insured s Home State. If you have any questions regarding this bulletin or provisions of the NRRA, please contact the Legal Division at (501) _(Signed by Jay Bradford) JAY BRADFORD INSURANCE COMMISSIONER STATE OF ARKANSAS _(signed 8/24/11) DATE

22 Surplus Lines Page 1 of 3 4/3/2012 Home News Releases Annual Reports Related Links Contact Us SURPLUS LINES INSURERS Finance Division- Updated April 2, 2012! The Commissioner will continue to maintain a list of eligible surplus lines insurers. The Nonadmitted and Reinsurance Reform Act of 2010 (NRRA) restricts the eligibility requirements Arkansas may impose on a company to be a nonadmitted insurer in our state. The Items below are ANNUAL FILINGS which were in place prior to the enactment of the NRRA have been reviewed and please note the following: 1. Financial Statement and Other Filings Checklist (No longer Required) 2. Annual Continuation Form : SPECIAL NOTICE TO SURPLUS LINES INSURERS: PURSUANT TO FEDERAL LEGISLATION ENTITLED THE NONADMITTED AND REINSURANCE REFORM ACT AND 2011 ARKANSAS LEGISLATION TO IMPLEMENT THE FEDERAL ACT, SURPLUS LINES INSURERS WILL NO LONGER BE REQUIRED TO PAY ANNUAL STATE FILING FEES OR RULE 57 ANNUAL CONTINUATION FEES. ACCORDINGLY, THE FORM FOR SUBMISSION OF THOSE FEES HAS BEEN REMOVED FROM THIS WEBSITE FOR FOREIGN SURPLUS LINES INSURANCE COMPANIES. 3. Earthquake Market Analysis Due Annually April 1st (No longer required) 4. Arkansas Mandatory Comprehensive Health Insurance Pool Form (No longer Required) 5. Information on Surplus Lines Coverage (This is an informational web page document only- not a filing requirement) 6. Foreign nonadmitted insurers should request to be removed from the Approved Surplus Lines Insurers list and added to the Eligible Surplus Lines Insurers list and have their Arkansas statutory deposit released by no later than July 1, The instructions and process for operating under the NRRA are explained below. 7. For all filing Questions, Kimberly Johnson at Kimberly.johnson@arkansas.gov Approved Surplus Lines Insurers SL - (Prior to July 21, 2011 NRRA effective date) 1. Defined as a foreign nonadmitted insurer who has applied and been approved under AR Code Ann and currently maintains a minimum statutory deposit of $100,000 in our state. 2. List of Approved Surplus Lines Insurers- Use our company search feature and select Company Type Surplus Lines 3. Questions concerning Approved Surplus Lines Insurers should be directed to Kimberly Johnson, Insurance Examiner at or Kimberly.johnson@arkansas.gov 4. We are encouraging all Approved insurers to be transitioned to the Eligible Insurers list by no later than July 1, 2012, as long as you meet federal requirements. Once all the Approved companies have transitioned over we will no

23 Surplus Lines Page 2 of 3 4/3/2012 longer have an Approved list. Eligible Surplus Lines Insurers ESL - (After July 21, 2011 NRRA effective date) 1. Defined as a foreign nonadmitted insurer (does not include a risk retention group) that satisfies the following NRRA eligibility requirements: a. Insurer must be authorized to write in its domiciliary jurisdiction, and b. Have Capital and Surplus or its equivalent under the laws of its domiciliary jurisdiction, which equals the greater of the minimum capital and surplus requirement under the law of its home state, or $15,000, List of Eligible Surplus Lines Insurers- Use our company search feature and select Company Type Surplus Lines- Eligible NRRA Qualified 3. If you have never been approved in Arkansas, as a surplus lines insurer, to be added to our list of eligible surplus lines insurers we ask that you provide the following : a. Notice of Intent Letter (This is simply a letter stating that you intend to write in our state under the NRRA) addressed to the Commissioner, which includes the attached documentation: (This information should be sent to the attention of Kimberly Johnson, Insurance Examiner, Finance Division, 1200 West Third Street, Little Rock, AR ) b. Certificate of Compliance from the surplus line insurer s state of domicile. c. Copy of most recent financial statement filed with its state of domicile. d. Completed Uniform Consent to Service of Process Form (UCAA Form 12) - surplus line insurers do not have to appoint a resident agent, but provide the full name and address where a service of process is to be forwarded on Exhibit B of the form. Admitted companies holding a certificate of authority in our state must appoint a resident agent. 4. If you are an Approved Surplus Lines Insurer, to be added to our list of eligible surplus lines insurers we ask that you provide the following: NOTE: Foreign nonadmitted insurers should request to be removed from the Approved Surplus Lines Insurers list and added to the Eligible Surplus Lines Insurers list and have their Arkansas statutory deposit released. a. Send a written request (no or faxed request will be accepted) on company letterhead (it must be signed by an officer of the company) stating how it meets the NRRA eligibility requirements for an eligible surplus lines insurer as listed above. b. Certificate of Compliance from the surplus line insurer s state of domicile. c. Copy of most recent financial statement filed with its state of domicile. d. Completed Uniform Consent to Service of Process Form (UCAA Form 12) - surplus line insurers do not have to appoint a resident agent, but provide the full name and address where a service of process is to be forwarded on Exhibit B of the form. Admitted companies holding a certificate of authority in our state must appoint a resident agent. e. Include a check for $75.00, payable to the Arkansas Insurance Department Trust Fund per Rule 57 for the Release of a Security Deposit. f. Entire request should be submitted to Malisa Landers, Securities Administrator, Finance Division, 1200 West Third Street, Little Rock, AR g. No deposit will be considered for release until all fees owed from previous deposit transactions have been paid in full. The releases will be processed in the order received. Overdue Company fees or filings due to other Divisions of this Department may be collected before the final deposit release. h. Questions concerning the Deposit release process should be directed to Malisa Landers, Securities Administrator at: or Malisa.landers@arkansas.gov 5. Questions concerning Eligible Surplus Lines Insurers should be directed to Kimberly Johnson, Insurance Examiner at or Kimberly.johnson@arkansas.gov Alien Surplus Lines Insurers 1. Quarterly Listing of Alien Insurers- The National Association of Insurance Commissioners (NAIC) announced the listing is now available for reference and download from the NAIC website Application for companies which intend to apply for listing on the NAIC Quarterly Listing of Alien Insurers-

24 Surplus Lines Page 3 of 3 4/3/ For nonadmitted insurers domiciled outside the U.S., a surplus lines broker may place business with such insurers provided the insurer is listed on the Quarterly Listing of Alien Insurers maintained by the International Insurers Department of the National Association of Insurance Commissioners. 4. For questions concerning Alien Surplus Lines in Arkansas- Contact Carol Stiffler, Domestic Surplus Lines Insurers DSL 1. Qualifications for Domestic Surplus Lines Insurers- Ark. Code Ann Domestic insurer possessing policyholder surplus of at least twenty million dollars ($20,000,000) 3. All provisions of the Arkansas Insurance Code regarding financial and solvency requirements apply to domestic surplus lines insurers unless domestic surplus lines insurers are otherwise specifically exempted. 4. List of Domestic Surplus Lines Insurers- Use our company search feature and select Company Type Domestic Surplus Lines 5. Bulletin issued August 2, 2011 concerning the Licensing of Domestic Surplus Lines Insurers pursuant to Ark. Code Ann Questions concerning Domestic Surplus Lines Insurers should be directed to Kimberly Johnson, Insurance Examiner at or Kimberly.johnson@arkansas.gov 7. Financial Statement and Other Filings Checklist- (Word) (PDF) Other Useful Links & Information 1. State of Arkansas House Bill An act to authorize the Commissioner to enter into agreements with other jurisdictions to aid in the administration of taxes on surplus lines insurers, and for other purposes NRRA Law Arkansas Surplus Lines Insurance Law- Ark. Code Ann thru Home I Divisions Site Map Contact Us

25 Department of Insurance State of Arizona Office of the Director Telephone: (602) Telecopier: (602) JAN BREWER 2910 North 44th Street, Suite 210 CHRISTINA URIAS Governor Phoenix, Arizona Director of Insurance REGULATORY BULLETIN To: From: All Insurers Eligible to Write Surplus Lines Insurance in Arizona, All Licensed Surplus Lines Brokers, All Insureds Independently Procuring Nonadmitted Insurance, and Surplus Lines Association of Arizona Christina Urias Director Date: June 28, 2011 RE: Implementation of Federal Nonadmitted and Reinsurance Reform Act in Arizona The purpose of this bulletin is to outline nationwide regulatory changes that will affect the placement of nonadmitted insurance in Arizona. The Nonadmitted and Reinsurance Reform Act of 2010 ( NRRA ), 15 U.S.C et seq., provides that only an insured s Home State may require the payment of premium tax for nonadmitted insurance. Moreover, the NRRA subjects the placement of nonadmitted insurance solely to the statutory and regulatory requirements of the insured s Home State, and provides that only the insured s Home State may require a surplus lines broker to be licensed to sell, solicit or negotiate nonadmitted insurance with respect to such insured. 15 U.S.C. 8202(a), (b). Nonadmitted insurance, as defined in 15 U.S.C. 8206(9), applies only to property and casualty insurance (excluding workers compensation). Under Arizona law, unauthorized insurance and nonadmitted insurance are defined as any insurance permitted to be placed directly or through a surplus lines broker with an insurer who is not licensed to transact insurance in Arizona. A.R.S (11) The NRRA becomes effective July 21, For nonadmitted insurance business placed on or after July 21, 2011, the following information is provided for the benefit of insurers, brokers, insureds and stamping offices. What is the scope of the NRRA? The NRRA states that the placement of nonadmitted insurance is subject to the statutory and regulatory requirements solely of the insured s home state and that the NRRA 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. 15 U.S.C The NRRA does not expand the scope of the kinds of insurance that an insurer may write in the nonadmitted insurance market and each state continues to determine which kinds of insurance an insurer may write in that state. Although the NRRA preempts certain state laws with respect to nonadmitted insurance, it does not have any impact on insurance offered by insurers licensed or authorized in this state. 1 This Substantive Policy Statement is advisory only. A Substantive Policy Statement does not include internal procedural documents that only affect the internal procedures of the Agency, and does not impose additional requirements or penalties on regulated parties or include confidential information or rules made in accordance with the Arizona Administrative Procedure Act. If you believe that this Substantive Policy Statement does impose additional requirements or penalties on regulated parties you may petition the agency under Arizona Revised Statutes Section for a review of the Statement.

26 What is the insured s Home State for purposes of a particular placement? Arizona is the insured s Home State if the insured maintains its principal place of business here or, in the case of an individual, the individuals principal residence is here. A.R.S (6)(a). If Arizona is considered the insured s Home State, only Arizona s requirements regarding the placement of such business will apply. If 100% of the insured risk is located outside of Arizona, then the insured s Home State is the state to which the greatest percentage of the insured s taxable premium for that insurance contract is located. A.R.S (6)(b). If more than one insured from an affiliate group are named insureds on a single nonadmitted insurance placement, Arizona will be considered the Home State for that placement if Arizona is the Home State of the member of the affiliated group that has the largest percentage of premium attributed to it under such insurance contract. A.R.S (6)(c). How will these rules be applied? New and renewal policies with an effective date prior to July 21, 2011 will be subject to the laws and regulations of Arizona and other jurisdictions, as applicable, as of the policy effective date. The laws and regulations of Arizona and other jurisdictions, as applicable, as of the effective date of such policy will also apply to any modification during the policy period, such as all endorsements ( including risk- and premiumbearing endorsements), installment payments and premium audits. New and renewal policies with an effective date on or after July 21, 2011, and any modifications thereto, will be subject only to the laws and regulations of Arizona if Arizona is the Home State of the insured. What are the requirements for premium tax allocation and payment in Arizona? As of July 21, 2011, the NRRA permits only the insured s Home State to require the payment of premium tax for nonadmitted insurance. Until July 21, 2011, the laws and regulations of Arizona and other jurisdictions, as applicable, will continue to apply to premium tax due on multi-state placements. It is the intent of the Department to issue additional bulletins if and when Arizona begins participating in a tax sharing arrangement. Until additional bulletins are issued, the Arizona tax rate should be applied to new and renewal policies with an effective date on or after July 21, 2011, when Arizona is the insured s Home State. What are the license requirements for brokers? Only the insured s Home State may require a surplus lines broker to be licensed to sell, solicit or negotiate nonadmitted insurance with respect to a particular placement. If Arizona is the insured s Home State, the surplus lines broker must be licensed in Arizona. The NRRA provides that Arizona may not collect licensing fees for surplus lines brokers as of July 21, 2012, unless Arizona participates in the NAIC s national insurance producer database or any other equivalent uniform national database. 15 U.S.C Arizona participates in the National Insurance Producer Registry (NIPR), which provides such a database. A.R.S (H). What are the requirements for a diligent search and when is a diligent search not required? Arizona law defines diligent effort as having sought insurance for the same risk from at least three insurers authorized in Arizona to write the particular insurance coverage or type, class or kind of insurance. A.R.S (4). On or after July 21, 2011, a surplus lines broker seeking to procure or place nonadmitted insurance on behalf of an exempt commercial purchaser is not required to perform a diligent search if: 1) the broker has disclosed to the exempt commercial purchaser that insurance may or may not be available from the admitted market that 2

27 may provide greater protection with more regulatory oversight; and 2) the exempt commercial purchaser has subsequently requested in writing for the broker to procure or place such insurance from a nonadmitted insurer. Please note that Arizona uses the term industrial insured, rather than exempt commercial purchaser. Industrial insured is defined in A.R.S (C) and that definition is the same as exempt commercial purchaser under the NRRA. What are the eligibility requirements for nonadmitted insurers? The NRRA restricts the eligibility requirements a state may impose on a nonadmitted insurers. See 15 U.S.C For nonadmitted insurers domiciled in U.S. jurisdiction, a broker is permitted to place nonadmitted insurance with such insurers provide they are authorized to write such business in their state of domicile and maintain minimum capital and surplus that equals the greater of either the minimum capital and surplus requirements of imposed by A.R.S et seq., or $15 million. A.R.S (B). Arizona maintains a list of unauthorized insurers pursuant to A.R.S (G) and the list is available on the Department s website: For nonadmitted insurers domiciled outside the U.S., a broker may place business with such insurers provided the insurer is listed on the Quarterly Listing of Alien Insurers maintained by the International Insurers Department of the NAIC. What are the key definitions from the NRRA? The NRRA includes several definitions relevant to Arizona s implementation requirements. Key definitions include the following: - Exempt commercial purchaser : The term exempt commercial purchaser means any person purchasing commercial insurance that, at the time of placement, meets the following requirements: (A) The person employs or retains a qualified risk manager to negotiate insurance coverage. (B) The person has paid aggregate nationwide commercial property and casualty insurance premiums in excess of$100,000 in the immediately preceding 12 months. (C) (i) The person meets at least 1 of the following criteria: (I) The person possesses a net worth in excess of$20,000,000, as such amount is adjusted pursuant to clause (ii). (II) The person generates annual revenues in excess of $50,000,000, as such amount is adjusted pursuant to clause (ii). (III) The person employs more than 500 full-time or full-time equivalent employees per individual insured or is a member of an affiliated group employing more than 1,000 employees in the aggregate. (IV) The person is a not-for-profit organization or public entity generating annual budgeted expenditures of at least $30,000,000, as such amount is adjusted pursuant to clause (ii). (V) The person is a municipality with a population in excess of 50,000 persons. (ii) Effective on the fifth January 1 occurring after the date of the enactment of this subtitle and each fifth January 1 occurring thereafter, the amounts in subclauses (I),(II), and (IV) of clause (i) shall be adjusted to reflect the percentage change for such 5-year period in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the Department of Labor.15 U.S.C. 8206(5). - Home State : (A) In General. Except as provided in subparagraph (B), the term home State means, with respect to an insured 3

28 (i) the State in which an insured maintains it principal place of business or, in the case of an individual, the individual s principal residence; or (ii) if 100 percent of the insured risk is located out of the State referred to in clause (i), the State to which the greatest percentage of the insured s taxable premium for that insurance contract is allocated. (B) Affiliated Groups. If more than 1 insured from an affiliated group are named insureds on a single nonadmitted insurance contract, the term home State means the home State, as determined pursuant to subparagraph(a), of the member of the affiliated group that has the largest percentage of premium attributed to it under such insurancecontract.15 U.S.C. 8206(6). - Independently procured insurance : The term independently procured insurance means insurance procured directly by an insured from a nonadmitted insurer.15 U.S.C. 8206(7). - 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.15 U.S.C. 8206(9). - Nonadmitted insurer : The term nonadmitted insurer (A) means, with respect to a State, an insurer not licensed to engage in the business of insurance in such State; but (B) does not include a risk retention group, as that term is defined in section 2(a)(4) of the Liability Risk Retention Act of 1986 (15 U.S.C. 3901(a)(4)).15 U.S.C. 8206(11). - 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 government entity directly or indirectly 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.15 U.S.C. 8206(12). - 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: (A) The person is an employee of, or third-party consultant retained by, the commercial policyholder. (B) The person provides skilled services in loss prevention, loss reduction, or risk and insurance coverage analysis, and purchase of insurance. (C) The person (i) (I) has a bachelor s degree or higher from an accredited college or university in risk management, business administration, finance, economics, or any other field determined by a State insurance commissioner or other State regulatory official or entity to demonstrate minimum competence in risk management; and (II) (aa) has 3 years of experience in risk financing, claims administration, loss prevention, risk and insurance analysis, or purchasing commercial lines of insurance; or (bb) has (AA) a designation as a Chartered Property and Casualty Underwriter (in this subparagraph referred to as CPCU ) issued by the American Institute for CPCU/Insurance Institute of America; (BB) a designation as an Associate in Risk Management (ARM) issued by the American Institute for CPCU/Insurance Institute of America; (CC) a designation as Certified Risk Manager (CRM) issued by the National Alliance for Insurance Education & Research; (DD) a designation as a RIMS Fellow (RF) issued by the Global Risk Management Institute; or 4

29 (ii) (EE) 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; (I) has at least 7 years of experience in risk financing, claims administration, loss prevention, risk and insurance coverage analysis, or purchasing commercial lines of insurance; and (II) has any 1 of the designations specified in sub items (AA) through (EE) of clause (i)(ii)(bb); (iii) has at least 10 years of experience in risk financing, claims administration, loss prevention, risk and insurance coverage analysis, or purchasing commercial lines of insurance; or (iv) has a graduate degree from an accredited college or university in risk management, business administration, finance, economics, or any other field determined by a State insurance commissioner or other State regulatory official or entity to demonstrate minimum competence in risk management.15 U.S.C. 8206(13). - 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.15 U.S.C. 8206(15). - 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.15 U.S.C. 8206(16). Please direct any questions regarding this Regulatory Bulletin to Scott Greenberg, Chief Operating Officer, at (602) or sgreenberg@azinsurance.gov. The Department also plans to post on our website, additional information and guidelines regarding reporting and paying surplus lines taxes. 5

30 State Net Page 1 of 1 3/25/2015 RDOC :: CA 1467 STATE OF CALIFORNIA DEPARTMENT OF INSURANCE 45 FREMONT STREET SAN FRANCISCO, CA Bulletin No March 19, 2015 TO: All Surplus Line Brokers and Other Interested Persons SUBJECT: Exempt Commercial Insured In implementing the nonadmitted insurance provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Insurance Code Section (b) defines the term "commercial insured" to include specific dollar amounts for net worth, annual revenues, and annual budgeted expenditures, which are subject to adjustment on January 1, 2015, and each fifth January 1 occurring thereafter. Under these provisions, the specified dollar amounts are adjusted to reflect the percentage change for a five-year period in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the United States Department of Labor. Insurance Code section (b) (3) (B) requires the Commissioner to issue a bulletin to all surplus line brokers advising of any adjustments, and in so doing the Commissioner may adopt the calculations of the NAIC or other entity. The NAIC Surplus Lines (C) Task Force, at an open session during the November 2014 NAIC National Meeting, agreed to a method for calculating the adjustments. The NAIC has made the numerical calculations available to the California Department of Insurance ("CDI"). The NAIC Surplus Lines (C) Task Force adopted a standard interpretation of the phrase "such 5-year period" to be the five years beginning September 2009 and ending September The CDI issues this bulletin to advise all surplus line brokers and other interested parties of its adoption of the NAIC's adjustment calculations. Wherefore, in determining the applicability of the commercial insured definition, the percentage change calculation and adjusted minimum amounts for the affected categories should be calculated utilizing the percentages and dollar amounts shown below: Change Calculation CPI-U September * CPI-U September * *Source: CPI Detailed Report, October 2014, Table 24: Consumer Price Index for All Urban Consumers Adjustment Calculation ( )/ Percentage Change.102 or 10.2% Category Previous Minimum Adjusted Minimum as of 1/1/2015 Net Worth $20,000,000 $22,040,000 Annual Revenues $50,000,000 $55,100,000 Annual Budgeted Expenditures $30,000,000 $33,060,000 DAVE JONES Insurance Commissioner By /s/ Nettie Hoge, Chief of Staff

31 May 3, 2012 BULLETIN #1263 RE: NONADMITTED CARRIER ELIGIBILITY Effective July 21, 2011, the California Insurance Code ( CIC ) was amended to conform to the nonadmitted insurer eligibility requirements of the Nonadmitted and Reinsurance Reform Act of 2010 (the NRRA ). CIC Sections and establish the following three surplus line carrier categories: 1. LASLI carriers are preapproved carriers who have met the standards set forth in CIC , 2. Eligible carriers are carriers who have met the standards set forth in CIC and the NRRA but the CDI does not pre-approve these carriers, and 3. File and Use Recognition System carriers are carriers who have filed specific documentation set forth in CIC (c) with the CDI to be recognized as eligible by the CDI. 1. LASLI Carriers - Effective July 21, 2011, the List of Eligible Surplus Line Insurers, ("LESLI"), was replaced by the List of Approved Surplus Line Insurers, ( LASLI ). The LASLI is a voluntary list of nonadmitted insurers that the California Department of Insurance ( CDI ) has approved for use by surplus line brokers. All insurers that were on the LESLI at that time were automatically transferred to the LASLI, and thus continued to be eligible for use by surplus line brokers in California. What brokers should know about LASLI carriers: CDI s LASLI list is an optional listing brokers may rely upon for preapproved carriers California capitalization levels apply and quality of assets are pre-reviewed Officer and director backgrounds are pre-reviewed The LASLI list is updated and is posted on the CDI and SLA websites Click here for the LASLI list. 2. Eligible Carriers - LASLI is a voluntary list and insurers may opt off the list. As a result, there may be nonadmitted insurers that are not on LASLI but pursuant to the NRRA and CIC Section , are nonetheless eligible for use by surplus line brokers, as long as the broker has determined at the time of placement that the insurer meets specific eligibility criteria.

32 What brokers should know about eligible carriers: Eligible carriers do not need to file any documents with the CDI. California capitalization levels apply (for U.S. domiciled insurers only) There is no CDI pre-review or approval of capitalization levels or assets CDI does not perform officer and director background reviews Different eligibility rules apply for U.S. domiciled and non U.S. domiciled carriers A U.S domiciled ( foreign ) nonadmitted insurer (a U.S. domiciled or Branch of an alien insurer not domiciled in California) must be licensed in its state of domicile to write the type of coverage being placed and, maintain a minimum of $45 million in capital and surplus (unless excepted). A non-u.s. domiciled ( alien ) nonadmitted insurer must be on the Quarterly Listing of Alien Insurers issued by the NAIC s International Insurers Department ( IID List ). Click here for the IID List. The NAIC has stated that it does not attempt to analyze or consider either the political stability of the domiciliary country or its diplomatic relationship with the U.S. The CDI does not maintain nor does it endorse or control the accuracy of the IID list. If Brokers require more information about the IID List, they should contact the NAIC. 3. File and Use Recognition System Carriers - The Commissioner has the authority pursuant to CIC (c) to recognize that a nonadmitted insurer is eligible under the criteria set forth in CIC Sections (a) and (b) if the documents that are specified in CIC Section (c) are filed with the CDI by the insurer or a broker on its behalf. Consistent with this authority, the Commissioner has established a File and Use Recognition System List comprised of companies on whose behalf the required documents have been filed with the CDI. In order for the information that is required to be filed to be readily available to the CDI, such filings are strongly encouraged. The File and Use Recognition System List, however, is Informational only. Carriers that are not on the File and Use Recognition System List may still be used if they meet the eligibility standards (See above Eligible Carriers). Further, regardless of whether or not a carrier is on the File and Use Recognition List and in accord with CIC Section , the broker has a separate duty to determine that a carrier is eligible at the time of each placement. What brokers should know about the file and use system: Brokers and/or carriers make basic filings to get carriers on the CDI File and Use Recognition System List California s capitalization levels apply, but CDI does not pre-review or approve capitalization levels or assets CDI does not perform officer and director background reviews CDI recognition system permits CDI to have information about the carrier and respond to public inquiries

33 Click here for a copy of the File and Use Recognition System List. NONADMITTED CARRIER INELIGIBILITY If the Commissioner determines that a carrier is not eligible, the Commissioner may issue an order and ask the SLA to notify all surplus line brokers that the carrier is no longer eligible. If you have any questions, please feel free to contact myself or Linda Cheng at Sincerely, Joy Erven Director, Stamping Office The Surplus Line Association of California 50 California Street, 18th Floor San Francisco, CA

34 January 8, 2013 BULLETIN #1278 RE: UPDATE ON NONADMITTED CARRIER ELIGIBILITY Following the enactment of Assembly Bill 2303 on September 29, 2012, California Insurance Code (CIC) Section (c) has been repealed. As a result, effective January 1, 2013, the File and Use Recognition System no longer exists. Companies that previously appeared on the File and Use System List may still be used for California placements provided the broker has verified or determined eligibility. Effective January 1, 2013, nonadmitted insurers are only eligible to place business in California if the insurers have met the requirements established under CIC or CIC As such, brokers must ensure that the nonadmitted insurer with whom the broker is making the placement for California home state insureds would qualify under the following: CIC (Eligible Carriers) Brokers may make placements with a nonadmitted insurer provided at the time of placement the broker has determined that the carrier has met the following: - For a Foreign (US domiciled) insurer, the insurer must be licensed in its domiciliary jurisdiction to write the type of coverages being placed in California, and maintain a minimum capital and surplus or its equivalent of at least $45 million (unless excepted). - For an Alien (non-u.s. domiciled) insurer, the insurer must be on the current International Insurers Department Quarterly Listing of Alien Insurers (IID List) maintained by the National Association of Insurance Commissioner (NAIC). Click here for the current IID List. Please note that there is NO published list of eligible foreign carriers under CIC CIC (LASLI Carriers) These are carriers on the California List of Approved Surplus Line Insurers (LASLI). The LASLI is an optional listing of nonadmitted insurers that the California Department of Insurance (CDI) has approved for use by California surplus line brokers. These carriers have voluntarily provided the CDI with specific documents for examination and have been determined to have met the financial stability, reputation and integrity requirements as set forth in CIC

35 The LASLI is updated and posted on the CDI and SLA websites. Click here for the LASLI. Nonadmitted Carrier Ineligibility If the Commissioner determines that a carrier is not eligible, the Commissioner may issue an order and ask the SLA to notify all surplus line brokers that the carrier is no longer eligible. If you have any questions, please feel free to contact myself or Linda Cheng at Sincerely BMcK Benjamin J. McKay, J.D. M.P.A. Executive Director

36 September 25, 2013 Bulletin # 1288 RE: California LASLI Filing Requirements Guide for Surplus Line Insurers (Guide) Attached is the 2013 Guide issued by the California Department of Insurance (CDI) for nonadmitted insurers who wish to remain on or be added to the List of Approved Surplus Line Insurers (LASLI). The LASLI is a voluntary list of nonadmitted insurers that the CDI has approved for use by surplus line brokers for placement of risks when California is the insured s home state. The filing requirements are in accordance with California Insurance Code You may also obtain the Guide from the SLA website The filing requirements for 2013 are essentially the same as those in the prior year, except for the filing fees. Effective June 15, 2013, the new filing fees are as follows: Type of Filing Filing Fee LASLI application $5,052 Annual renewal $2,526 Financial update $282 Non-financial update $41 Should you have any questions, please call me or Patrice Kwang at (800) or (415) You may also contact the CDI as follows: Carol Frair, Senior Staff Counsel, Corporate Regulatory Affairs Bureau at (415) , or Shannon Carrion, Bureau Chief, Licensing Compliance & Company Investigations Bureau at (916) Sincerely, LC/pk Attachment Linda Cheng Manager, Financial Department

37 STATE OF CALIFORNIA DEPARTMENT OF INSURANCE LICENSING SERVICES DIVISION 300 CAPITOL MALL, SUITE 1600 SACRAMENTO, CA (916) (916) [FAX] Dave Jones, Insurance Commissioner CALIFORNIA LASLI FILING REQUIREMENTS GUIDE FOR SURPLUS LINE INSURERS This document provides guidance as regards some frequently asked questions ( FAQs ) and provides guidance on the filing requirements for nonadmitted insurers wishing to be added to or to continue to be on the List of Approved Surplus Line Insurers ( LASLI ). The Guide is intended to assist those who prepare regulatory filings for nonadmitted insurers. It is not all inclusive and does not supersede the actual language of the governing statutory California surplus line laws and regulations, specifically CIC FAQs Q: What is the LASLI? A: The LASLI is a List of Approved Surplus Line Insurers in California. The LASLI is an optional listing and an insurer need not be on the LASLI to be used for surplus line placements in California if the alien (non-us domiciled) nonadmitted insurer is on the Quarterly Listing of Alien Insurers maintained by the NAIC International Insurers Department, or if the foreign (US domiciled) nonadmitted insurer satisfies other financial and licensing requirements set forth in CIC Both foreign and alien nonadmitted insurers may be included on the LASLI provided they satisfy the standards set forth in CIC Q: Where can one obtain a copy of the LASLI? A: The LASLI is available on the California Department of Insurance s ( CDI ) website at Q: What are the requirements to become LASLI listed? A: Refer to the attached Guide for a summary of the requirements or refer to CIC for detailed requirements. Q: Under the LASLI requirements, all financial and certain non-financial documents need to be certified or verified. If these documents are available from the National Association of Insurance Commissioners ( NAIC ) or other public source, is certification or verification of documents still required? #728425v1

38 California Department of Insurance California LASLI Filing Requirements Guide for Surplus Line Insurers Page 2 of 17 A: If the financial and certain non-financial documents are available from the NAIC or other public source, certification or verification of these documents is not required. However, if hard copies of the documents are provided to the CDI instead, these documents must be certified or verified and submitted in quadruplicate (one original and three photocopies). Q: What are the required filing fees? A: Refer to the Guide for details of the fees for a LASLI application, and subsequent annual renewals and update filings. The fees are posted on the CDI s website as well: fees/upload/ fee-schedule-final.pdf Q: Where should the documents and fees be filed? A: All documents and fees should be submitted to the following address: Accounting Services Bureau State of California Department of Insurance 300 Capitol Mall Sacramento, CA #728425v v v1 Revised September 25, 2013

39 California Department of Insurance California LASLI Filing Requirements Guide for Surplus Line Insurers Page 3 of 17 The Guide is divided into the following sections: I. LASLI Filing Requirements II. Document Filing Requirements A. Filing Requirements for Foreign Insurers B. Filing Requirements for Alien Insurers III. Definitions of Certified and Verified IV. Annual Renewal Requirements V. Update Filing Requirements A. Update Filing Requirements for Foreign Insurers B. Update Filing Requirements for Alien Insurers VI. Suggested Dates for Filing Financial Documents VII. Filing Fees Schedule Exhibit A Exhibit B Exhibit C Exhibit D Exhibit E Exhibit F Verified Regulatory Disclosure Statement Verified Statement to be used when Certification is Unavailable Verified Statement Incorporating Previously Filed Documents Verified Statement to be used when Certificate of Good Standing, Certificate of Compliance, or Equivalent Certificate is Unavailable Document Checklists for Foreign and Alien Insurers Verified Statement to be used to Identify Documents that are Available from the NAIC #728425v v v1 Revised September 25, 2013

40 California Department of Insurance California LASLI Filing Requirements Guide for Surplus Line Insurers Page 4 of 17 I. LASLI Filing Requirements To be considered for placement on the LASLI, a nonadmitted insurer must make an application to the CDI and submit all the documents specified under CIC (c) and (d), along with a filing fee of $5,052. The required documents and applicable filing fee are summarized in Sections II and VII of this Guide, respectively. Subsequent to its placement on the LASLI, the nonadmitted insurer is required to renew its status annually by submitting updates of the documents set forth in CIC (c) and (d). The documents submitted must demonstrate that the insurer meets the following standards: A. The insurer has established its financial stability, reputation, and integrity for the class of insurance it proposes to place with California surplus line brokers {CIC (a)(1)}. B. A nonadmitted insurer who wishes to operate as an approved surplus line carrier in California must have and maintain a minimum capital and surplus of $45 million at all times. The insurer must also have at least $25 million in assets acceptable under CIC (a)(2)(A). Acceptable assets are essentially comprised of cash, or securities falling within CIC 1170 to 1182, or readily marketable securities listed on regulated US national or principal regional securities exchanges. If a nonadmitted insurer has less than $45 million in capital and surplus, then the carrier may request an affirmative finding of acceptability from the Commissioner based upon factors such as quality of management, capital and surplus of any parent company, company underwriting profit and investment income trends, market availability and company record and reputation within the industry. C. For a new applicant, the insurer must have actively transacted insurance for at least three years immediately prior to its application for surplus line eligibility unless an exemption is granted {CIC (e)(3)}. D. Alien insurers must have established an irrevocable US trust account consisting of cash and marketable securities of no less than $5.4 million at all times with a qualified US financial institution. Letters of credit may be used to fund the trust account, provided they are issued by a qualified US financial institution. {CIC (b)(1)} E. The insurer must currently hold a license to issue insurance policies (other than reinsurance) to residents of the jurisdiction that granted the license unless it has been granted an exemption {CIC (e)(4)}. F. All documents filed must be complete, clear, comprehensible, unambiguous, accurate and consistent {CIC (e)(1)}. #728425v v v1 Revised September 25, 2013

41 California Department of Insurance California LASLI Filing Requirements Guide for Surplus Line Insurers Page 5 of 17 G. The insurer must have an appointed California-licensed surplus line broker who has agreed to act as its contact broker to assist with the insurer s LASLI application and subsequent regulatory filing responsibilities in California (CIC ). A nonadmitted insurer may make its LASLI application, annual renewal filings, and update filings directly with the CDI provided the insurer keeps its contact broker informed. It is recommended that the contact broker maintain a complete set of all such filings. II. Document Filing Requirements All required documents must be filed in accordance with the provisions of CIC (c) and (d). All financial and certain non-financial documents must be certified, while several other required documents must be verified. For definitions of certified and verified, refer to Section III of this Guide. In addition, the following standards must be met: (1) All communications and documents filed must be submitted in, or translated into, the English language. All financial data must be converted into US dollars. (2) Documents filed must be complete, in that pages cannot be omitted or cut off and they must include all referenced schedules, exhibits and/or attachments. (3) Documents filed must be legible. (4) Documents must be filed in quadruplicate (at least one original and up to three photocopies). If any required document(s) is not available at the time of the insurer s filing, the insurer should provide an explanation why the document(s) was not included and an estimate as to when the document(s) will be made available to the CDI. If a required document is available from the NAIC or other public source, then the document need not be filed with the CDI, and certification or verification of this document is not necessary. However, the insurer will still have to submit a verified statement to the CDI identifying the document that is available from the NAIC or other public source along with the appropriate filing fee. Exhibit F is a specimen of such verified statement that the Commissioner considers to be in compliance with the California Insurance Code. The filing requirements for foreign are slightly different from alien insurers; hence, requirements for these two types of insurers are addressed in separate sections #728425v v v1 Revised September 25, 2013

42 California Department of Insurance California LASLI Filing Requirements Guide for Surplus Line Insurers Page 6 of 17 A. Filing Requirements for Foreign Insurers Foreign insurers must file each of the documents listed below (in quadruplicate, one original and three photocopies) with the LASLI application and, subsequent to their placement on the LASLI, at least annually as part of the annual renewal process or as an update filing: 1. Annual Statement of the insurer not older than 12 months, and prepared in the NAIC prescribed format {CIC (c)(1)(A) & (D)(i)}. The Annual Statement must be certified and include all supplementary reports, exhibits, and schedules required by the NAIC. 2. Audited Financial Report of the insurer, prepared by an independent certified public accountant or accounting firm ( CPA ), showing the insurer s condition as of a date not more than 12 months prior to submission {CIC (c)(1)(B)}. The CPA must be in good standing with the American Institute of Certified Public Accountants in all states where the CPA is licensed to practice. The Audited Financial Report must be prepared in accordance with statutory accounting practices prescribed, or otherwise permitted, by the insurance regulator of the insurer s domiciliary jurisdiction. CIC (c)(1)(D)(i) requires Audited Financial Reports to be certified; however, the CDI will accept verified copies if certified copies are not available at the time of filing. The CDI expects to receive certified copies when they become available. Exhibit B is a specimen of such a verification statement that the Commissioner considers to be in compliance with the California Insurance Code. 3. A certified copy of the insurer s current License or Certificate of Authority issued by its domiciliary jurisdiction. The license should set forth the insurer s authority to transact the types of insurance it proposes to provide California home state insureds {CIC (c)(2)}. 4. A Certificate of Good Standing, Certificate of Compliance, or other Equivalent Certificate issued by the insurer's domiciliary jurisdiction {CIC (c)(2)}. If such certification is not available from its domiciliary jurisdiction or any other state where it is licensed, the insurer must provide a verified statement signed by a responsible executive or officer of the company. Exhibit D is a specimen of such a verification statement that the Commissioner considers to be in compliance with the California Insurance Code. 5. Agent for Service of Process appointed by the insurer to receive service of suits filed against the insurer. The Agent must be located in California. Information #728425v v v1 Revised September 25, 2013

43 California Department of Insurance California LASLI Filing Requirements Guide for Surplus Line Insurers Page 7 of 17 must include the Agent s full name, the name of the firm the Agent represents, business address, telephone and fax numbers where the agent can be reached during normal business hours {CIC (c)(3)}. 6. Principal Place of Business of the insurer, including complete street address, mailing address, telephone and fax numbers {CIC (c)(4)}. 7. An Explanation, Report, or other Statement as to the Insurer's Record Regarding Market Conduct and Consumer Complaints. Such report should be from the insurance regulatory office or official of the insurer's domiciliary jurisdiction and may be certified or verified {CIC (c)(5)}. If such report is not available from the insurer s domiciliary jurisdiction for the current filing year, or if the market conduct report is older than 12 months, then the insurer can provide a verified statement describing its own record regarding market conduct, and its own record of claims payment and treatment of policyholders. 8. Regulatory Disclosure Statement. A verified statement that discloses any currently known regulatory actions pending against the insurer or any affiliated entities {CIC (c)(6)} for the current filing year. These regulatory actions include, but are not limited to, legal proceeding for receivership, conservation, liquidation, license revocation or suspension, or any other cease and desist order. If the insurer or its affiliate(s) is subject to such proceedings, the statement must identify the proceeding by date, jurisdiction, and relief or sanction sought. Copies of any outstanding orders must also be attached to the statement. For insurers and their affiliates who are not subject to any such actions, Exhibit A is a specimen of such a verified regulatory disclosure statement that the Commissioner considers to be in compliance with the California Insurance Code. 9. The insurer s Proposed Plan of Operation in California {CIC (d)(1)}. The Plan assists the Commissioner in determining whether the insurer has the financial stability, reputation and integrity for the class of insurance it proposes to accept from surplus line brokers, and in ascertaining that (i) the insurer does not intend to offer in California products that violate CIC (e)(6); and (ii) the insurer does not conduct any activity through its affiliate that constitutes the transaction of insurance in this State or a violation of CIC 700 and 703. The Plan should include the following information: a) A brief description of the products the insurer intends to accept from California surplus line brokers. #728425v v v1 Revised September 25, 2013

44 California Department of Insurance California LASLI Filing Requirements Guide for Surplus Line Insurers Page 8 of 17 b) A list of all affiliated companies who are admitted in California, including any affiliate(s) applying for admission in this State. c) An explanation as to how the coverages offered by the nonadmitted insurer differ from those offered by affiliated insurers (if any) transacting business in California on an admitted or nonadmitted basis. d) A brief description of the insurer s reinsurance program(s). e) If applicable, a description of any administrative services to be rendered in California by an affiliated insurer domiciled in California. For new applicants, the insurer s business plan should also include: (1) three- to five-year written premium volume projections by line(s) of business, both worldwide and in California; and (2) three- to five-year pro forma statutory financial statements along with the assumptions used. 10. Biographical Affidavits on the Officers and Directors of the insurer {CIC (d)(1)}. If the insurer has filed these with the NAIC, they must also be filed in California. 11. Latest Report of Examination of the insurer issued by its domiciliary regulator. If the latest Report is not available at the time of the filing, the insurer must provide an explanation why it is not available, and an estimate as to when the latest Report should be made available {CIC (c)(7)}. All copies must be certified. 12. List of Surplus Line Brokers Authorized to Issue Policies on Behalf of the Insurer {CIC (c)(8)}. California-licensed surplus line broker(s) may issue policies on behalf of a nonadmitted insurer provided the broker(s) has a written authorization from the insurer. The insurer is required to provide the Commissioner with a list of those California-licensed surplus line brokers who have been granted such authorization. If the insurer has not granted this authority to any broker, the insurer must submit a statement that indicates no broker has the authority to issue policies on the insurer s behalf. 13. Quarterly Financial Statements of the insurer for the current year if available at the time of making the LASLI application. For LASLI-listed companies, Quarterly Statements are normally filed as updates. {CIC (d)(1)} Quarterly Statements must be certified and filed as soon as they are available; however, the CDI will accept verified copies if certified copies are not available at the time of filing. The CDI also expects to receive certified copies when they do become available. Exhibit B is a specimen of such a verification statement that the #728425v v v1 Revised September 25, 2013

45 California Department of Insurance California LASLI Filing Requirements Guide for Surplus Line Insurers Page 9 of 17 Commissioner considers to be in compliance with the California Insurance Code. B. Filing Requirements for Alien Insurers Alien insurers must file each of the documents listed below (in quadruplicate, one original and three photocopies) with the LASLI application and, subsequent to their placement on the LASLI, at least annually as part of the annual renewal process or as an update filing: 1. Standard IID Financial Reporting Format ( IID Report ) of the insurer not more than 12 months old. The IID Report (including all the required schedules and exhibits) shall be prepared following the filing instructions as prescribed by the International Insurers Department ( IID ) of the NAIC {CIC (c)(1)(A) & (E)}. There are two filings of this IID Report: (a) An initial financial filing as required by the NAIC IID that is due within three months of the insurer s year-end; and (b) the final filing as required by the NAIC IID that is due within seven months of the insurer s year-end. However, if the insurer is waived by the NAIC IID from providing its initial filing, the insurer must advise the CDI in writing by March 31 st that it will submit its final filing no later than May 31 st of each year. All copies of the financial statement must be certified; however, the CDI will accept verified copies if certified copies are not available at the time of filing. The CDI expects to receive certified copies when they do become available. Exhibit B is a specimen of such a verification statement that the Commissioner considers to be in compliance with the California Insurance Code. 2. Audited Financial Report of the insurer, prepared by an independent licensed auditor in the insurer s domiciliary jurisdiction, showing the insurer s condition as of a date not more than 12 months prior to submission {CIC (c)(1)(B) & (E)}. The Aaudited Financial Report must be prepared in accordance with either (i) Generally Accepted Auditing Standards that prescribe Generally Accepted Accounting Principles, or (ii) International Accounting Standards as published and revised from time to time by the International Auditing Guidelines published by the International Auditing Practice Committee of the International Federation of Accountants. The Audited Financial Report must include financial statement notes and a summary of significant accounting practices. All copies of the Audited Financial Report must be certified; however, the CDI will accept verified copies if certified copies are not available at the time of filing. The CDI expects to receive certified copies when they become available. Exhibit B is a specimen of such a verification statement that the Commissioner considers to be #728425v v v1 Revised September 25, 2013

46 California Department of Insurance California LASLI Filing Requirements Guide for Surplus Line Insurers Page 10 of 17 in compliance with the California Insurance Code. 3. US Trust Agreement of the insurer {CIC (c)(1)(C)(i)} prepared in accordance with the NAIC Standard Form Trust Agreement for Alien Excess or Surplus Lines Insurers (as amended January 1, 2007). All copies of the agreement must be certified. The trustee bank may certify these agreements. 4. Most recent quarterly Statement of Account or List of Assets in the Trust Account {CIC (c)(1)(C)(ii)}. This Statement, generally provided on a regular basis by the trustee bank, shows a list of the assets held in the insurer s trust account at the end of each quarter. The Statement must be verified. Exhibit B is a specimen of such a verification statement that the Commissioner considers to be in compliance with the California Insurance Code. 5. A certified copy of the insurer s current License or Certificate of Authority issued by its domiciliary jurisdiction. The license should set forth the insurer s authority to transact the types of insurance it proposes to provide California home state insureds {CIC (c)(2)}. Each alien insurer must make every attempt to get a certified copy of its license issued by its domiciliary jurisdiction. 6. A Certificate of Good Standing, a Certificate of Compliance, or other Equivalent Certificate issued by the insurer's domiciliary jurisdiction {CIC (c)(2)}. If such certification is not available from its domiciliary jurisdiction, the insurer must provide a verified statement signed by a responsible executive or officer of the company. Exhibit D is a specimen of such a verification statement that the Commissioner considers to be in compliance with the California Insurance Code. 7. Agent for Service of Process in California appointed by the insurer to receive service of suits filed against the insurer. The Agent must be located in California. Information must include the Agent s full name, the name of the firm the Agent represents, business address, telephone and fax numbers where the agent can be reached during normal business hours {CIC (c)(3)}. 8. Principal Place of Business of the insurer, including complete street address, mailing address, telephone and fax numbers {CIC (c)(4)}. 9. An Explanation, Report, or other Statement as to the Insurer's Record Regarding Market Conduct and Consumer Complaints. Such report should be from the insurance regulatory office or official of the insurer's domiciliary jurisdiction and may be certified or verified {CIC (c)(5)}. #728425v v v1 Revised September 25, 2013

47 California Department of Insurance California LASLI Filing Requirements Guide for Surplus Line Insurers Page 11 of 17 If such report is not available from the insurer s domiciliary jurisdiction for the current filing year, or if the market conduct report is older than 12 months, then the insurer can provide a verified statement describing its own record regarding market conduct, and its own record of claims payment and treatment of policyholders. 10. Regulatory Disclosure Statement. A verified statement that discloses any currently known regulatory actions pending against the insurer or any affiliated entities {CIC (c)(6)} for the current filing year. These regulatory actions include, but are not limited to, legal proceeding for receivership, conservation, liquidation, license revocation or suspension, or any other cease and desist order. If the insurer or its affiliate(s) is subject to such proceedings, the statement must identify the proceeding by date, jurisdiction, and relief or sanction sought. Copies of any outstanding orders must also be attached to the statement. For insurers and their affiliates who are not subject to any such actions, Exhibit A is a specimen of such a verified regulatory disclosure statement that the Commissioner considers to be in compliance with the California Insurance Code. 11. The insurer s Proposed Plan of Operation in California {CIC (d)(1). The Plan assists the Commissioner in determining whether the insurer has the financial stability, reputation and integrity for the class of insurance it proposes to accept from surplus line brokers and in ascertaining that (i) the insurer does not intend to offer in California products that violate CIC (e)(6); and (ii) the insurer does not conduct any activity through its affiliate that constitutes the transaction of insurance in this State or a violation of CIC 700 and 703. The Plan should include the following information: a) A brief description of the products the insurer intends to accept from California surplus line brokers. b) A list of all affiliated companies who are admitted in California, including any affiliate(s) applying for admission in this State. c) An explanation as to how the coverages offered by the nonadmitted insurer differ from those offered by affiliated insurers (if any) transacting business in California on an admitted or nonadmitted basis. d) A brief description of the insurer s reinsurance program(s). e) Premiums written in California by lines of business. f) If applicable, a description of any administrative services to be rendered in California by an affiliated insurer domiciled in California. For new applicants, the insurer s business plan should also include: (1) three- to #728425v v v1 Revised September 25, 2013

48 California Department of Insurance California LASLI Filing Requirements Guide for Surplus Line Insurers Page 12 of 17 five-year written premium volume projections by line(s) of business, both worldwide and in California; and (2) three- to five-year pro forma statutory financial statements along with the assumptions used. 12. Biographical Affidavits on the Officers and Directors of the insurer {CIC (d)(1)}. If these affidavits are filed in the insurer s home jurisdiction or elsewhere, they must also be filed in California. 13. List of Surplus Line Brokers Authorized to Issue Policies on Behalf of the Insurer {CIC (c)(8)}. California-licensed surplus line broker(s) may issue policies on behalf of a nonadmitted insurer provided the broker(s) has a written authorization from the insurer. The insurer is required to provide the Commissioner with a list of those California-licensed surplus line brokers who have been granted such authorization. If the insurer has not granted this authority to any broker, the insurer must submit a statement that indicates no broker has the authority to issue policies on the insurer s behalf. 14. Quarterly or Half-Yearly Results for the current year, if available, should be included with the insurer s LASLI application. For LASLI-listed companies, Quarterly or Half-yearly Results are normally filed as updates. Quarterly or Half-yearly Results must be certified or verified, and filed as soon as they are available {CIC (d)(1)}. Exhibit B is a specimen of such a verification statement that the Commissioner considers to be in compliance with the California Insurance Code III. Definitions of Certified and Verified Certified an originally signed or sealed statement, dated not more than 60 days before submission, made by a public official or other person (someone at the Department of Insurance of the insurer s domiciliary jurisdiction), attached to a copy of a document, attesting that the copy is a true copy of the original, and that the original is in the custody of the person making the statement {CIC (a)}. Verified a document or copy accompanied by an originally signed statement, dated not more than 60 days before submission, from a responsible executive or official who has authority to provide the statement and knowledge whereof he or she speaks, attesting either under oath before a notary public, or under penalty of perjury under California law, that the assertions made in the document are true {CIC (q)}. #728425v v v1 Revised September 25, 2013

49 California Department of Insurance California LASLI Filing Requirements Guide for Surplus Line Insurers Page 13 of 17 IV. Annual Renewal Requirements To maintain their surplus line eligibility in California and to ensure continual compliance with the requirements of CIC , LASLI-listed companies are required to renew their eligibility status annually. This renewal process includes the filing of up-to-date versions of all the documents required under CIC (c) & (d) along with a $2,526 filing fee. {CIC (i) and (j)} Approved insurers may incorporate certain previously filed documents (except for the Market Conduct Information and Regulatory Disclosure Statement) into a current annual renewal package, provided there were no changes to the information in those documents. To incorporate a previously filed document(s) into a current annual filing, the insurer must: (1) Submit a verified statement that lists the document(s) previously provided to the CDI and affirm that there has been no change to the information contained in the previously filed document(s); and (2) make a specific reference to the prior filing(s) in its current annual renewal filing. Exhibit C is a specimen of such verified statement that the Commissioner considers to be in compliance with the California Insurance Code. Insurers may not incorporate a previously filed Market Conduct Report (or Market Conduct Information Statement) and a previously filed Regulatory Disclosure Statement into a current annual renewal filing, even if the information previously provided has not changed, since the information in these documents pertains to a specific period. Each year, a LASLI-listed company is required to submit market conduct information pertaining to the current filing year. If such information is not available from its domiciliary jurisdiction, the insurer must then submit a verified statement describing its record of claims payment and treatment of policyholders for the current filing period. A LASLI-listed company is also required to submit a Regulatory Disclosure Statement each year, stating whether the insurer or any of its affiliates is subject to regulatory actions. A standardized Regulatory Disclosure Statement acceptable by the Commissioner has been incorporated into Exhibit A for insurers and their affiliates who are not subject to any such actions. When to File: Annual renewal filings should be made on or before the anniversary of the insurer s LASLI approved date; however, insurers do not have to wait until their LASLI anniversary date to make a filing. It is strongly recommended that insurers make their annual renewal filing as soon as all the required materials are available. #728425v v v1 Revised September 25, 2013

50 California Department of Insurance California LASLI Filing Requirements Guide for Surplus Line Insurers Page 14 of 17 All applications, annual renewals, and update filings must be filed with the CDI. These filings may be made through the insurer s California contact broker or directly to the CDI, provided the insurer keeps its contact broker informed. Where to File: All documents and fees must be sent to the CDI at the following address: Accounting Services Bureau State of California Department of Insurance 300 Capitol Mall Sacramento, CA Regulatory Filing Contacts: For questions regarding surplus lines eligibility and filing requirements, please contact: Carol Frair Shannon Carrion Senior Staff Counsel Chief, Licensing Compliance and Corporate Regulatory Affairs Bureau OR Company Investigations Bureau 45 Fremont Street 320 Capitol Mall San Francisco, CA Sacramento, CA (415) (916) V. Update Filing Requirements A. Update Filing Requirements for Foreign Insurers Whenever any previously-filed document (described in Section II above) becomes outdated, a LASLI-listed Foreign insurer is required to file the new, up-to-date version of the document, as soon as it becomes available, along with the appropriate filing fee with the CDI. If a required document is available from the NAIC or other public source, then the document need not be filed with the CDI. However, the insurer will have to submit a verified statement to the CDI identifying the document that is available from the NAIC or other public source along with the appropriate filing fee. Exhibit F is a specimen of such verified statement that the Commissioner considers to be in compliance with the California Insurance Code. The following classifies the documents as financial, non-financial or supplemental information based on the required filing fee: 1. Updated Financial Document requiring a $282 filing fee. (a) NAIC Annual Statement (b) Audited Financial Report (c) Report of Examination (d) NAIC Quarterly Statements #728425v v v1 Revised September 25, 2013

51 California Department of Insurance California LASLI Filing Requirements Guide for Surplus Line Insurers Page 15 of Updated Non-financial Document requiring a $41 filing fee. (a) Certificate of Authority (b) Certificate of Good Standing or Compliance (c) Agent for Service of Process (d) Principal Place of Business (e) Market Conduct Report (f) Regulatory Disclosure Statement (g) List of surplus line brokers authorized to issue policies (h) Any other material change involving the company s operations (e.g. name change, domiciliary change, ownership change, etc.) 3. Updated Supplemental Information requiring a $41 filing fee. (a) Proposed Plan of Operation (b) Biographical Affidavits on Officers & Directors B. Update Filing Requirements for Alien Insurers Whenever any previously-filed document (described in Section II above) becomes outdated, a LASLI-listed Alien insurer is required to file the new, up-to-date version of the document, as soon as it becomes available, along with the appropriate filing fee with the CDI. If a required document is available from the NAIC or other public source, then the document need not be filed with the CDI. However, the insurer will have to submit a verified statement to the CDI identifying the document that is available from the NAIC or other public source along with the appropriate filing fee. Exhibit F is a specimen of such verified statement that the Commissioner considers to be in compliance with the California Insurance Code. The following classifies the documents as financial, non-financial or supplemental information based on the required filing fee: 1. Updated Financial Document requiring a $282 filing fee. (a) Standard IID Financial Reporting Format Initial (b) Standard IID Financial Reporting Format Final (c) Audited Financial Report (d) Quarterly or Half-Yearly Results 2. Updated Non-Financial Document requiring a $41 filing fee. (a) Certificate of Authority (b) Certificate of Good Standing or Compliance (c) Trust Agreement (d) Statement of Trust Assets (e) Agent for Service of Process (f) Principal Place of Business #728425v v v1 Revised September 25, 2013

52 California Department of Insurance California LASLI Filing Requirements Guide for Surplus Line Insurers Page 16 of 17 (g) Market Conduct Report (h) Regulatory Disclosure Statement (i) List of surplus line brokers authorized to issue policies (j) Any other material change involving the company s operations (e.g. name change, domiciliary change, ownership change, etc.) 3. Updated Supplemental Information requiring a $41 filing fee. (a) Proposed Plan of Operation (b) Biographical Affidavits on Officers & Directors VI. Suggested Dates for Filing Financial Documents The CDI requires LASLI-listed companies to file new, amended, or updated financial documents as soon as they are available and in accordance with the provisions of CIC Updated financial documents are generally available when they are due for regulatory filing with the insurer s domiciliary jurisdiction. Therefore, the CDI expects to receive the new financial documents no later than the dates specified below. If a required document is available from the NAIC or other public source, then the document need not be filed with the CDI. However, the insurer will have to submit a verified statement to the CDI identifying the document that is available from the NAIC or other public source along with the appropriate filing fee. Exhibit F is a specimen of such verified statement that the Commissioner considers to be in compliance with the California Insurance Code. Foreign Insurers Financial Document Annual Statement March 31 st Quarterly Statement Audited Financial Statement June 30 th Quarterly Statement September 30 th Quarterly Statement Alien Insurers Financial Document Standard IID Reporting Format Initial Standard IID Reporting Format Final Audited Financial Report Document Should be Filed NO LATER than April 30 th each year May 31 st each year June 30 th each year August 30 th each year November 30 th each year Document Should be Filed NO LATER than April 15 th each year August 15 th each year An Alien insurer should file their audited financial statement 15 days after it is due for regulatory filing with the insurer s domiciliary regulators. #728425v v v1 Revised September 25, 2013

53 California Department of Insurance California LASLI Filing Requirements Guide for Surplus Line Insurers Page 17 of 17 March 31 st Listing of Assets in Trust Account June 30 th Listing of Assets in Trust Account September 30 th Listing of Assets in Trust Account December 31st Listing of Assets in Trust Account Quarterly or Half-Yearly Results April 15 th each year July 15 th each year October 15 th each year January 15 th each year Due as soon as they are available VII. Filing Fees Schedule All checks for filing fees must be made payable to the California Department of Insurance in US dollars {CIC (j)}. The following filing fees are in effect as of June 15, 2013: Type of Filing Filing Fee LASLI Application $5,052 Subsequent Annual Renewal (see Section IV above) $2,526 Updated Financial Document $282* Updated Non-Financial Document $41* Updated Supplementary Information $41* *Note: These fees apply only if the document(s) is submitted to the CDI as an update filing (see Section V above for more details) and NOT as part of the insurer s annual renewal. #728425v v v1 Revised September 25, 2013

54 #728425v1 EXHIBIT A

55 REGULATORY DISCLOSURE STATEMENT (a nonadmitted insurer) and its affiliated entities are currently not known to be the subject of any order or proceeding regarding conservation, liquidation, or other receivership; or regarding revocation or suspension of a license to transact insurance in any jurisdiction; or otherwise seeking to stop the insurer from transacting insurance in any jurisdiction. I make this statement as an executive or official who has authority to provide the statement and knowledge whereof he or she speaks and under penalty of perjury under California law that the assertions are true. Signature Title Name Date Revised January 29, 2004 #728425v1

56 #728425v1 EXHIBIT B

57 V E R I F I C A T I O N I declare under penalty of perjury under California law that this is a true correct copy of the original, and that I am an (Name of Document) executive or officer of who has (Name of the Nonadmitted Insurer) the authority to provide this declaration. Signature Title Name Date Revised January 29, 2004 #728425v1

58 #728425v1 EXHIBIT C

59 V E R I F I C A T I O N As an officer or executive of who has the (Name of the nonadmitted Insurer) authority and knowledge to provide this declaration, I declare under penalty of perjury under California law that all of the following statements are true and correct: 1. The documents identified below have previously been filed with the California Department of Insurance (CDI) and there have been no changes to the information in those documents. 2. These documents on file with the CDI contain the most current information available, and should be considered as part of the annual renewal for (year): Document Previously Filed Year ended Annual Statement Period ended Quarterly Statement Year ended IID Report Year ended Audited Financial Statement Certificate of Authority Certificate of Good Standing/Compliance Agent for Service of Process Principal Place of Business Proposed California Plan of Operation/Business Plan List of Surplus Line Brokers Authorized to Issue Policies Biographical Affidavits on Officers and Directors Except as enclosed, there are no changes to the biographical affidavits previously filed. Report of Examination: Date of Report: List of Trust Assets as of (for alien insurers only): Trust Agreement (for alien insurers only): Date of Trust: Date of Last Amendment: Other: Date Filed Signature Title Name Date Revised February 17, 2010 #728425v1

60 #728425v1 EXHIBIT D

61 V E R I F I C A T I O N I declare under penalty of perjury under California law that the Insurance Department for the state/country of does not issue a Certificate of Good Standing, Certificate of Compliance, or other equivalent Certificate. I further declare that a Certificate of Good Standing, Certificate of Compliance, or other equivalent Certificate is not available from any other state where the company is licensed and that I am an executive or officer of (Name of the Nonadmitted Insurer) who has the authority to provide this declaration. Signature Title Name Date Revised January 29, 2004 #728425v1

62 #728425v1 EXHIBIT E

63 CHECKLIST for FOREIGN (US DOMICILED) INSURERS CALIFORNIA LASLI FILING REQUIREMENTS Please make checks payable to the California Department of Insurance (CDI). All documents must be submitted in QUADRUPLICATE (one original and three photocopies) to: Accounting Services Bureau State of California Department of Insurance 320 Capitol Mall Sacramento, CA If a required document is available from the National Association of Insurance Commissioners (NAIC) or other public source, then the document need not be filed with the CDI. However, the insurer will have to submit a verified statement to the CDI identifying the document that is available from the NAIC or other public source along with the appropriate filing fee. ο o ο Filing Fee: LASLI Application : $5,052 Annual Renewal : $2,526 Updated Financial Document : $282 Updated Non-Financial or Supplemental Document : $41 Certified Annual Statement Audited Financial Report Certified or Verified ο Verified Regulatory Disclosure Statement ο Proposed Business Plan/Plan of Operation In California ο Biographical Affidavit on the Officers and Directors ο Certified Report of Examination ο List of Surplus Lines Brokers Authorized to Issue Policies ο o Certified Current License or Certificate of Authority Certified of Good Standing or Certificate of Compliance. If the domiciliary jurisdiction does not issue such a certificate, see Exhibit D. ο March 31 st Quarterly Statement & Supplements Certified or Verified o June 30 th Quarterly Statement & Supplements Certified or Verified o o Agent for Service of Process Principal Place of Business o September 30 th Quarterly Statement & Supplements Certified or Verified o Market Conduct Report/Information Certified or Verified Revised September 25, 2013 #728425v1

64 CHECKLIST for ALIEN (NON-US DOMICILED) INSURERS CALIFORNIA LASLI FILING REQUIREMENTS Please make checks payable to the California Department of Insurance (CDI). All documents must be submitted in QUADRUPLICATE (one original and three photocopies) to: Accounting Services Bureau State of California Department of Insurance 320 Capitol Mall Sacramento, CA If a required document is available from the National Association of Insurance Commissioners (NAIC) or other public source, then the document need not be filed with the CDI. However, the insurer will have to submit a verified statement to the CDI identifying the document that is available from the NAIC or other public source along with the appropriate filing fee. Filing Fee LASLI Application : $5,052 Annual Renewal : $2,526 Updated Financial Document : $282 Updated Non-Financial or Supplemental Document : $41 Audited Financial Report Certified or Verified Certificate of Good Standing or Certificate of Compliance If the domiciliary jurisdiction does not issue such a certificate, see Exhibit D. Agent for Service of Process Principal Place of Business Certified Financial Statement and/or Standard IID (International Insurers Department) Financial Reporting Format Initial or Final Market Conduct Report/Information Certified or Verified Verified Regulatory Disclosure Statement Certified Trust Agreement (as Amended January 1, 2007) Verified List of Trust Assets as of March 31 st Verified List of Trust Assets as of June 30 th Verified List of Trust Assets as of September 30 th Verified List of Trust Assets as of December 31 st Certified Current License or Certificate of Authority Premiums Written in California by Lines of Business Proposed Business Plan / Plan of Operation in California Biographical Affidavit on the Officers and Directors List of Surplus Lines Brokers Authorized to Issue Policies Quarterly or Semi-Annual Results Revised September 25, 2013 #728425v1

65 #728425v1 EXHIBIT F

66 V E R I F I C A T I O N As an officer or executive of who has the (Name of the nonadmitted Insurer) authority and knowledge to provide this declaration, I declare under penalty of perjury under California law that the document(s) listed below need not be submitted to the California Department of Insurance as they are available from the National Association of Insurance Commissioners. Signature Title Name Date New March 28, 2012 #728425v1

67 To: SLA Members From: Ted Pierce, Executive Director Re: California Implementation of the Federal Non-admitted and Reinsurance Reform Act ( NRRA ) of 2010 Date: June 21, 2011 This information is provided by the Surplus Line Association ( SLA ) in its capacity as a trade association and is not provided on behalf of the California Department of Insurance ( CDI ) nor by the SLA in its capacity as the CDI s advisory organization. This information should not be considered legal or tax advice; it is recommended that surplus line brokers seek professional legal and tax advice on these important matters. NRRA The Non-Admitted and Reinsurance Reform Act was signed into law by President Barack Obama on July 21, 2010, as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The bill, which includes language to standardize the reporting, allocation and payment of non-admitted insurance premium tax on multi-state risks, will take effect July 21, In response, the California Legislature is close to enacting NRRA conforming legislation in AB 315 (Soloria). While California has not yet adopted this legislation, the SLA would like to provide the following guidance to its members. The SLA will provide updated information after the California Governor signs AB 315. CALIFORNIA CONFORMING LEGISLATION Upon the passage of AB 315 and when the NRRA becomes effective on 7/21/11, brokers should determine which state law applies to their multi-state insurance transactions: 1. Is the placement on a single state risk or a multi-state risk? a. If the exposure is in only one state, the laws and regulations of that state apply.

68 2. If the exposure is in more than one state, determine whether the insured is a business entity or an individual. a. If the insured is a business entity, home state is where the insured maintains its principal place of business. b. If the insured is an individual, home state is where the insured maintains his or her principal residence. 3. However, if none of the insured risk is located in the state where the insured maintains its principal place of business or, in the case of an individual, his/her principal residence, the home state for the purposes of that placement is the state to which the greatest percentage of the insured s taxable premium for that insurance contract is allocated. 4. If more than one insured from an affiliated group is named insured on a single non-admitted insurance contract, the home state for that placement is the home state of the member of the affiliated group that has the largest percentage of premium attributed to it under such insurance contract. It is recommended that brokers keep adequate records of this information. INSURER ELIGIBILITY IN CALIFORNIA AB 315 amends the existing insurer eligibility requirements for California home state placements to conform with NRRA as follows: 1. Foreign non-admitted insurers (US-domiciled) must be licensed or authorized to write the type of insurance in their domiciliary jurisdiction and maintain a minimum of $45,000,000 in capital and surplus to be eligible to write non-admitted insurance in California; and 2. Alien non-admitted insurers (non-us-domiciled) listed on the International Insurance Department s Quarterly Listing of Alien Insurers, maintained by the National Association of Insurance Commissioners, are eligible to write non-admitted insurance in California. The California conforming legislation repeals the List of Eligible Surplus Line Insurers ( LESLI ) and replaces it with the List of Approved Surplus Line Insurers ( LASLI ), which is a voluntary list of approved insurers. The requirements for LASLI approval are substantially similar to those for the current LESLI list. Insurers on the LESLI on July 20, 2011 will remain on the LASLI beginning July 21, Insurers wishing to remain on the LASLI will be required to continue to file all the documents mandated in the current CIC (c) and pay the appropriate filing fees. Brokers who wish to use a company that is not on the LASLI will need to either file on behalf of the insurer or have the non-admitted insurer file the following directly with the CDI: 1. A certificate of capital and surplus issued by the insurer s domiciliary jurisdiction; 2. A certified copy of the insurer s license issued by its domiciliary jurisdiction, plus a certificate of good standing, certificate of compliance, or other equivalent certificate; 3. Information on the insurer s agent for service of process in California; 4. Insurer s principal place of business;

69 5. Insurer s regulatory disclosure statement that discloses any currently known regulatory actions (including license revocation or suspension or cease and desist order) pending against the insurer or any of its affiliates; and 6. A list of all the California surplus line brokers authorized by the insurer to issue policies in this State on its behalf. SLA BROKER FILING PROCEDURES Pending approval by the California Department of Insurance, the SLA will respond to the new state law by requiring filing brokers to provide a batch coversheet (draft below) indicating if any batch items qualify as an Exempt Commercial Purchaser and are therefore exempt from the Diligent Search Report (SL-2). A sample checklist for identifying Exempt Commercial Purchasers is attached. In addition, the coversheet will indicate if the batch contains any multi-state policies by reporting the percentage of California premium. PREMIUM TAX PAYMENT AND FILING Because NRRA allows only the home state of the insured to impose a tax on non-admitted insurance, AB 315 amends surplus line and independent procurement tax provisions which currently require a tax only on the portion of the premium allocated to risks in California. Instead, the California law will require a tax on the entire premium (100%), regardless of where the risk is located, when California is the home state of the insured. Similarly, on multi-state policies in which California is the home state, the stamping fee is to be calculated on 100 percent of the premium, not just the California portion. Under AB 315, if a new or renewal policy has an effective date on or before July 20, 2011, and is placed on or before July 20, 2011, the provisions of AB 315 do not apply. The same holds true for installments, cancellations, and endorsements effective after July 20, 2011 on those same policies, so long as the policy extensions do not exceed an aggregate of 90 days in a 12 month period. These transition rules are intended to address the July 21, 2011, effective date of NRRA, and will remain in effect only until October 18, 2012, at which time all policies and endorsements must comply with AB 315, regardless of the original effective date. Examples are attached. Surplus Line Brokers are required, under AB 315, to provide data on tax allocations relative to multi-state policies in the annual premium tax filing beginning with the filing due March 1, The Commissioner of Insurance can waive this requirement. If that option is exercised, the SLA will report back to you. The SLA is seeking additional clarification as to the extent of the data and the applicable policies required in the filing for the 2011 transition year, and will advise you of its findings. The NRRA grants the insured s home state exclusive authority to regulate and tax surplus lines insurance that includes multi-jurisdictional boundaries. Additionally, the tax sharing provision of NRRA empowers the states to enter into a multi-state agreement for the purpose of creating national or uniform standards regarding the collection, allocation, and distribution of multi-state premium taxes. If a state chooses to enter a more formal interstate compact, the compacting states would additionally be empowered to establish uniform standards for insurer eligibility. Should California enter into a compact, additional information and guidance will follow.

70 AB 315 EFFECTIVE DATE EXAMPLES: Note: In all examples, it is assumed California is the home state. 1. Policy effective 12/20/10. Additional insured ("A/I") Endorsement 1 effective 7/19/11. Because the policy was placed and effective prior to 7/21/11, and the endorsement was effective prior to 10/18/12, AB 315 does not apply to either the policy or the endorsement. 2. Policy effective 1/23/11. A/I Endorsement effective 8/13/11. Because the policy was placed and effective prior to 7/21/11, and the endorsement was effective prior to 10/18/12, AB 315 does not apply to either the policy or the endorsement. 3. Policy effective 7/1/11. Cancelled 12/1/11. Because the policy was placed and effective prior to 7/21/11, and the cancellation was effective prior to 10/18/12, AB 315 does not apply to either the policy or the cancellation/return premium. 4. Policy effective 7/19/11 but bound with the carrier on 7/21/11. A/I Endorsement effective 8/13/11. Because the placement was made after AB 315 took effect, AB 315 applies to both the policy and the endorsement. 5. Policy effective 7/1/11. Two (2) month Policy Extension effective 7/1/12. Because the policy was placed and effective prior to 7/21/11, and the extension expiration date was within 90 days of the original policy expiration date, the extension is treated as a regular endorsement. AB 315 does not apply to either the policy or the endorsement. 6. Policy effective 7/1/11. Four (4) month Policy Extension effective 7/1/12. Because the policy was placed and effective prior to 7/21/11, AB 315 does not apply to the policy, but because the extension expiration date exceeds 90 days from the original policy expiration date, the extension is treated as a separate placement. AB 315 does apply to the endorsement. 7. Policy effective 7/23/11. A/I Endorsement effective 9/22/11. Because the policy was effective after AB 315 took effect, AB 315 applies to both the policy and the endorsement. 8. Three (3) year policy effective 12/20/10. A/I Endorsement effective 11/12/12. Because the policy was placed and effective prior to 7/21/11, AB 315 does not apply to the policy, but because the endorsement was effective after 10/18/12, AB 315 does apply to the endorsement. 9. Open-ended policy effective 7/1/11. A/I Endorsement effective 11/12/12. Because the policy was placed and effective prior to 7/21/11, AB 315 does not apply to the policy, but because the endorsement was effective after 10/18/12, AB 315 does apply to the endorsement. 10. Open-ended policy effective 7/1/11. Premiums invoiced in quarterly installments. Because the policy was placed and effective prior to 7/21/11, AB 315 does not apply to the policy. As long as the installments are invoiced before 10/18/12, AB 315 does not apply to the installments either. AB 315 will apply to any installments invoiced on or after 10/18/12. 1 A/I endorsement is used as an example of a policy change, premium bearing, endorsement. Return premiums would be subject to the same rules.

71 CA SLA DRAFT 6/20/2011 CALIFORNIA SLA FILING DRAFT COVERSHEET DATE OF SUBMISSION: April 1, 2011 BROKER NAME: AAAA Insurance Brokers, Inc. BROKER NUMBER: 1234 ECP Insured Name Type Policy No. Premium Stamp Fee Taxes Invoice Date % CA X ABC Equipment New XF , /1/11 20% Dover Corp. Renewal A , /4/11 100% Pine, Inc. Endt TRX , /31/10 100% TOTALS 9, Submitted by: Sarah Clark (415)

72 CALIFORNIA EXEMPT COMMERCIAL PURCHASER SAMPLE CHECKLIST CA SLA DRAFT 6/20/2011 Exempt Commercial Purchaser Qualifications Checklist Under the NRRA, the surplus line broker does not need to perform a diligent search if the insured qualifies as an Exempt Commercial Purchaser. To determine whether the insured meets the NRRA definition of an Exempt Commercial Purchaser, please review the following checklist. If the insured meets all three requirements, a diligent search does not need to be performed. Requirement 1: Employs or retains a qualified risk manager (refer to definition below) Requirement 2: Paid an aggregate nationwide property & casualty premium of at least $100,000 in the immediately preceding 12 months. Requirement 3: Meets one of the following: Possesses a net worth in excess of $20 million, or Generates annual revenues over $50 million, or Employs more than 500 full time employees per individual insured, or is a member of an affiliated group employing more than 1,000 employees in the aggregate, or Is a non profit or public entity generating annual budget over $30 million, or Is a municipality with a population in excess of 50,000 persons. NRRA Qualified Risk Manager Definition Under the NRRA, a Qualified Risk Manager must meet all three of the following requirements: Requirement 1: Must be an employee of, or a third party consultant retained by, a commercial policyholder, and Requirement 2: Provides skilled services in loss prevention, loss reduction, or risk and insurance coverage analysis, and purchase of insurance, and Requirement 3: A bachelor's degree or higher from an accredited college or university in risk management, business administration, finance, economics, or any other field determined by a State insurance commissioner or other State regulatory official or entity to

73 demonstrate minimum competence in risk management; and three years of experience in risk financing, claims administration, loss prevention, risk and insurance analysis, or purchasing commercial lines of insurance, or Holds one of the designations below: CPCU or ARM or CRM or RF or any other designation, certification, of license determined by a State Insurance commissioner or other State regulatory official or entity to demonstrate minimum competence in risk management, or CA SLA DRAFT 6/20/2011 Has seven years of experience in risk financing, claims administration, loss prevention, risk and insurance coverage analysis, or purchasing commercial lines of insurance; and any one of the following designations: CPCU or ARM or CRM or RF or any other designation, certification, or license determined by a State insurance commissioner or other State insurance regulatory official or entity to demonstrate minimum competence in risk management, or Has at least ten years of experience in risk financing, claims administration, loss prevention, risk and insurance coverage analysis, or purchasing commercial lines of insurance, or Has a graduate degree from an accredited college or university in risk management, business administration, finance, economics, or any other field determined by a State insurance commissioner or other State regulatory official or entity to demonstrate minimum competence in risk management.

74 State Net Page 1 of 2 5/21/2015 RDOC :: CO 990 Bulletin No. B-2.10 Nonadmitted and Reinsurance Reform Act of 2010 The Reporting of Surplus Lines Premium Tax I. Background and Purpose The purpose of this bulletin is to provide surplus lines brokers with the procedures for reporting Colorado Division of Insurance s (Division) surplus lines premium tax reporting procedures that will be effective July 21, 2011 to the Colorado Division of Insurance (Division). Bulletins are the Division s interpretations of existing insurance law or general statements of Division policy. Bulletins themselves establish neither binding norms nor finally determine issues or rights. II. Applicability and Scope This bulletin applies to all surplus lines brokers that are regulated by the Colorado Division of Insurance. The language of the Nonadmitted and Reinsurance Reform Act of 2010 (NRRA) states that No State other than the home state of an insured may require any premium tax payment for nonadmitted insurance. The NRRA also permits states to enter into a compact or otherwise establish procedures to allocate the premium taxes paid to an insured s home state. III. Division Position Colorado s "Nonadmitted Insurance Act" was not amended during the 2011 legislative session; consequently, the Division will not be entering into a compact or establishing procedure to allocate among the states the premium taxes that are paid to Colorado. Most of the Division s surplus lines premium tax reporting procedures that were effective prior to July 21, 2011 will remain applicable. The exception to the Division s current procedures is for an insured whose home state is not Colorado but the insurance policy covers risks or exposures located in Colorado. Due to the passage of the Nonadmitted and Reinsurance Reform Act of 2010 ("NRRA"), effective July 21, 2011, Colorado amended its "Nonadmitted Insurance Act" during the 2012 legislative session through HB , effective August 8, In regards to the allocation of premium tax,and in accordance with section , C.R.S., Colorado has not entered into a compact or any tax sharing agreements. Therefore, premium tax for insureds whose home state, as defined in Section , C.R.S., is Colorado, is based upon the entire premium for the risk and exposures located both in and outside of Colorado. When reporting the premium, 100% of the total premium is used and not just premium associated with the Colorado exposures. Colorado collects 3% tax on 100% of the premium. If one hundred percent of the insured risk is located out of the Colorado, the entire premium for that policy is allocated to the state which has the greatest percentage of the insured s taxable premium. The broker should not only include a surplus lines policy on their Colorado monthly report, unless if: 1. The insured s home state is Colorado *; : or 2. The insured s home state is not Colorado, but the insurance policy covers risks or exposures located in Colorado, and 100% of the insured risk is located outside the insured s home state, and the greatest percentage of the taxable premium for that policy is payable to Colorado *The broker should not include a surplus lines policy on their monthly report if the insured s home state is Colorado, and 100% of the insured risk for that policy is located outside of Colorado. In this circumstance, the premium tax is paid to the state with the greatest percentage of the taxable premium for the policy. For the purposes of application of this standard: The policy s premium tax will be based upon the premium for the risk and exposures located in Colorado. The premium for the risk and exposures located outside of Colorado will not be taxed by Colorado Thus, if the insured s home state is Colorado and the insurance policy covers risk and exposures located both in Colorado and a state other than Colorado the broker will include that policy on their monthly report. The policy s premium tax will be based upon the premium for the risk and exposures

75 State Net Page 2 of 2 5/21/2015 located in Colorado. The premium for the risk and exposures located outside of Colorado will not be taxed. Further, if all of the risk is located outside the insured s home state, and the majority of that risk is located in Colorado, the broker will include that policy on their monthly report and Colorado will assess premium taxes on the risk and exposures located in Colorado, but will not tax for the risk and exposures located outside of Colorado. entire policy for the risk and exposures located both in and outside of Colorado. IV. Additional Division Resources A. For More Information Colorado Division of Insurance Rates and Forms, Life and Health Section Corporate Affairs Section 1560 Broadway, Suite 850 Denver, CO Tel Internet: B. Related Division Regulations Colorado Insurance Regulation 2-4-1; Concerning Surplus Lines Insurance Issued By Nonadmitted Insurers V. History Issued July 25, 2011 Reissued May XX, 2015

76 STATE OF COLORADO DEPARTMENT OF REGULATORY AGENCIES DIVISION OF INSURANCE 1560 Broadway, Suite 850 Denver, Colorado I. Background and Purpose Bulletin No. B-2.10 Nonadmitted and Reinsurance Reform Act of 2010 The purpose of this bulletin is to provide surplus lines brokers with the Colorado Division of Insurance s (Division) surplus lines premium tax reporting procedures that will be effective July 21, Bulletins are the Division s interpretations of existing insurance law or general statements of Division policy. Bulletins themselves establish neither binding norms nor finally determine issues or rights. II. Applicability and Scope This bulletin applies to all surplus lines brokers that are regulated by the Colorado Division of Insurance. The language of the Nonadmitted and Reinsurance Reform Act of 2010 (NRRA) states that No State other than the home state of an insured may require any premium tax payment for nonadmitted insurance. The NRRA also permits states to enter into a compact or otherwise establish procedures to allocate the premium taxes paid to an insured s home state. III. Division Position Colorado s Nonadmitted Insurance Act was not amended during the 2011 legislative session; consequently, the Division will not be entering into a compact or establishing procedure to allocate among the states the premium taxes that are paid to Colorado. Most of the Division s surplus lines premium tax reporting procedures that were effective prior to July 21, 2011 will remain applicable. The exception to the Division s current procedures is for an insured whose home state is not Colorado but the insurance policy covers risks or exposures located in Colorado. The broker should not include a surplus lines policy on their monthly report, unless: The insured s home state is Colorado: The insured s home state is not Colorado, but the insurance policy covers risks or exposures located in Colorado, and o 100% of the insured risk is located outside the insured s home state, and o the greatest percentage of the taxable premium for that policy is payable to Colorado For the purposes of application of this standard: o The policy s premium tax will be based upon the premium for the risk and exposures located in Colorado. o The premium for the risk and exposures located outside of Colorado will not be taxed by Colorado Bulletin B of 2 Effective July 25, 2011

77 Thus, if the insured s home state is Colorado and the insurance policy covers risk and exposures located both in Colorado and a state other than Colorado the broker will include that policy on their monthly report. The policy s premium tax will be based upon the premium for the risk and exposures located in Colorado. The premium for the risk and exposures located outside of Colorado will not be taxed. Further, if all of the risk is located outside the insured s home state, and the majority of that risk is located in Colorado, the broker will include that policy on their monthly report and Colorado will assess premium taxes for the risk and exposures located in Colorado, but will not tax for the risk and exposures located outside of Colorado IV. Additional Division Resources A. For More Information Colorado Division of Insurance Corporate Affairs 1560 Broadway, Suite 850 Denver, CO Tel Internet: B. Related DOI Regulations Colorado Insurance Regulation 2-4-1; Concerning Surplus Lines Insurance Issued By Nonadmitted Insurers V. History Issued July 25, Bulletin B of 2 Effective July 25, 2011

78 COLORADO DEPARTMENT OF REGULATORY AGENCIES Amended Regulation Division of Insurance 3 CCR CORPORATE ISSUES CONCERNING SURPLUS LINES INSURANCE ISSUED BY NONADMITTED INSURERS Section 1 Section 2 Section 3 Section 4 Section 5 Section 6 Section 7 Section 8 Section 9 Section 10 Section 11 Section 12 Section 13 Section 14 Section 1 Authority Scope and Purpose Applicability Disclosure Premium Rates Procurement Taxes on Premium Eligible List Filings Standards for Approval Severability Enforcement Effective Date History Authority This regulation is promulgated under the authority of , and , C.R.S. Section 2 Scope and Purpose The purpose of this regulation is to establish standards regarding the placement of insurance by producers and the qualification of insurers pursuant to the Colorado Nonadmitted Insurance Act, , et seq., C.R.S. and the Nonadmitted and Reinsurance Reform Act of 2010,15 U.S.C. sec 8201 et. seq., as amended. This regulation also serves to further protect Colorado insurance consumers by setting forth necessary disclosure requirements for surplus lines insurance contracts. Section 3 Applicability This regulation shall apply to any company eligible, or seeking to become eligible, to effect a contract of insurance pursuant to Colorado's Nonadmitted Insurance Act, to any producer or Colorado surplus lines broker, as defined by (3), C.R.S., procuring or assisting in the procurement of surplus lines insurance for an insured whose home state, as defined in (7), C.R.S., is Colorado, and any person that enters into an independent procurement for nonadmitted insurance. Regulation of 5 Effective September 1, 2012

79 Section 4 Disclosure A. Every insurance contract procured and delivered as a surplus line coverage to an insured whose home state is Colorado must include the disclosure stated in , C.R.S. B. In accordance with Section , C.R.S., if the policy is written on a claims-made basis, the following shall also appear on the policy: This policy is a claims-made policy which provides liability coverage only if a claim is made during the policy period or any applicable extended reporting period. C. If an automobile policy does not provide the basic complying policy coverages in , C.R.S. the following must appear on the policy: This policy does not meet the statutory requirements of this State's financial responsibility laws. It does not provide liability coverage for bodily injury and property damage. D. The provisions of (1)(b), C.R.S. shall apply to policies of property and casualty insurance issued or delivered in this state by an unauthorized insurer affording coverage only on property located temporarily or permanently, or operations conducted temporarily or permanently outside the boundaries of the United States of America, its territories or possessions when the policy is placed by licensed property and casualty producers or brokers of this state, who shall remain responsible for verifying that the insuring company is licensed or authorized by the appropriate regulatory bodies to transact the business of insurance in that jurisdiction, and contains the following disclaimer: This policy is issued by an insurance company that is not regulated by the Colorado Division of Insurance. The insurance company may not provide claims service and may not be subject to service of process in Colorado. If the insurance company becomes insolvent, insureds or claimants will not be eligible for protection under Colorado insurance law. E. These required disclosures shall be affixed to the declaration page of the contract given to the insured. A copy, bearing the disclosures, shall also be maintained by the broker, in the case of the issuance of a binder prior to the formal policy, such disclosure shall also appear on the binder. Section 5 Premium Rates The provisions of , C.R.S. allow for the use of an eligible nonadmitted insurer if coverage is not available or affordable. In determining affordability, the rate quoted by each admitted insurer must exceed the rate quoted by the eligible nonadmitted insurer by 10% for comparable benefits and provisions. Regulation of 5 Effective September 1, 2012

80 Section 6 Procurement Section , C.R.S. requires that a diligent effort be made to procure coverage with an admitted insurer before placing coverage with an eligible nonadmitted insurer. A. Due diligence shall be satisfied by documentation prepared by the producer, office of the producer or broker. The documentation must demonstrate that the coverage required was not procurable after a comprehensive search was made from a minimum of three admitted insurers authorized to and currently transacting that line of business in this state. If there are fewer than three admitted insurers in this state which are authorized and currently transacting the line of business needed, such diligent effort shall be met by searching this lesser market. B. A written record documenting diligent search efforts shall be maintained by the broker or producer for a period of not less than three years from the effective date of the coverage. The broker may rely upon representations made by a producer with regard to search efforts made by the producer. C. Given that availability and affordability of coverages is continually changing, the determination of placement and evidence of diligent search efforts must be made each policy period prior to placement of coverage with an eligible nonadmitted insurer. D. If the insurance transaction is primarily for automobile liability to meet the financial responsibility requirements in Colorado any eligible surplus lines carrier must comply with the provisions of et. seq, C.R.S., including C.R.S., and with the reporting requirements contained in , C.R.S. Section 7 Taxes on Premium A. Each broker shall treat all premium tax revenues received for surplus lines insurance written in Colorado in a fiduciary capacity. B. Each broker shall, no later than the 15th of each month for the prior month, submit a report to the Division of Insurance showing each policy written including those accepted from licensed producers. The report shall include the name of the insured, line of business, name of non admitted insurer, surplus lines premium, policy fees charged and surplus lines taxes due. Such report shall be on a form prescribed by the Commissioner. C. In accordance with , C.R.S., a broker reporting a policy written with a non admitted insurer that is not listed on the Division of Insurance s eligible list is required to retain documentation verifying that the non admitted insurer meets the requirements of Sec,. 524 of the Nonadmitted and Reinsurance Reform Act of 2010, or the type of insurance is listed in , C.R.S. D. In accordance with (1), C.R.S, the reporting period will be the calendar year. On or before the first day of March each broker and every person that enters into an independent procurement for nonadmitted insurance shall file their statement of, and remit the premium taxes for, all nonadmitted insurance transacted during the preceding calendar year. Regulation of 5 Effective September 1, 2012

81 Section 8 Eligible List A. The Commissioner will prepare, at least annually, a listing of those nonadmitted insurers whose filings have been reviewed by the Division of Insurance and found to meet the qualification requirements of Sec. 524 of the Nonadmitted and Reinsurance Reform Act of Such list will be effective from July 1 of each year through June 30 of the following year unless otherwise amended. B. The Commissioner, within his/her discretion, may consider a filing received during the current approval period. If such filing is approved, such approval will expire on June 30 following acceptance. Section 9 Filings A. A foreign or alien non admitted insurer that wants to be included on the Division of Insurance s eligible list shall, on or before March 1 st of every year, submit to the Division a completed form approved by the Commissioner and the fees as prescribed by Sections and , C.R.S. B. An Insurance Exchange; a Lloyds plan, or other similar unincorporated group of individual insurers or a combination of both unincorporated and incorporated insurers; or a group of incorporated insurers under common administration, shall annually file such other information necessary to determine compliance with the conditions contained in , C.R.S. Section 10 Standards for Approval A. A foreign company seeking inclusion on the eligible list of nonadmitted insurers must meet the qualification requirements and criteria contained in section 5A(2) and 5C(2)(a)(i) of the National Association of Insurance Commissioners Non-Admitted Insurance Model Act unless Colorado has adopted nationwide uniform requirements, forms and procedures in accordance with section 521(b) of the Nonadmitted and Reinsurance Reform Act of B. An alien company seeking inclusion on the eligible list of nonadmitted insurers must be listed on the Quarterly Listing of Alien Insurers maintained by the International Insurers Department of the NAIC. C. A foreign insurer with less than the minimum required capital and surplus may make formal request of the Commissioner that they be given consideration for approval as an Eligible Nonadmitted insurer. Companies applying for special consideration must demonstrate at a minimum: 1) that they primarily write risks for which they maintain a specialty; 2) exceptional expertise in these specialty risks; and 3) sufficient surplus for the potential volatility of the risks written. Applications should be accompanied by an actuarial opinion and a supporting report specifically addressing the sufficiency of reserves and surplus for the risks written and anticipated to be written. Additionally, the applicant shall provide a copy of the audited financial report of the parent and the ultimate controlling company (person), if any, and any other additional information requested by the Commissioner. Section 11 Severability If any provision of this regulation or the application of it to any person or circumstance is for any reason held to be invalid, the remainder of this regulation shall not be affected. Regulation of 5 Effective September 1, 2012

82 Section 12 Enforcement Noncompliance with the Regulation may result in the imposition of any of the sanctions made available in the Colorado statutes pertaining to the business of insurance or other laws which include the imposition of civil penalties, issuance of cease and desist orders, and/or suspensions or revocation of license, subject to the requirements of due process. Section 13 Effective Date This amended regulation shall be effective September 1, Section 14 History New Regulation 90-14, effective January 1, 1991 Amended Regulation effective February 1, 1996 Executive Order D reviewed December 1998 Amended Regulation effective April 1, 2000 Amended Regulation effective March 2, 2002 Sections 4.C. and 6.D. amended effective February 1, 2004 Amended Regulation effective January 1, 2007 Amended Regulation effective January 1, 2009 Amended Regulation effective March 1, 2012 Amended Regulation effective September 1, 2012 Regulation of 5 Effective September 1, 2012

83 STATE OF CONNECTICUT INSURANCE DEJ~4RTMENT February 24, 20 I I Bulletin Number FS-4SL- I 0 (Revised) TO: SUBJECT: ALL ELIGIBLE SURPLUS LINES INSURERS 2010 and 2011 FINANCIAL REPORTING REQUIREMENTS This bulletin has been revised to remove the requirement of Connecticut Form SL-JO. Section 38a-740-6(b)(I) of the Regulations of Connecticut State Agencies requires that each foreign eligible surplus lines insurer shall, annually, on or before the first day of March, submit to the Commissioner, by electronically filing with the National Association oflnsurance Commissioners ("NAIC"), a true and complete report, signed and sworn to by its president or a vice-president, and secretary or an assistant secretary, of its financial condition on the thirty-first day of December next preceding, in such form and with such detail as is prescribed by the Commissioner. An electronically filed report that is timely submitted to the NAIC is deemed to have been submitted to the Commissioner in accordance with this subdivision. Section 38a-740-6(b)(2) of the Regulations of Connecticut State Agencies requires that each alien insurer shall file annually, on or before the fifteenth day of May, a true and complete report, signed and sworn to by its president or a vice-president, and secretary or an assistant secretary, of its financial condition on the thirty-first day of December next preceding, in such form and with such detail as is prescribed by the Commissioner. Alien companies may report their annual financial results on the same form as the United States domicild companies or, in its place, Connecticut Fonn SG-6, a copy of which is attached. As provided in the Regulations of Connecticut State Agencies 38a-740-6(b)(3) foreign eligible surplus lines insurers will be required to report their financial condition on a quarterly basis in 2011 to this Department in the same manner as noted above. These reports are to include a breakdown of the company's Connecticut business showing premiums and losses by line (same format as page 19 of the Annual Statement but with current year-to-date amounts). Quarterly filings are to be made as follow : Quarter Ending March 31, 2011 June 30, 20 l l September 30, 2011 Due Date May 15, 2011 August 15, 2011 November 15, 201 l All mail, including certified and registered trail, should be sent to the Financial Regulation Division, at the following address: P.O. Box 816 Hartford, CT Mail sent by private delivery service should be sent directly to our address: 153 Market Street, 7th Floor Hartford, CT If you have any questions on this bulletin, you may contact the Financial Regulation Division at (860) or ctinsdept.financial@ct.gov.,,.,~.a, 1_... C51Yw1. d;jtllqw\tl ~v\._~ ' Barbara C. Spear Deputy Commissioner P.O. Box 816 Hartford, CT An Equal Opportunity Employer

84 STATE OF CONNECTICUT INSURANCE DEPARTMENT BULLETIN SL-2 JULY 18,2011 TO: RE: All insurers eligible to write nonadmitted insurance in Connecticut, all licensed surplus lines brokers, and all insureds who independently procure insurance with a nonadmitted insurer Implementation of federal Nonadmitted and Reinsurance Reform Act in Connecticut The purpose of this bulletin is to outline nationwide regulatory changes that will affect the placement of nonadmitted insurance in Connecticut. The Nonadmitted and Reinsurance Reform Act of 2010 ("NRRA")I, establishes federal standards for surplus lines coverage and other nonadmitted insurance. The NRRA becomes effective on July 21,2011. For nonadmitted insurance business placed on or after July 21, 2011, the following information is provided for the benefit of insurers, brokers, and insureds: The NRRA provides that only an insured's "Home State" n1ay requirethe payment of premium tax for nonadmitted insurance. 2 Moreover, the NRRA subjects the placement of nonadmitted insurance solely to the statutory and regulatory requirements of the insured's Home State, and provides that only the insured's Home State may require a surplus lines broker to be licensed to sell, solicit or negotiate nonadmitted insurance with respect to such insured 3. What is the scope of the NRRA? "Nonadmitted insurance," as defined in 15 U.S.C. 8206(9), includes both surplus lines and independently procured insurance, but is restricted to property and casualty insurance. 4 In addition, the NRRA does not preempt state laws requiring primary or excess workers' compensation insurance to be placed in the admitted market. 5 The NRRA states that "the placement of nonadmitted insurance is subject to the statutory and regulatory requirements solely of the insured's home state" but that the NRRA "may not be I Congress enacted the NRRA last year as part ofthe Dodd-Frank Wall Street Reform and Consumer Protection Act, (Title V. Subtitle B, 511 et seq.) The provisions regulating the nonadmitted insurance market, NRRA & 527, are codified at 15 U.S.c NRRA 521(a) (15 U.S.c. 8201(a). 3 NRRA 522(a), (b) (15 U.S.c. 8202(a), (b)). 4 NRRA 527(9) (15 U.S.C. 8206(9)). 5 NRRA 522(d) (15 U.S.c. 8202(d)). P.O. Box 816 Hartford, CT An Equal Opportunity Employer

85 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.,,6 The NRRA does not expand the scope of the kinds of insurance that an insurer may write in the nonadmitted insurance market and each state continues to determine which kinds of insurance an insurer may write in that state. Although the NRRA preempts certain state laws with respect to nonadmitted insurance, it does not have any impact on insurance on Connecticut risks offered by insurers licensed or authorized in this state. When is Connecticut the insured's Home State for purposes of a particular placement? Connecticut is the insured's Home State if the insured maintains its principal place of business here; or in the case of an individual, the individual's principal residence is here. 7 If Connecticut is considered the insured's Home State, only Connecticut's requirements regarding the placement of such business will apply. If 100% of the insured risk is located outside of Connecticut, then the insured's Home State is the state to which the greatest percentage of the insured's taxable premium for that insurance contract is allocated. If more than one insured from an affiliate group are named insureds on a single nonadmitted insurance placement, and the insureds have different Home States, Connecticut will be considered the Home State for that placement if Connecticut is the Home State of the member of the affiliated group that has the largest percentage of premium attributed to it under the insurance contract. How will these rules be applied? New and renewal policies with an effective date prior to July 21,2011 will be subject to the laws and regulations of Connecticut and other jurisdictions, as applicable, as of the policy effective date. The laws and regulations of Connecticut and other jurisdictions, as applicable, as of the effective date of such a policy will also apply to any modification to that policy during the policy period, such as all endorsements (including risk- and premium-bearing endorsements), installment payments and premium audits. New and renewal policies with an effective date on or after July 6 NRRA 522 (15 U.S.C. 8202). 7 Pursuant to 2011 Conn. Pub. Acts No , 33, 34, Connecticut entered into the National Association of Insurance Commissioners' Nonadmitted Insurance Multistate Agreement ("NIMA"). An insured's principal place of business, pursuant to NIMA, means: (a) the state where the insured maintains its headquarters and where the insured's high level officers direct, control and coordinate business activities; or (b) if the insured's high level officers direct, control and coordinate the business activities in more than one state, the state in which the greatest percentage of the insured's taxable premium for that insurance contract is allocated; or (c) if the insured maintains its headquarters or the insured's high level officers direct, control and coordinate the business activities outside any state, the state to which the greatest percentage of the insured's taxable premium for that insurance contract are located. An insured's principal residence means: (a) the state where the insured resides for the greatest number of days during a calendar year; or (b) if the insured's principal residence is located outside any state, the state to which the greatest percentage of the insured's taxable income for that insurance contract is allocated 2

86 21, 2011, and any modifications thereto, will be subject only to the laws and regulations of Connecticut if Connecticut is the Home State of the insured. What are the requirements for premium tax allocation and payment in Connecticut? As of July 21,2011, the NRRA permits only the insured's Home State to require the payment of premium tax for nonadmitted insurance. Until July 21, 2011, the laws and regulations of Connecticut and other jurisdictions, as applicable, will continue to apply to premium tax due on multi-state placements. Until additional bulletin(s) are issued, the Connecticut tax rate should be applied to new and renewal policies with an effective date on or after July 1,2011, when Connecticut is the insured's Home State. 8 What are the license requirements for brokers? Only the insured's Home State may require a surplus lines broker to be licensed to sell, solicit or negotiate nonadmitted insurance with respect to a particular placement. 9 If Connecticut is the insured's Home State, the surplus lines broker must be licensed in Connecticut. The NRRA provides that Connecticut may not collect licensing fees for surplus lines brokers as of July 21, 2012, unless Connecticut participates in the NAIC's national insurance producer database or any other equivalent uniform national database. 1O Connecticut participates in the National Insurance Producer Registry (NIPR), which provides such a database, thus satisfying the NRRA requirement. When are the requirements for a diligent search and when is a diligent search not required? The Insurance Department will continue to maintain a list of those lines of insurance or their components for which coverages are believed by the Commissioner to be generally unavailable from licensed insurers, commonly known as "the exportable list." The exportable list is found on the Insurance Department website at the following address: &q= Conn. Gen. Stat. 38a-741(b)(l) provides that when any insurance policy is procured under the authority of a surplus lines broker for a line of insurance or its component that does not appear on the exportable list, both the surplus lines broker and the insured are to execute an affidavit setting forth facts showing that the surplus lines broker and insured were unable, after diligent effort, to procure the full amount of insurance necessary to protect the interests of the insured from any authorized insurer or insurers. In the event that a portion of the coverage is obtained from an authorized insurer, such an affidavit is further required to show that the portion of insurance procured from unauthorized insurer(s) is excess over that procured from authorized insurer(s). 8 See Conn. Gen. Stat. 38a-277 and 38a-743, as amended by 2011 Conn. Pub. Acts No , 33 and NRRA 522(b) (15 U.S.C. 8022(b). 10 NRRA 523 (15 U.S.c. 8203). 3

87 On or after July 21, 2011, the NRRA provides that a surplus lines broker seeking to procure or place nonadmitted insurance on behalf of an "exempt commercial purchaser" is not required to perform a diligent search if: 1) the broker has disclosed to the exempt comnlercial purchaser that insurance mayor may not be available from the admitted market that may provide greater protection with more regulatory oversight; and 2) the exempt commercial purchaser has subsequently requested in writing for the broker to procure or place such insurance from a nonadmitted insurer. 11 Public Act adopts the NRRA definition of "Exempt commercial purchaser," which is set forth in the "key definitions" section of this bulletin below. What are the eligibility requirements for nonadmitted insurers? Under current Connecticut law, the Insurance Commissioner maintains a list of eligible surplus lines insurers,i2 and a surplus lines broker may not place Connecticut business with an insurer that is not listed. I3 The NRRA restricts the eligibility requirements a state may impose on nonadmitted insurers. 14 For nonadmitted insurers domiciled in a U.S. jurisdiction, a surplus lines broker is permitted to place nonadmitted insurance with such insurers provided they are authorized to write such business in their state of domicile and maintain minimum capital and surplus of $15 million or the minimum capital and surplus amount required in Conn. Gen. Stat. 38a-72, whichever is greater. IS For nonadmitted insurers domiciled outside the U.S., a surplus lines broker may place business with such insurers provided the insurer is listed on the Quarterly Listing of Alien Insurers maintained by the International Insurers Department of the National Association of Insurance Commissioners (NAIC). What are the key definitions from the NRRA? The NRRA includes several definitions relevant to Connecticut's implementation of its requirements. Key definitions include the following: - "Exempt commercial purchaser": The term "exempt commercial purchaser" means any person purchasing commercial insurance that, at the time of placement, meets the following requirenlents: (A) The person employs or retains a qualified risk manager to negotiate insurance coverage. (B) The person has paid aggregate nationwide commercial property and casualty insurance premiums in excess of$1 00,000 in the immediately preceding 12 mont~s. (C) (i) The person meets at least 1 of the following criteria: (I) The person possesses a net worth in excess of $20,000,000, as such amount is adjusted pursuant to clause (ii). 11 See also Conn. Gen. Stat. 38a-741, as amended by 2011 Conn. Pub. Acts No , effective June 21, See Conn. Agencies Regs. 38a See Conn. Agencies Regs. 38a and 38a See NRRA 524 (15 U.S.c. 8204), 15 NRRA 524 (15 U.S.C. 8204) references the financial criteria of the NAIC Nonadmitted Insurance Model Act, 5A(2) and 5C(2)(a). 4

88 (II) The person generates annual revenues in excess of $50,000,000, as such amount is adjusted pursuant to clause (ii). (III) The person employs more than 500 full-time or full-time equivalent employees per individual insured or is a member of an affiliated group employing more than 1,000 employees in the aggregate. (IV) The person is a not-for-profit organization or public entity generating annual budgeted expenditures of at least $30,000,000, as such amount is adjusted pursuant to clause (ii). (V) The person is a municipality with a population in excess of 50,000 persons. (ii) Effective on the fifth January 1 occurring after the date of the enactment of this subtitle and each fifth January 1 occurring thereafter, the amounts in subclauses (I), (II), and (IV) of clause (i) shall be adjusted to reflect the percentage change for such 5-year period in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the Department oflabor.15 U.S.C. 8206(5). - "Home State": (A) In General.-Except as provided in sub-paragraph (B), the term' 'home State" means, with respect to an insured (i) the State in which an insured maintains its principal place of business or, in the case of an individual, the individual's principal residence; or (ii) if 100 percent of the insured risk is located out of the State referred to in clause (i), the State to which the greatest percentage of the insured's taxable premium for that insurance contract is allocated. (B) Affiliated Groups.-If more than 1 insured from an affiliated group are named insureds on a single nonadmitted insurance contract, the term "home State" means the home State, as determined pursuant to subparagraph(a), of the member of the affiliated group that has the largest percentage of premium attributed to it under such insurancecontract.15 U.S.C. 8206(6). - "Independently procured insurance": The term "independently procured insurance" means insurance procured directly by an insured from a nonadmitted insurer. 15 U.S.C. 8206(7). - "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. 15 U.S.C. 8206(9). - "Nonadmitted insurer": The term' 'nonadmitted insurer', (A) means, with respect to a State, an insurer not licensed to engage in the business of insurance in such State; but (B) does not include a risk retention group, as that term is defined in section 2(a)(4) of the Liability Risk Retention Act of 1986 (15 U.S.C. 3901(a)(4)).15 U.S.C. 8206(11). - "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 government 5

89 entity directly or indirectly 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.15 U.S.C. 8206(12). - "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: (A) The person is an employee of, or third-party consultant retained by, the commercial policyholder. (B) The person provides skilled services in loss prevention, loss reduction, or risk and insurance coverage analysis, and purchase of insurance. (C) The person (i) (I) has a bachelor's degree or higher from an accredited college or university in risk management, business administration, finance, economics, or any other field determined by a State insurance commissioner or other State regulatory official or entity to demonstrate minimum competence in (ii) risk management; and (II) (aa) has 3 years of experience in risk financing, claims administration, loss prevention, risk and insurance analysis, or purchasing commercial lines of insurance; or (bb) has (AA) a designation as a Chartered Property and Casualty Underwriter (in this subparagraph referred to as "CPCU'') issued by the American Institute for CPCU/Insurance Institute of America; (BB) a designation as an Associate in Risk Management (ARM) issued by the American Institute for CPCU/Insurance Institute of America; (CC) a designation as Certified Risk Manager (CRM) issued by the National Alliance for Insurance Education & Research; (DD) a designation as a RIMS Fellow (RF) issued by the Global Risk Management Institute; or (EE) 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; (I) has at least 7 years of experience in risk financing,claims administration, loss prevention, risk and insurance coverage analysis, or purchasing commercial lines of insurance; and (II) has any 1 of the designations specified in sub items (AA) through (EE) of clause (i)(ii)(bb); (iii) has at least 10 years of experience in risk financing, claims administration, loss prevention, risk and insurance coverage analysis, or purchasing con1merciallines of Insurance; or (iv) has a graduate degree from an accredited college or university in risk management, business administration, finance, economics, or any other field 6

90 determined by a State insurance commissioner or other State regulatory official or entity to demonstrate minimum competence in risk management. 15 U.S.C. 8206(13). - "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. 15 U.S.C. 8206(15). - "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.15 U.S.C. 8206(16). Conclusion Please note that Bulletin SL-l remains in full force and effect to the extent it is not inconsistent with the NRRA, Conn. Gen. Stat. 38a-741 as amended by 2011 Conn. Pub. Acts No and this bulletin. Please contact the Connecticut Insurance Department Licensing Unit at cid.licensing((i)ct.gov with any questions regarding this bulletin. 7

91 STATE OF CONNECTICUT INSURANCE DEPARTMENT Bulletin SL-3 June 15, 2012 To: Re: All Surplus Lines Brokers New Procedures for Filing Surplus Lines Taxes and Surplus Lines Affidavits The manner in which the State of Connecticut Insurance Department, Licensing Division, will be accepting surplus lines taxes and surplus lines affidavits is changing. Connecticut will be moving forward with the elimination of the manual paper filing of surplus lines affidavits, taxes and payments. The purpose of this bulletin is to outline streamlined electronic procedures for (1) filing tax returns and submitting payments; and (2) for filing the necessary affidavits required by Connecticut General Statute 38a-741, as amended by section 36 of Public Act No These streamlined requirements meet the legislative intent of Public Act No to provide for the electronic transmission of documents, when not inconsistent with other applicable statutory requirements, and to examine the feasibility of transforming to an electronic format all forms used by the public to file information with state agencies. a. Surplus Lines Taxes Beginning with the 2 nd quarter filing, due August 15, 2012, all filings of affidavits and payments of taxes will be made using the National Association of Insurance Commissioners OPTins (Online Premium Tax for Insurance) application. Each individual or business entity submitting tax returns to the Insurance Department will be required to transmit them electronically via ACH, credit or debit. Licensees may begin using the system on or after June 15, The steps to submit tax filing through the OPTins application are simple and require no formal training. Easy to follow instructions are available at: Once registered and set up, licensees will be able to log in, upload their return forms and submit payments online. The Insurance Department will no longer accept paper checks everything will have to be filed electronically so that tax forms along with payment are received at the Connecticut Insurance Department immediately upon submission by the company or licensee. Using OPTins allows licensees to save time and ensure that both the forms and payment are received together and on time. To implement OPTins, contact the OPTins Marketing Team at optinsmktg@naic.org or call (816) Connecticut will continue to collect all surplus lines premium taxes for risks in which Connecticut is the home state. That means that any surplus lines policy for which the insured s home state is Connecticut, regardless of portions of risk located elsewhere, will be considered a Connecticut risk and subject to Connecticut taxes. The definition of home state in the NRRA will determine if Connecticut is the home state. Specifically, the NRRA at 15 U.S.C. 8206(6) provides: (A) In General. Except as provided in sub-paragraph (B), the term home State means, with respect to an insured P.O. Box 816 Hartford, CT An Equal Opportunity Employer

92 (i) (ii) The State in which an insured maintains its principal place of business or, in the case of an individual, the individual s principal residence; or If 100 percent of the insured risk is located out of the State referred to in clause (i), the State to which the greatest percentage of the insured s taxable premium for that insurance contract is allocated. Affiliated Groups. If more than 1 insured from an affiliated group are named insureds on a single nonadmitted insurance contract, the term home State means the home State, as determined pursuant to paragraph (A), of the member of the affiliated group that has the largest percentage of premium attributed under such insurance contract. Additionally, please note that the new quarterly schedule requires that tax returns and payments are to be filed on the 15 th of February, May, August and November of each year. See Connecticut General Statute section 38a-743(c)(3), as amended by section 34 of Public Act No b. Surplus Lines Affidavits Connecticut General Statute 38a-741(b)(1) provides that when any insurance policy is procured under the authority of a surplus lines broker for a line of insurance or its component that does not appear on the exportable list, both the surplus lines broker and the insured are to execute an affidavit, setting forth facts showing that the surplus lines broker and insured were unable, after diligent effort, to procure the full amount of insurance necessary to protect the interests of the insured from any authorized insurer or insurers. In the event that a portion of the coverage is obtained from an authorized insurer, the surplus lines affidavit is further required to show that the portion of insurance procured from unauthorized insurer(s) is excess over the amount procured from authorized insurer(s). Consistent with the federal Nonadmitted and Reinsurance Reform Act of 2010 ( NRRA ), Connecticut General Statutes 38a-741(b) was amended to provide that a surplus lines affidavit is not required to be submitted by a surplus lines broker that procures or places nonadmitted insurance on behalf of an exempt commercial purchaser, provided that the (1) the broker has disclosed to the exempt commercial purchaser that insurance may or may not be available from the admitted market that may provide greater protection with more regulatory oversight; and (2) the exempt commercial purchaser has subsequently requested in writing for the broker to procure or place such insurance from an unauthorized insurer. For the definition of exempt commercial purchaser, please consult Insurance Department s Bulletin SL-2 at Filing of surplus lines affidavits for those insureds who are not exempt commercial purchasers fills a valuable regulatory purpose and allows the Insurance Department to properly monitor the propertycasualty marketplace. Therefore, surplus lines affidavits filing requirements applicable to all insureds, other than exempt commercial purchasers, remain in full force and effect. To provide greater filing efficiencies for surplus lines brokers and for Department staff who review and utilize surplus lines affidavits, effective for the August 15, 2012 tax return due date, surplus lines brokers are required to file surplus lines affidavits electronically in PDF format through OPTins. The affidavit form has been revised as of June 1, PDF s of the old form will still be accepted with the August 15 th filing. This bulletin only applies to nonadmitted insurance, including surplus lines insurance, placed through licensed surplus lines brokers. Unauthorized insurance that is not placed through a surplus lines Bulletin SL-3 Page 2 of 3

93 broker, including independently procured insurance, continues to be under the jurisdiction of the Connecticut Department of Revenue Services. You may address questions regarding this notice to: RE: Bulletin SL-3 in the subject line. The Connecticut Insurance Department encourages readers of this notice to sign up for e-alerts on the Department s web site for news, information, updates and other relevant material. Thomas B. Leonardi Insurance Commissioner Bulletin SL-3 Page 3 of 3

94 Commissioner s Office Delaware Department of Insurance Information Regarding the NRRA and Delaware Premium Taxes The federal Nonadmitted and Reinsurance Reform Act of 2010 ("NRRA") became effective on July 21, 2011, and placed surplus lines taxation, regulation, and licensing authority under the exclusive oversight of the home state of the insured (see 18 Del. C. 1904(a)(9) for definition of home state). The NRRA, among other changes, stipulates that: The placement of nonadmitted (surplus lines) insurance shall be subject to the statutory and regulatory requirements solely of the insured s home state, as defined in the NRRA. No state other than the home state of an insured may require any premium tax payment for nonadmitted insurance. 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. IMPORTANT: In accordance with 18 Del. C and 1926, if Delaware is the home state of the insured, the amount of tax paid to Delaware is calculated on the entire premium for the policy, not just the portion that applies to risks located within Delaware. The Department collects 2% tax on 100% of the policy premium when the policy is procured for a Delaware home state insured. In the past, reports were made to the state in which the covered risk was located, but the NRRA stipulates that all reporting and tax payment shall now be made to the state that is by definition the home state of the insured. All surplus lines licensees should take whatever measures are necessary to ensure that the proper amount of premium tax is paid to this state when Delaware is the home state of the insured.

95 Commissioner s Office Delaware Department of Insurance THE FOLLOWING INFORMATION MAY HELP ESTABLISH IF DELAWARE IS THE HOME STATE OF THE INSURED: Delaware is considered the home state of the insured if any of the following conditions apply: 1. Delaware is the principal place of business or principal state of residence of the insured and all of the risk is located in Delaware. (single-state policy) 2. Delaware is the principal place of business of the insured or the principal state of residence of the insured and any part of the risk is located in Delaware. (multi-state policy) 3. Another state is the principal place of business or principal state of residence of the insured but all of the risk is located in Delaware. (multi-state policy) 4. Another state is the principal place of business or principal residence of the insured but none of the risk is located in that state and the majority of the risk is located in Delaware. (multi-state policy) 5. More than 1 insured from an affiliated group are named insureds on a single nonadmitted insurance contract, and the insured is the member of that affiliated group that has the largest percentage of premium attributed to it under the insurance contract and that premium is for risks located in Delaware. If none of these conditions apply to the policy, then Delaware is not the home state of the insured, and no report or tax should be sent to the Delaware Department of Insurance. Use these tips to help determine which state is the home state of the insured and make your filing according to that state s requirements. Premium tax questions can be directed to Ann Fletcher, Tax Coordinator at Ann.Fletcher@state.de.us

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101 Karen Weldin Stewart, CIR-lVfL Commissioner Defawatc Department of Insurance SURPLUS LINES BULLETIN NO. 1 O TO: RE: All licensed Surplus Lines Brokers, all Insurers eligible to write Nonadmitted Insurance in Delaware, and all Insureds independently procuring Nonadmitted Insurance NEW SURPLUS LINES REPORTING FORMS TO COLLECT FISCAL ANALYSIS DATA DATE: September 30, 2011 As explained in SL Bulletin No. 9, the federal Nonadmitted and Reinsurance Reform Act of 2010 ("NRRA"), became effective on July 21, The NRRA subjects the placement of nonadmitted insurance solely to the statutory and regulatory requirements of the insured's Home State, and provides that only the insured's Home State may require the payment of premium tax for nonadmitted insurance. In response to the NRRA, the Delaware State Legislature passed the new "Delaware Nonadmitted Insurance Act," which revises Delaware Code Title 18, Chapter 19 in its entirety. One important stipulation in the new law calls for the Insurance Commissioner to perform a fiscal analysis of the affect ofnrra-related changes to Delaware's revenues. The findings must be reported to the Legislature in January 2012, at which time a decision will be made as to whether Delaware will enter into a tax sharing arrangement with other states. To help accomplish the tasks of the fiscal analysis, the Delaware Department of Insurance developed the attached forms that will provide important information from surplus lines brokers, eligible insurers, and insureds that independently procure insurance from nonadmitted insurers. THESE NEW FORMS TEMPORIL Y REPLACE THE FOLLOWING FORMS CURRENTLY IN USE: New Form SL-1903-MS replaces current Form SL Notice of Insurance Transaction New Form SL-1925-M replaces current Form SL-1917-Quarterly Ta,"'< Summary Report Please note that the numbering for surplus lines forms is generally taken from the section of Title 18 Chapter 19 with which the form complies. Th.ese new forms have been remunbered to correspond to the applicable sections of the revised Chapter 19. Both of these new forins are interim forms that contain information the Department needs to collect for the fiscal analysis. They are intended to be used temporarily while the Department conducts this study. Although these paper forms increase the administrative burden on brokers, insurers, and insureds, it should be a temporary burden limited to the duration of the fiscal analysis. The Department staff and I appreciate your full cooperation as the requirements of the NRRA and the new Delaware Nonadmitted Insurance Act are put into action.

102 PLEASE REVIEW THE FOLLOWING INFORMATION CAREFULLY: 1. Only new and renewal policies with an effective date on or after July 21, 2011, and any modifications thereto. should be reported on these forms. Do not include new policies, renewals, or endorsements to policies with an effective date before July 21, If you have already submitted the old SL-1905 form in Excel fonnat for business you have written since July 21, 2011, and those submissions did not include any multi-state business, you do not have to go back and submit the SL-1903-MS form for what you have already reported. However, if you have written any multi-state business since July 21, 2011, you must go back and submit the SL-1903 for those multi-state policies only-even if they were reported on the Sl-1905 Excel form. The Department needs the data from the SL-1903-MS for the fiscal analysis. 3. Item #2 above refers to old SL-1905 Excel fotm submissions made before the date ofthfa Bulletin only. From this date forward, new Form SL-1903-MS is to be used to report every surplus lines insurance transaction for which Delaware is the home state of the insured. One fonn should be filled out for each new policy or policy change.. The forrn(s) should be printed and submitted monthly as attachment(s) to the SL-1925-Monthly report. This form should be used for both single- and multi-state policies. 4. Form SL-1925-M is a monthly tax report that summarizes all business that was transacted during the calendar month. It is due by the 15Ut day of the month following the reporting period. For example, the SL-I 925-M form reporting business transacted during the month of September 2011 would be due by October 15, A copy of the SL-1903-MS form must be attached to the repott for each transaction being reported. Premium tax is paid with this report. (Please note: The October 15 due-date for the September business report will be pushed to October 30 due to the timing of this Bulletin.) 5. If no business is written during the calendar month, no report is required. 6. These forms should be filed by, or on behalfof, individual surplus lines brokers only. Agencies cannot transact business, only individuals; therefore, agencies do not make tax reports to the Department. ln summary, each monthly report submission should include the SL-1925-Monthly fonn, a copy of the SL-1903-MS fonn for each transaction, and a check for payment of premium tax based on 100% of the policy premium. REMEMBER: Unless additional bulletins are issued by the Delaware Department of Insurance stating otherwise, if De.I aware is the insured' s Home State, the entire tax amount should be paid to Delaware at the Delaware tax rate of 2% on 100% of the premium for new and renewal policies with an effective date on or after July 21, Continue to watch the Department's website for future buljetins and updates. _.----Karen Weldin Stewart, CIR-ML Insurance Commissioner

103 STATE OF DELAWARE DEPARTMENT OF INSURANCE SURPLUS LINES BROKER REPORT OF SURPLUS LINES TRANSACTION D Original Report Amended Report 0 Per 18 Del. C and I Form SL 1903 MS I THIS FORM IS TO BE FILED BY, OR ON BEHALF OF, INDIVIDUAL SURPLUS LINES BROKERS ONLY. AGENCIES CANNOT TRANSACT BUSINESS AND SHOULD NOT SUBMIT THIS FORM. GENERAL INSTRUCTIONS: Use this form to report each surplus lines policy transaction for which Delaware is the home state of the insured. This form should be attached to the SL-1925 Monthly Report and submitted by the 15"' of the month following the month.of the report. PART 1 - POLICY INFORMATION: All fields are required. Enter the reportlng surplus lines broker individual name and DE license#. For endorsements enter the effective date of the change in the Inception Date field. SL Broker Name: DE License #: ~~~~~~~~ Name of Insured: Insured Address: Policy Number: Inception Date: D New/Renewal Policy D Endorsement Total Premium: ~~~~~~~~~ ~~~~~- -~~~~~~~- Description and Location of Risk: Name of Insurer: NAIC#: PART 2 - PREMIUM ALLOCATION INFORMATION: Complete this portion if this policy ls a multi-state policy. Check the box for each state with exposure in this policy. Enlerthe amount of premium allocable to each state and the percent(%) of the total premium allocable to each state on the appropriate lines. This information w!f! aid the Department in its analysis of the impact of the NRRA on the surplus lines market and the effect on premium tax revenue. Thank you for your cooperation. Property: Casualty: If the risk is real or personal property, allocate premium based on the location of the risk, computed on the basis that was used to calculate the Insurable value of the risk. Allocate all casualty premiums to the home slate oflhe insured. State Allocated Premium$ % State AL D ME D AK D MD D AZ - MA D AR D Ml D CA I MN co D MS D CT I I MO D DE I I MT DC D NE D FL D NV D GA D NH D HI I I NJ [ ] ID NM [] IL D NY D * NC D A ND D s OH I I KY D OK D LA D OR D SEND TO: Delaware Department of Insurance Attn: SURPLUS LINES SECTION 841 Silver Lake Blvd. Dover, DE Allocated Premium$ % IMPORTANT: ATTACH THIS FORM TO THE SL-1925 MONTHLY REPORT State Allocated Premium $ %. PA 0 RI D SC 0 SD D TN 0 TX D UT 0 Vf VA WA WV WI I/IN AS GU PR VI CN OT D D D D I I D D D D D 2011 SL-1903-MS Delaware Surplus Lines Multi-Stale Transaction And Premium Allocation Form

104 STATE OF DELAWARE DEPARTMENT OF INSURANCE SURPLUS LINES BROKER MONTHLY PREMIUM TAX SUMMARY REPORT FOR THE MONTH OF_, 2011 Original Report [DJ Amended Report [DJ Form SL-1925-M THIS FORM IS TO BE FILED BY, OR ON BEHALF OF, INDIVIDUAL SURPLUS LINES BROKERS ONLY. AGENCIES CANNOT TRANSACT BUSINESS AND SHOULD NOT SUBMIT THIS FORM. GENERAL INSTRUCTIONS - Thls f9im i~.due orfor IJ~fore the 15th. day.c>f the month tollowing the reporting perio<:f. Une 1: Include all premium from policies for which DE is the home state of the Insured. Line 2: Include any premium that was relumed lo the policyholder. Line 3: Subtract Line 2 ftom Line 1. l.ine 4: Premium Tax Rate per Remember: Delaware tax is due on 100% of policy premium when DE is the home slate of the Insured. Line 5: Mulllply Line 3 by Line 4. Pay this amount Make checks payable to "Defawaro Insurance DepaJtmenf' IMPORTANT: A COPY OF THE SL-1903-MS FORM MUST BE ATTACHED TO THIS REPORT FOR EACH POLICY PART 1 - SURPLUS LINES (SL) BROKER INFORMATION AND MAILING ADDRESS Individual SL Broker Name: Age11cy Name: Agency Address: City- State - Zip+ 4: Tax Contact Name: Tax Contact Phone#: lndmdual Broker ID#: {DE Uc.#) lndmdual Broker NPN: Agency ID#: (DE Uc.#) Questions should be directed to: Ann Fletcher, Tax and Fees Coordinator Ann.Fletchen@state.de. us PART 2- GROSS PREMIUMS TAX SUMMARY Please note: Zero reports are not required. Do not submit this report if no business was written during the month. ~-I2tal Surplus LiDes PrerniUJI1 _\t\fritt _ ~~~~~~~~~ 2. LESS: Premiums returned 3. ~tl~f uq~lt1_sl.l~f!_f>r~niiums\j\/rit_te_n_(~l-_in_~--1_:_l 1n_e~2)~:_ ~ 4. Premi_11_m Tax_ Rate (~%L_u _, T_<!_X AmO\.!llt_Q~e (Urie 3 X line 4): Pay this amount -~ PART 3-AFFIDAVIT NOTE: All Premium Tax and Fees Reports shall be verified by the oath or affirmation of the reporting Surplus Lines Broker, duly administered by a person authorized In administer oaths.!, as a licensed Surplus Lines Broker, being duly sworn, depose and declare that the contracts for Insurance reported by me to the Delaware Insurance Department during the period indicated above represent all such business transacted by me fur this period and were Issued pursuant lo Chapter 19, 11Ue 18, Delaware Code. and are subject to the following conditions for export: (a) That as a surplus lines broker, duly licensed In lhe slate of Delaware, I procured all policies referred IO herein from eligible surplus fines insurern; (b) That the full amount ofinsurance required was not procurable, after diligent effort was made lo do so, from among t:he insurers authoi:!zed to transact and actually wrltlng tllat kind and class of Insurance In this State, and the amount of Insurance exported was ooly the excess over or other than the amount praairable from authorized insurers; (c) That lhe Insurance was not exported for!he purpose or obill!nlng a lower premium rate than would be accepted by an authorized Insurer; and (d) Thal the Insurance was not exported to obtain terms of the Insurance con!ract(s) that are more favorable than would be accepted by an authorized Insurer. Sworn lo and subscribed before me this date ~ SEND TO: Delaware Department of Insurance Attn: SURPLUS LINES SECTION 841 Silver Lake Blvd. Dover, DE Slgnalw ef Rep<Jrllng SL Broker IMPORTANT: ATTACH PAYMENT ANO COPY OF FORM SL-1903-MS FOR EACH POLICY 2011 SL-192&-M Delaware Surplus Lines Monthly Broker Report Contact Person: mmjietcher@stale.de.us

105 Karen Weldin Stewart, CIR ML COllllnissioner Delaware Department of Insurance SURPLUS LINES BULLETIN NO. J] TO: RE >0 DATED: ALL NONADMITTED INSURERS PLACING BUSINESS COVERING RISK EXPOSURES IN DELAWARE DATA REOUEST NONADMITTED AND REINSURANCE REFORM ACT OF 2010 (NRRA) IMPLEMENTATION REVENUE STUDY December 5, 2011 BACKGROUND The Delaware Department of Insurance has been charged with performing 11 fiscaj study to find the potential impact that entering into an interstate tax sharing arrangement would have on Delaware's surplus lines tax revenue before making a decision to join either of the agreements currently being presented to the states. In accordance with 18 Del. C. 1903A, the NRRA Implementation Revenue Study Conunittee has been established to consider which agreement would result in the most retention of surplus lines tax revenue for the Stale and tlle most costefficient method of administering the collection and distribution of tax revenues. NOTICE AND REQUEST FOR DATA The Delaware Depal1ment of Insurance is asking all nonadmitted insw'ers writing policies with effective dates between July 2 1, 2011 and December 31, 2011, which cover risk exposures in the state of Delaware, to report certain policy data to the Department. This data is being gathered as part of the work being done by the NRRA Implementation Revenue Study Committee in compliance with 18 Del. C. 1903A. AltllOugh the NRRA stipulates that assessment of premium taxes and regulatory authority are limited to the home state of the insured ~ the Department is requesting in good faith that nonadmitted insurers submit the data for these six months even tf Delaware is nol the home state of the insured. For its study, the Committee must have data showing what premium is going to other states that would come to Delaware, as well as what premium is coming to Delaware that would be allocated to other states under tlle terms of an interstate tax sharing arrangement. IMPORTANT: This is a one-time study and there is no indication that the study will be repeated. The Department has tried to make participation in this data call as simple as possible and anticipates fuji cooperation from all nonadmitted insurers with Delawdre risk exposures, 84 1 Sil ver Llike Blvd., Dover, DE (302) Dover (302) 739 5:}80 fax (302) Wilmington

106 DATA FILING INSTRUCTiONS The Department bas prepared an Excel spreadsheet (see attached sample) to be used to report the following data elements: Company Name, ErN, NAIC #, Contact Name alld Contact Emai l Fields Policy Number Column Policy Effective Date Column Home State of the Insured Column (2 character postal abbreviation) Multi-State or Single-State Policy Column (indicated by M or S) Total Policy Premium Column Column(s) showing State and Premium data rot each state with risks covered by each policy There should be one line (record) for each policy. The Department's spreadsheet is available by clicking herc. Lf preferred, the company may prepare its own Excel spreadsheet with these data elements in the order listed. Please prepare one spreadsheet for the months of July through December complcted Excel file should be sent as an attachment to dcsurpluslines(ipstutc.dt;!.us. The findings atod recommendations resulting from this tiscal study must be reported to the Delaware General Assembly when it reconvenes in January 2012, so please respond ns soon as possible, I)rcfcrably 110 later than,bnu31'y 15,2012. Again. this is a limited data call for a one-time revenue study related to nonadmitted policies with ri sk exposures in the state of Delaware, written during the months of July through December 201 I only. Participation is vo luntary, but the Department wou ld appreciate full cooperation from all nonadmitted insurers so that the results of this study may be used to protect tax revenues and the benefits to Delaware citizens. Each This bulletin is effective immediately. ~ KarCJ1WCidiJteW8l't, Cl R-ML Insurance Commissione. 2

107 DELAWARE DEPARTMENT OF INSURANCE REQUEST FOR INSURER POLICY DATA TO COMPLETE FISCAL ANALYSIS PURSUANT TO 18 DEL. C. 1903A Return completed spreadsheet by as an attachment in Excel format to: Instructions: After saving the spreadsheet to your computer, click "File" then click "Send to" then click "Mail Recipient (as Attachment)" ENTER INFORMATION FOR EACH POLICY WITH EFFECTIVE DATE AFTER JULY 21, 2011 THAT HAS EXPOSURE IN DELAWARE NOTE: Include premium bearing policy endorsements. Company Name: EIN: NAIC #: Contact Name: Contact If you have any questions, contact: Ann Fletcher, CQIA, CICA, APIR Tax and Fees Coordinator Policy Effective Date Home State of Insured Multi State or Single State Total Policy Premium Add columns as needed to report all states with risks covered by each policy Policy Number State Premium State Premium State Premium State Premium State Premium Example 1 7/22/2011 MD M DE MD Example 2 8/16/2011 DE S DE NRRAFiscalStudyCompanyPremiumReport 2011.xls Page 1

108 Karen Weldin Stewart, CIR-ML Commissioner Delaware Department of Insurance SURPLUS LINES BULLETIN NO. 12 TO: RE: DATED: INDIVIDUAL SURPLUS LINES LICENSEES, SURPLUS LINES COMPLIANCE REPORTING STAFF, AND INSUREDS WHO DIRECTLY PROCURE INSURANCE FROM NONADMITTED INSURERS REVISED QUARTERLY SURPLUS LINES BROKER REPORTING FORMS AND PROCEDURES May 7, 2012 PURPOSE The purpose of this bulletin is to introduce to individual surplus lines licensees, surplus lines compliance reporting staff, and insureds who directly procure insurance from nonadmitted insurers, the new surplus lines broker quarterly SL-1925-Q reporting form, which replaces former surplus lines broker quarterly reporting form SL BACKGROUND The federal Nonadmitted and Reinsurance Reform Act of 2010 ("NRRA"), effective on July 21, 2011, subjects the placement of nonadmitted insurance solely to the statutory and regulatory requirements of the insured's Home State, and provides that only the insured's Home State may require the payment of premium tax for nonadmitted insurance. In response to the NRRA, the Delaware State Legislature passed the new "Delaware Nonadmitted Insurance Act," which revises Delaware Code Title 18, Chapter 19 in its entirety. According to the NRRA and 18 Del. C., Chapter 19, surplus lines brokers and insureds that independently procure insurance only report to the home state of the insured. If it is determined that Delaware is the home state of the insured, you only report to DE; the entire policy premium must be reported (even if it's multi-state); and 2% tax must be paid to DE on the entire premium amount. INSTRUCTIONS Effective immediately, discontinue use of the monthly SL-1925-M form. 841 Silver Lake Blvd., Dover, DE (302) Dover (302) fax (302) Wilmington 1

109 The attached quarterly reporting form, number SL-1925-Q, replaces former form number SL-1917, effective immediately. If you have already filed the monthly SL-1925-M and/or quarterly SL-1917 forms for the calendar year 2012 first quarter filings, you are NOT required to re-file using the new form. However, you must initiate use of the SL-1925-Q beginning with your next quarterly filing. Please continue to use the SL-1903-MS paper form to manually report multi-state policies ONLY. You may go back to filing the electronic SL-1905 Excel form for all other policies. Go back to quarterly tax filing/payment instead of monthly, and attach your SL MS forms (if you have any) to the quarterly report. Please note that zero quarterly reports are not required. If no business is written during the calendar quarter, the quarterly report is not required; however, annual reports are always required, regardless of business volume. All forms, along with instructions, are available on the Department's website: This bulletin is effective immediately. Karen Weldin Stewart, CIR-ML Insurance Commissioner 2

110 BULLETIN: TO: FROM: FLORIDA SURPLUS LINES AGENTS AND INDEPENDENTLY PROCURED COVERAGE (IPC) FILERS GARY D. PULLEN, EXECUTIVE DIRECTOR, FLORIDA SURPLUS LINES SERVICE OFFICE DATE: JANUARY 4, 2012 SUBJECT: FURTHER FILING GUIDANCE ON FLORIDA MULTI-STATE POLICIES The purpose of this bulletin is to provide further guidance regarding the filing of multi-state policies in which Florida is deemed to be the Home State under the provisions of the Nonadmitted and Reinsurance Reform Act (NRRA). Previously, the Florida Surplus Lines Service Office (FSLSO) issued Bulletin which provided that Florida licensed surplus lines agents and IPC filers should withhold making their multi-state policy filings bearing an effective date on or after January 1, 2012 until such time that the Surplus Lines Clearinghouse became operational. On December 20, 2011, in an emergency meeting, the Nonadmitted Insurance Multi-State Agreement (NIMA) participating states determined that it was not feasible for the Surplus Lines Clearinghouse to be fully operational to accept multi-state policy filings for first and second quarter transactions. Therefore, until such time that the Surplus Lines Clearinghouse is fully operational, Florida surplus lines agents and IPC filers should resume filing Florida home state policies with the FSLSO until further notice. The FSLSO will provide subsequent filing instructions for multi-state policies as it becomes available. Additional information may be obtained from FSLSO s website at If you have any questions, please call our office at (800) Maclay Commerce Drive. Ste 200, Tallahassee, FL fax

111 BULLETIN: TO: FROM: FLORIDA SURPLUS LINES AGENTS AND INDEPENDENTLY PROCURED COVERAGE (IPC) FILERS GARY D. PULLEN, EXECUTIVE DIRECTOR FLORIDA SURPLUS LINES SERVICE OFFICE DATE: MAY 4, 2012 SUBJECT: FILING CHANGES ON MULTI-STATE RISK POLICIES FOR SURPLUS LINES CLEARINGHOUSE The purpose of this bulletin is to provide guidance regarding the filing of multi-state surplus lines policies after the Surplus Lines Clearinghouse has become operational. This bulletin is specific to policies in which Florida is deemed the Home State under the provisions of the Nonadmitted and Reinsurance Reform Act (NRRA) and the policy includes premium for an exposure in one or more states/territories. All multi-state policies issued or renewed on or after July 1, 2012, and any subsequent endorsements to those policies, in which Florida is deemed the Home State should be filed with the Surplus Lines Clearinghouse once it has become operational. Endorsements on multi-state policies with an effective date prior to July 1, 2012 should continue to be filed with FSLSO in accordance with the statutes in effect at the time the policy became effective. As per the NIMA agreement, the Surplus Lines Clearinghouse will require brokers and IPC filers to provide the same data elements that are currently required by FSLSO for each policy filing. Furthermore, licensed brokers will be required to provide their National Producer Number (NPN) upon registration with the Surplus Lines Clearinghouse. This number is assigned by the National Association of Insurance Commissioner s National Insurance Producer Registry and is unique to each producing entity. To find your NPN number, please visit: As of the date of this bulletin, the NIMA premium allocation formula has not been formally adopted by each of the participating states. Therefore, for multi-state policies issued or renewed with an effective date on or after July 1, 2012, agents and IPC filers should continue to use their current rating basis for allocation purposes until further guidance is provided. Within the next week, the Surplus Lines Clearinghouse will provide further filing instructions for multistate policies as well as information regarding batch filing via XML. If you have any questions, please contact Clearinghouse staff at (877) Maclay Commerce Drive. Ste 200, Tallahassee, FL fax

112 BULLETIN: TO: FROM: FLORIDA SURPLUS LINES AGENTS AND INDEPENDENTLY PROCURED COVERAGE (IPC) FILERS GARY D. PULLEN, EXECUTIVE DIRECTOR FLORIDA SURPLUS LINES SERVICE OFFICE DATE: JUNE 5, 2012 SUBJECT: FILING CHANGES ON MULTI-STATE RISKS BEARING NON-US PREMIUM The purpose of this bulletin is to provide notification that, effective June 5, 2012, Florida surplus lines agents and Independently Procured Coverage (IPC) filers will no longer be required to report Non-US premium allocations on multi-state policy filings to the Florida Surplus Lines Service Office (FSLSO). Non-US premium is defined as premium charged on exposures occurring or located outside of the United States and its territories. Multi-state policies bearing Non-US premium previously filed with FSLSO will receive a credit or refund on any taxes paid on the Non-US allocated portion. Surplus lines agents and IPC filers will not be required to complete any corrective action on policy filings in order to receive the applicable credits for amounts previously paid. However, agents and IPC filers are responsible for providing a credit or refund to policyholders. This bulletin is intended to provide guidance to brokers or policyholders who transact multi-state business in Florida and report such transactions with the Florida Surplus Lines Service Office. The information provided should not be interpreted or used as a legal opinion, nor does it supersede directives provided by state or other governing authorities. For more information, you may contact FSLSO at Maclay Commerce Drive. Ste 200, Tallahassee, FL fax

113 BULLETIN: TO: FROM: FLORIDA SURPLUS LINES AGENTS AND INDEPENDENTLY PROCURED COVERAGE (IPC) FILERS GARY D. PULLEN, EXECUTIVE DIRECTOR, FLORIDA SURPLUS LINES SERVICE OFFICE DATE: NOVEMEBER 4, 2011 SUBJECT: FILING CHANGES ON MULTI-STATE RISK POLICIES WITH NIMA STATES The purpose of this bulletin is to provide filing guidance regarding multi-state policies wherein Florida is deemed the Home State under the provisions of the Nonadmitted and Reinsurance Reform Act (NRRA) AND the policy includes premium for an exposure in one or more Nonadmitted Insurance Multi-State Agreement (NIMA) states/territories. This bulletin is specific only to NIMA States which, as of this date, are: Alaska, Connecticut, Florida, Hawaii, Louisiana, Mississippi, Nevada, Nebraska, Puerto Rico, South Dakota, Utah, and Wyoming. For policies that bear an effective or renewal date ON or AFTER January 1, 2012, are deemed Florida home state and include exposure in one other NIMA state, all Florida surplus lines agents and tax filers are asked to withhold making their filing until the Surplus Lines Clearinghouse has become operational for the NIMA states. Please be advised in situations where the above described policies have already been filed with Florida, this office will ask that such policies be backed out and filed with the Surplus Lines Clearinghouse at the time it can accept filings. Multi-state policies that include Florida as the Home State as provided by the NRRA but DO NOT include a second NIMA state as part of the exposure should continue to be filed with the FSLSO in accordance with its filing provisions. The FSLSO will provide subsequent filing instructions for multi-state policies as it becomes available. Additional information may be obtained from FSLSO s website at If you have any questions, please call our office at (800) Maclay Commerce Drive. Ste 200, Tallahassee, FL fax

114 BULLETIN: TO: FROM: FLORIDA SURPLUS LINES AGENTS, INSURERS AND INDEPENDENTLY PROCURED COVERAGE (IPC) FILERS GARY D. PULLEN, EXECUTIVE DIRECTOR, FLORIDA SURPLUS LINES SERVICE OFFICE DATE: JULY 21, 2011 SUBJECT: IMPLEMENTATION OF FEDERAL NONADMITTED & REINSURANCE REFORM ACT IN FLORIDA The purpose of this bulletin is to outline nationwide regulatory changes that will affect the placement of nonadmitted insurance in Florida. The Nonadmitted and Reinsurance Reform Act of 2010 ( NRRA ), 15 U.S.C et seq., provides that only an insured s Home State may require the payment of premium tax for nonadmitted insurance. Moreover, the NRRA subjects the placement of nonadmitted insurance solely to the statutory and regulatory requirements of the insured s Home State, and provides that only the insured s Home State may require a surplus lines broker to be licensed to sell, solicit or negotiate nonadmitted insurance with respect to such insured. 15 U.S.C. 8202(a), (b). Nonadmitted insurance, as defined in 15 U.S.C. 8206(9), applies only to property and casualty insurance (excluding workers compensation). In response to the NRRA, the 2011 Florida Legislature passed SB 1816 relative to the collection of the gross premium for multi-state policies. This legislation became effective immediately after signature by the Governor on May 26, As such, Florida began collecting the entire policy premium for multi-state policies for which Florida is deemed to be the Home State (as defined by the NRRA) effective July 1, These policies will be subject to tax provisions outlined in SB 1816 which provides that Florida will tax the gross premium based on the individual states tax rates for which each portion of the exposure is located. Service fees will be charged based on the gross premium of the entire policy at Florida's current rate. Assessments and surcharges will be assessed on the Florida portion of the premium only. For multi-state policies effective prior to July 1, 2011, only the Florida allocated premium should be reported to FSLSO. All other provisions of the NRRA will become effective on July 21, FSLSO released modifications to the Surplus Lines Information Portal (SLIP) on July 1, 2011 that incorporated new fields for agents completing multi-state filings and premium breakouts. An updated version of the FTP Submit Software format was also made available for download on July 1, 2011 to accommodate the.slx (batch filing) format changes released in early April. Additional information may be obtained from FSLSO s website at If you have any questions, please call our office at (800)

115 What is the scope of the NRRA? The NRRA states that the placement of nonadmitted insurance is subject to the statutory and regulatory requirements solely of the insured s home state and that the NRRA 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. 15 U.S.C The NRRA does not expand the scope of the kinds of insurance that an insurer may write in the nonadmitted insurance market and each state continues to determine which kinds of insurance an insurer may write in that state. Although the NRRA preempts certain state laws with respect to nonadmitted insurance, it does not have any impact on insurance offered by insurers licensed or authorized in this state. What is the insured s Home State for purposes of a particular placement? Florida is the insured s Home State if the insured maintains its principal place of business here or, in the case of an individual, the individual s principal residence is here. If Florida is considered the insured s Home State, only Florida s requirements regarding the placement of such business will apply. If 100% of the insured risk is located outside of Florida, then the insured s Home State is the state to which the greatest percentage of the insured s taxable premium for that insurance contract is allocated. Principal place of business means, with respect to determining the Home State of the insured, (a) the State where the insured maintains its headquarters and where the insured s high-level officers direct, control and coordinate the business activities in more than one State, the State in which the greatest percentage of the insured s taxable premium for that insurance contract is allocated; or (c) if the insured maintains its headquarters or the insured s high-level officers direct, control and coordinate the business activities outside any State, the State to which the greatest percentage of the insured s taxable premium for that insurance contract is allocated. Principal residence means, with respect to determining the Home State of the insured, (a) the State where the insured resides for the greatest number of days during a calendar year; or (b) if the insured s principal residence is located outside any State, the State to which the greatest percentage of the insured s taxable premium for that insurance contract is allocated. If more than one insured from an affiliate group are named insureds on a single nonadmitted insurance placement, Florida will be considered the Home State for that placement if Florida is the Home State of the member of the affiliated group that has the largest percentage of premium attributed to it under such insurance contract. How will these rules be applied? With regards to regulatory provisions, new and renewal policies with an effective date prior to July 21, 2011 will be subject to the laws and regulations of Florida and other jurisdictions, as applicable, as of the policy effective date. The laws and regulations of Florida and other jurisdictions, as applicable, as of the effective date of such a policy will also apply to any modification to that policy during the policy period, such as all endorsements (including risk- and premium-bearing endorsements), installment payments and premium audits. New and renewal policies with an effective date on or after July 21, 2011, and any modifications thereto, will be subject only to the laws and regulations of Florida if Florida is the Home State of the insured. What are the requirements for premium tax allocation and payment in Florida? The NRRA permits only the insured s Home State to require the payment of premium tax for nonadmitted insurance to become effective no later than July 21, The 2011 Florida Legislature passed Senate Bill 1816 which was signed into law by the Governor on May 26, Per SB 1816, Florida surplus lines 2

116 agents must begin filing all new and renewal multi-state policies (and their subsequent endorsements) bearing an effective date of July 1, 2011 with Florida if and only if, Florida is the Home State of the policy. New and renewal multi-state policies with an effective date prior to July 1, 2011 will be filed with their appropriate states for which there is exposure. For these policies, only the Florida allocated premium will be reported to Florida. As provided by SB 1816, for new and renewal multi-state policies where Florida is the Home State effective July 1, 2011 and thereafter, taxes and service fees will be calculated based on the total gross premium regardless of where the exposure is located. Taxes will be calculated using the tax rates of the states applicable to the premium allocated for each state where the risk is located. Assessments and surcharges will be calculated based on the Florida allocated portion of the policy. It is the intent of the Department to issue additional bulletins if and when Florida begins participating in a tax sharing arrangement. Until additional bulletins are issued, the Florida tax rate allocation provisions should be applied to new and renewal policies with an effective date on or after July 1, 2011, when Florida is the insured s Home State. What are the license requirements for agents? Only the insured s Home State may require a surplus lines agent to be licensed to sell, solicit or negotiate nonadmitted insurance with respect to a particular placement. If Florida is the insured s Home State, the surplus lines agent must be licensed in Florida. The NRRA provides that Florida may not collect licensing fees for surplus lines agents as of July 21, 2012, unless Florida participates in the NAIC s national insurance producer database or any other equivalent uniform national database. 15 U.S.C Florida participates in the National Insurance Producer Registry (NIPR), which provides such a database. When are the requirements for a diligent search and when is a diligent search not required? Florida s Surplus Lines Law requires that a diligent effort to search for available coverage in the admitted market must be made before exporting coverage to the nonadmitted market. F.S states that Diligent Effort means seeking coverage and having been rejected by at least three authorized insurers currently writing this type of coverage and documenting these rejections. However, if the residential structure has a dwelling replacement cost of $1 million or more, the term means seeking coverage from and having been rejected by at least one authorized insurer currently writing this type of coverage and documenting the rejection. Florida surplus lines agents should note that the 2011 Florida Legislative Session incurred change to F.S Eligibility to Export with regards to the diligent effort requirement for certain insurance coverages. For more information, please visit: On or after July 21, 2011, a surplus lines agent seeking to procure or place nonadmitted insurance on behalf of an exempt commercial purchaser is not required to perform a diligent search if: 1) the agent has disclosed to the exempt commercial purchaser that insurance may or may not be available from the admitted market that may provide greater protection with more regulatory oversight; and 2) the exempt commercial purchaser has subsequently requested in writing for the agent to procure or place such insurance from a nonadmitted insurer. For a definition of an Exempt Commercial Purchaser, please visit: What are the eligibility requirements for nonadmitted insurers? The NRRA restricts the eligibility requirements a state may impose on nonadmitted insurers. See 15 U.S.C For nonadmitted insurers domiciled in a U.S. jurisdiction, a state may only impose the requirements in conformance with the Non-Admitted Insurance Model Act. However, an agent is only permitted to place business with a foreign insurer on the Florida Eligible Insurers List. For a copy of Florida s Eligible Surplus Lines Insurer List, please visit: 3

117 For nonadmitted insurers domiciled outside the U.S., an agent may place business with such insurers provided the insurer is listed on the Quarterly Listing of Alien Insurers maintained by the International Insurers Department of the NAIC. What are the key definitions from the NRRA? The NRRA includes several definitions relevant to Florida s implementation of its requirements. All agents, insurers and IPC filers should be aware of these terms which include the following: - Exempt commercial purchaser - Home State - Independently procured insurance - Nonadmitted insurance - Nonadmitted insurer - Premium tax - Qualified risk manager - Surplus lines broker - State Definitions for these terms, as defined by the NRRA, can be found by visiting: 4

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122 OFFICE OF INSURANCE AND SAFETY FIRE COMMISSIONER RALPH T. HUDGENS COMMISSIONER OF INSURANCE SAFETY FIRE COMMISSIONER INDUSTRIAL LOAN COMMISSIONER COMPTROLLER GENERAL BULLETIN 11-EX-3 SEVENTH FLOOR, WEST TOWER FLOYD BUILDING 2 MARTIN LUTHER KING, JR. DRIVE ATLANTA, GEORGIA (404) TO: FROM: All Surplus Line Brokers and Insureds Independently Procuring Nonadmitted Insurance Ralph T. Hudgens, Insurance and Safety Fire Commissioner DATE: September 12, 2011 RE: Implementation of Federal Nonadmitted and Reinsurance Reform Act of 2010 in Georgia The purpose of this bulletin is to outline nationwide regulatory changes that will affect the placement of nonadmitted insurance in Georgia. The Nonadmitted and Reinsurance Reform Act of 2010 ( NRRA ), 15 U.S.C et seq., provides that only an insured s home State may require the payment of premium tax for nonadmitted insurance. Moreover, the NRRA subjects the placement of nonadmitted insurance solely to the statutory and regulatory requirements of the insured s home State, and provides that only the insured s home State may require a surplus line[s] broker to be licensed to sell, solicit or negotiate nonadmitted insurance with respect to such insured. 15 U.S.C. 8202(a), (b). Nonadmitted insurance, as defined in 15 U.S.C. 8206(9), applies only to property and casualty insurance (excluding workers compensation). The NRRA became effective on July 21, For nonadmitted insurance business placed on or after July 21, 2011, the following information is provided for the benefit of brokers and insureds independently procuring nonadmitted insurance: What is the scope of the NRRA? The NRRA states that the placement of nonadmitted insurance is subject to the statutory and regulatory requirements solely of the insured s home State and that the NRRA may not be construed to preempt any State law, rule, or regulation that restricts the placement of workers compensation insurance or excess insurance for selffunded workers compensation plans with a nonadmitted insurer. 15 U.S.C The NRRA does not expand the scope of the kinds of insurance that an insurer may write in the nonadmitted insurance market and each state continues to determine which kinds of insurance an insurer may write in that state. Although the NRRA preempts certain state laws with respect to nonadmitted insurance, it does not have any impact on insurance offered by insurers licensed or authorized in this state. What is the insured s home State for purposes of a particular placement? Georgia is the insured s home State if the insured maintains its principal place of business here or, in the case of an individual, the individual s principal residence is here. If Georgia is considered the insured s home State, only Georgia s requirements regarding the placement of such business will apply. If 100% of the insured risk is located outside of Georgia, then the insured s home State is the state to which the greatest percentage of the insured s taxable premium for that insurance contract is allocated. See 15 U.S.C. 8206(6). THE OFFICE OF INSURANCE AND SAFETY FIRE COMMISSIONER DOES NOT DISCRIMINATE ON THE BASIS OF RACE, COLOR, NATIONAL ORIGIN, SEX, RELIGION, AGE OR DISABILITY IN EMPLOYMENT OR THE PROVISION OF PROGRAMS OR SERVICES

123 If more than one insured from an affiliated group are named insureds on a single nonadmitted insurance placement, Georgia will be considered the home State for that placement if Georgia is the home State of the member of the affiliated group that has the largest percentage of premium attributed to it under such insurance contract. See 15 U.S.C. 8206(6). How will these rules be applied? New and renewal policies with an effective date prior to July 21, 2011 will be subject to the laws and regulations of Georgia and other jurisdictions, as applicable, as of the policy effective date. The laws and regulations of Georgia and other jurisdictions, as applicable, as of the effective date of such a policy will also apply to any modification to that policy during the policy period, such as all endorsements (including risk-and premium-bearing endorsements), installment payments and premium audits. New and renewal policies with an effective date on or after July 21, 2011, and any modifications thereto, will be subject only to the laws and regulations of Georgia if Georgia is the home State of the insured. What are the requirements for premium tax allocation and payment in Georgia? As of July 21, 2011, the NRRA permits only the insured s home State to require the payment of premium tax for nonadmitted insurance. Until July 21, 2011, the laws and regulations of Georgia and other jurisdictions, as applicable, will continue to apply to premium tax due on multi-state placements. It is the intent of the Department to issue additional bulletins if and when Georgia begins participating in a tax sharing arrangement. Until additional bulletins are issued, new and renewal policies with an effective date on or after July 21, 2011, and for which Georgia is the insured s home State, should be reported as follows by surplus line[s] brokers: If a surplus line policy covers risks or exposures located or to be performed both in and out of Georgia, the sum payable shall be computed based on (i) an amount equal to 4 percent of that portion of the gross premiums allocated to this state plus (ii) an amount equal to the portion of premiums allocated to other states or territories on the basis of the tax, rates and fees applicable to properties, risks, or exposures located or to be performed outside Georgia. Insureds independently procuring insurance for a surplus line policy that covers risks or exposures located or to be performed both in and out of Georgia will compute the sum payable based on an amount equal to 4 percent of gross premiums paid for such insurance. Georgia requires quarterly filing and payment of premium taxes (O.C.G.A ). Surplus line[s] brokers must report quarterly on form GID-212-PT. Insureds independently procuring insurance must report 30 days from the effective date of the policy on form GID-214-PT. These forms are available at and will soon be available in a format that allows for multi-state risk reporting. What are the license requirements for surplus line brokers? Only the insured s home State may require a surplus line[s] broker to be licensed to sell, solicit or negotiate nonadmitted insurance with respect to a particular placement. If Georgia is the insured s home State, the surplus line[s] broker must be licensed in Georgia. The NRRA provides that a State may not collect licensing fees for surplus line[s] brokers as of July 21, 2012, unless the State participates in the NAIC s national insurance producer database or any other equivalent uniform national database. 15 U.S.C Georgia participates in the National Insurance Producer Registry (NIPR), which provides such a database, and therefore, will be permitted to collect such license fees. What are the diligent search requirements? Under Georgia law, the insured or the insured s agent must make an effort to procure the desired insurance coverage or benefits from authorized insurers. When such effort has been unsuccessful, the desired insurance coverage may be procured from unauthorized insurers, subject to the provisions of O.C.G.A

124 On or after July 21, 2011, a surplus line[s] broker seeking to procure or place nonadmitted insurance on behalf of an exempt commercial purchaser is not required to perform a diligent search if: 1) the broker has disclosed to the exempt commercial purchaser that insurance may or may not be available from the admitted market that may provide greater protection with more regulatory oversight; and 2) the exempt commercial purchaser has subsequently requested in writing for the broker to procure or place such insurance from a nonadmitted insurer. 15 U.S.C. 8206(5). What are the eligibility requirements for nonadmitted insurers? The NRRA restricts the eligibility requirements a state may impose on nonadmitted insurers. See 15 U.S.C For nonadmitted insurers domiciled in a U.S. jurisdiction, a broker is permitted to place nonadmitted insurance with such insurers provided they are authorized to write such business in their state of domicile and maintain minimum capital and surplus of $15 million or the Commissioner makes an affirmative finding of the acceptability of the insurer. For nonadmitted insurers domiciled outside the U.S., a broker may place business with such insurers provided the insurer is listed on the Quarterly Listing of Alien Insurers maintained by the International Insurers Department of the NAIC. What are the key definitions from the NRRA used in this bulletin? The NRRA includes several definitions relevant to Georgia s implementation of its requirements. Key definitions include the following: - Exempt commercial purchaser : The term exempt commercial purchaser means any person purchasing commercial insurance that, at the time of placement, meets the following requirements: (A) The person employs or retains a qualified risk manager to negotiate insurance coverage. (B) The person has paid aggregate nationwide commercial property and casualty insurance premiums in excess of $100,000 in the immediately preceding 12 months. (C) (i) The person meets at least 1 of the following criteria: (I) The person possesses a net worth in excess of $20,000,000, as such amount is adjusted pursuant to clause (ii). (II) The person generates annual revenues in excess of $50,000,000, as such amount is adjusted pursuant to clause (ii). (III) The person employs more than 500 full-time or full-time equivalent employees per individual insured or is a member of an affiliated group employing more than 1,000 employees in the aggregate. (IV) The person is a not-for-profit organization or public entity generating annual budgeted expenditures of at least $30,000,000, as such amount is adjusted pursuant to clause (ii). (V) The person is a municipality with a population in excess of 50,000 persons. (ii) Effective on the fifth January 1 occurring after the date of the enactment of this subtitle and each fifth January 1 occurring thereafter, the amounts in subclauses (I), (II), and (IV) of clause (i) shall be adjusted to reflect the percentage change for such 5-year period in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the Department of Labor. 15 U.S.C. 8206(5). - home State : (A) In General. Except as provided in subparagraph (B), the term home State means, with respect to an insured (i) the State in which an insured maintains its principal place of business or, in the case of an individual, the individual s principal residence; or (ii) if 100 percent of the insured risk is located out of the State referred to in clause (i), the State to which the greatest percentage of the insured s taxable premium for that insurance contract is allocated. 3

125 (B) Affiliated Groups. If more than 1 insured from an affiliated group are named insureds on a single nonadmitted insurance contract, the term home State means the home State, as determined pursuant to subparagraph (A), of the member of the affiliated group that has the largest percentage of premium attributed to it under such insurance contract. 15 U.S.C. 8206(6). - Independently procured insurance : The term independently procured insurance means insurance procured directly by an insured from a nonadmitted insurer. 15 U.S.C. 8206(7). - Nonadmitted insurance : The term nonadmitted insurance means any property and casualty insurance permitted to be placed directly or through a surplus line[s] broker with a nonadmitted insurer eligible to accept such insurance. 15 U.S.C. 8206(9). - Nonadmitted insurer : The term nonadmitted insurer (A) means, with respect to a State, an insurer not licensed to engage in the business of insurance in such State; but (B) does not include a risk retention group, as that term is defined in section 2(a)(4) of the Liability Risk Retention Act of 1986 (15 U.S.C. 3901(a)(4)). 15 U.S.C. 8206(11). - Premium tax : The term premium tax means, with respect to surplus line[s] or independently procured insurance coverage, any tax, fee, assessment, or other charge imposed by a government entity directly or indirectly 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. 15 U.S.C. 8206(12). - 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: (A) The person is an employee of, or third-party consultant retained by, the commercial policyholder. (B) The person provides skilled services in loss prevention, loss reduction, or risk and insurance coverage analysis, and purchase of insurance. (C) The person (i) (I) has a bachelor s degree or higher from an accredited college or university in risk management, business administration, finance, economics, or any other field determined by a State insurance commissioner or other State regulatory official or entity to demonstrate minimum competence in risk management; and (II) (aa) has 3 years of experience in risk financing, claims administration, loss prevention, risk and insurance analysis, or purchasing commercial lines of insurance; or (bb) has (AA) a designation as a Chartered Property and Casualty Underwriter (in this subparagraph referred to as CPCU ) issued by the American Institute for CPCU/Insurance Institute of America; (BB) a designation as an Associate in Risk Management (ARM) issued by the American Institute for CPCU/Insurance Institute of America; (CC) a designation as a Certified Risk Manager (CRM) issued by the National Alliance for Insurance Education & Research; (DD) a designation as a RIMS Fellow (RF) issued by the Global Risk Management Institute; or (EE) 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; (ii) (I) has at least 7 years of experience in risk financing, claims administration, loss prevention, risk and insurance coverage analysis, or purchasing commercial lines of insurance; and (II) has any 1 of the designations specified in subitems (AA) through (EE) of clause (i)(ii)(bb); 4

126 (iii) has at least 10 years of experience in risk financing, claims administration, loss prevention, risk and insurance coverage analysis, or purchasing commercial lines of insurance; or (iv) has a graduate degree from an accredited college or university in risk management, business administration, finance, economics, or any other field determined by a State insurance commissioner or other State regulatory official or entity to demonstrate minimum competence in risk management. 15 U.S.C. 8206(13). - Surplus line[s] broker : The term surplus line[s] 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. 15 U.S.C. 8206(15). - 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. 15 U.S.C. 8206(16). If you have any questions regarding this bulletin, please contact Linda Brooks, Premium Tax Division at (404) RALPH T. HUDGENS INSURANCE AND SAFETY FIRE COMMISSIONER STATE OF GEORGIA 5

127 OFFICE OF INSURANCE AND SAFETY FIRE COMMISSIONER RALPH T. HUDGENS COMMISSIONER OF INSURANCE SAFETY FIRE COMMISSIONER INDUSTRIAL LOAN COMMISSIONER COMPTROLLER GENERAL BULLETIN 12-EX-1 SEVENTH FLOOR, WEST TOWER FLOYD BUILDING 2 MARTIN LUTHER KING, JR. DRIVE ATLANTA, GA (404) TO: ALL SURPLUS LINE BROKERS AND INSUREDS INDEPENDENTLY PROCURING NONADMITTED INSURANCE FROM: RALPH T. HUDGENS INSURANCE AND SAFETY FIRE COMMISSIONER DATE: MAY 21, 2012 RE: MULTI-STATE TAX RATE CHANGES - SENATE BILL 385 Effective July 1, 2012, all non-admitted business written in Georgia with an effective date on or after July 1, 2012 where Georgia is the HOME state - will be taxed pursuant to Senate Bill 385. If a surplus line policy covers risks or exposures located or to be performed both in and out of Georgia and Georgia is the home state, the entire premium will be taxed at a rate of 4% and filers do not need to allocate that portion of the risk located in each state. Allocations will be required if Georgia participates in a cooperative agreement, compact, or reciprocal agreement with other states. However, if Georgia enters into any such agreement, additional instructions will be provided at that time. SB 385 affects the tax rate and eliminates state allocation requirements, but does not revise or change any other information previously provided in Bulletin 11-EX-3 (which may be obtained from our website at A copy of SB 385 may be obtained from the Georgia General Assembly website at To access the Excel workbook/form that should be utilized for filing surplus line affidavits go to select Premium Tax from the home page, next select Forms and Filing Procedures, and then select the appropriate type of filing. Payment of tax is due at the time of filing. Any questions concerning this Bulletin should be addressed to the Premium Tax Division, 916 West Tower, #2 Martin Luther King, Jr. Drive, Atlanta, Georgia 30334, (404) , or premiumtax@oci.ga.gov. RALPH T. HUDGENS INSURANCE AND SAFETY FIRE COMMISSIONER STATE OF GEORGIA THE OFFICE OF INSURANCE AND SAFETY FIRE COMMISSIONER DOES NOT DISCRIMINATE ON THE BASIS OF RACE, COLOR, NATIONAL ORIGIN, SEX, RELIGION, AGE OR DISABILITY IN EMPLOYMENT OR THE PROVISION OF PROGRAMS OR SERVICES

128 NEIL ABERCROMBIE GOVERNOR KEALl'I $. LOPEZ DIRECTOR BRIAN SCHATZ LT. GOVERNOR GORDON J, ITO INSURANCE COMMISSIONER STATE OF HAWAl'i INSURANCE DIVISION DEPARTMENT OF COMMERCE & CONSUMER AFFAIRS P.O. BOX 3614 HONOLULU, HAWAl'I MERCHANT STREET, ROOM 213 HONOLULU, HAWAl'I 98B13 PHONE NO: (808) S&l-2790 FAX NO: (llqb) ~ae.2aoa MEMORANDUM 20 l 1-4E TO: FROM: All insurers eligible to write nonadmitted insurance in Hawaii, all licensed surplus lines brokers, and all insureds independently procuring nonadmitted insurance Insurance Commissioner Gordon I. Ito DATE: October 18, 2011 RE: Implementation of federal Nonadmitted and Reinsurance Refo1m Act in Hawaii The purpose of this memorandum is to outline nationwide regulatory changes that will affect the placement of nonadmitted insurance in Hawaii. The Nonadmitted and Reinsurance Reform Act of2010 ("NRRA"), 15 U.S.C et seq., provides that only an insured's "Home State" may require the payment of premium tax for nonadmitted insurance. Moreover, the NRRA subjects the placement of nonadmitted insurance solely to the statutory and regulatory requirements of the insured's Home State, and provides that only the insured's Home State may require a surplus lines broker to be licensed to sell, solicit or negotiate nonadmitted insurance with respect to such insured. 15 U.S.C. 8202(a), (b). "Nonadmitted insurance," as defined in 15 U.S.C. 8206(9), applies only to property and casualty insurance (excluding workers' compensation). The NRRA became effective on July 21, 20 I 1. Hawaii adopted legislation, Act 68, Session Laws of Hawaii 20 I 1 ("Act 68") in conformance with the NRRA and to implement the provisions of the federal act. The full text of Hawaii's legislation can be found at: For nonadmitted insurance business placed on or after July 21, 2011, the following information is provided for the benefit of insurers, producers, and insureds: What is the scope of the NRRA? The NRRA states that "the placement of nonadmitted insurance is subject to the statutory and regulatory requirements solely of the insured's home state" and that the NRRA "may not be construed to preempt any State law, rule, or regulation that restricts the placement of workers' compensation insurance or excess insurance for selffunded workers' compensation plans with a nonadmitted insurer." 15 U.S.C The NRRA does not expand the scope of the kinds of insurance that an insurer may write in the nonadmitted insurance market and each state continues to detennine which kinds of insurance an insurer may write in that state. Although the NRRA preempts certain state laws with respect to nonadmitted insurance, it does not have any impact on insurance offered by insurers licensed or authorized in this state. What is the insured's Home State for purposes ofa particular placement? Hawaii is the insured's Home State ifthe insured maintains its principal place of business here or, in the case of an individual, the individual's principal residence is here. If Hawaii is considered the insured's Home State, only Hawaii's requirements regarding the placement of such business will apply. If l 00% of the insured risk is located outside of Hawaii, then the insured's Home State is the state to which the greatest percentage of the insured's taxable premium for that insurance contract is allocated.

129 Memorandum 20U-4E October 18, 2011 Page2 If more than one insured from an affiliate group are named insureds on a single nonadmitted insurance placement, Hawaii will be considered the Home State for that placement if Hawaii is the Home State of the member of the affiliated group that has the largest percentage of premium attributed to it under such insurance contract. How wilj these laws be applied? New and renewal policies with an effective date prior to July 21, 201 I will be subject to the laws and rules of Hawaii and other jurisdictions, as applicable, as of the policy effective date. The laws and regulations of Hawaii and other jurisdictions, as applicable, as of the effective date of such a policy will also apply to any modification to that policy during the policy period, such as all endorsements (including risk- and premium-bearing endorsements), installment payments and premium audits. New and renewal policies with an effective date on or after July 21, 2011, and any modifications thereto, will be subject only to the laws and regulations of Hawaii if Hawaii is the Home State of the insured. What are the requirements for premium tax allocation and payment in Hawaii? As,of July 21, 2011, the NRRA permits only the insured's Home State to require the payment of premium tax for nonadmitted insurance. Until July 20, 2011, the pre-nrra laws and regulations of Hawaii and other jurisdictions, as applicable, will apply to premium tax due on multi-state placements. It is the intent of the Department to issue additional bulletins as more information becomes available. Until additional bulletins are issued, the Hawaii tax rate should be applied to new and renewal policies with an effective date on or after July 21, 2011, when Hawaii is the insured's Home State. The tax rate of each state affected by multiu state policies shall be applied to the premium apportioned to each state to determine the aggregate tax on the policy. Tax reports and payments shall follow this schedule: For calendar quarters ending September 30, the filing and payment due date shall be on or before November 15,and For calendar quarters ending December 31, the filing and payment due date shall be on or before February 15, and For calendar quarters ending March 31, the filing and payment due date shall be on or before May 15, and For calendar quarters ending June 30, the filing and payment due date shall be on or before August 15. What are the license requirements for brokers? Only the insured's Home State may require a surplus lines broker to be licensed to sell, solicit or negotiate nonadmitted insurance with respect to a particular placement. If Hawaii is the insured's Home State, the surplus lines broker must be licensed in Hawaii. The NRRA provides that Hawaii may not collect licensing fees for surplus lines brokers as of July 21, 2012, unless Hawaii participates in the NAIC's national insurance producer database or any other equivalent uniform national database. 15 U.S.C Hawaii participates in the National Insurance Producer Registry (NIPR), which provides such a database. What are the requirements for a diligent search and when is a diligent search not required? A diligent search is required prior to placement of surplus lines insurance. The requirements are explained in Haw. Rev. Stat. 431: On or after July 21, 2011, a surplus lines broker seeking to procure or place nonadmitted insurance on behalf of an "exempt commercial purchaser" is not required to perform a diligent search if: 1) th'e broker has disclosed to the exempt commercial purchaser that insurance may or may not be available from the admitted market that may provide

130 Memorandum 20 l l-4e October 18, 2011 Page 3 greater protection with more regulatory oversight; and 2) the exempt commercial purchaser has subsequently requested in writing for the broker to procure or place such insurance from a nonadmitted insurer. "Exempt commercial purchaser" is defined in Act 68 and the definition is consistent with the NRRA. What are the eligibility requirements for nonadmitted insurers? The NRRA restricts the eligibility requirements a state may impose on nonadmitted insurers. See 15 U.S.C For nonadmitted insurers domiciled in a U.S. jurisdiction, a broker is pennitted to place nonadmitted insurance with such insurers provided they are authorized to write such business in their state of domicile and maintain minimum capital and surplus of$15 million. For nonadmitted insurers domiciled outside the U.S., a broker may place business with such insurers provided the insurer is listed on the Quarterly Listing of Alien Insurers maintained by the International Insurers Department of the NAIC. What are the key definitions from the NRRA? The NRRA includes several definitions relevant to Hawaii implementation of its requirements. definitions that are consistent with the NRRA. Key definitions include the following: Act 68 adopts - "Exempt commercial purchaser": The term "exempt commercial purchaser" means any person purchasing commercial insurance that, at the time of placement, meets the following requirements: (A) The person employs or retains a qualified risk manager to negotiate insurance coverage. (B) The person has paid aggregate nationwide commercial property and casualty insurance premiums in excess of$100,000 in the immediately preceding 12 months. (C) (i) The person meets at least 1 of the following criteria: (I) The person possesses a net worth in excess of $20,000,000, as such amount is adjusted pursuant to clause (ii). (II) The person generates annual revenues in excess of $50,000,000, as such amount is adjusted pursuant to clause (ii). (Ill) The person employs more than 500 full-time or full-time equivalent employees per individual insured or is a member of an affiliated group employing more than 1,000 employees in the aggregate. (IV) The person is a not-for-profit organization or public entity generating annual budgeted expenditures of at least $30,000,000, as such amount is adjusted pursuant to clause (ii). (V) The person is a municipality with a population in excess of 50,000 persons. (ii) Effective on the fifth January 1 occurring after the date of the enactment of this subtitle and each fifth January 1 occurring thereafter, the amounts in subclauses (I), (II), and (IV) ofclause (i) shall be adjusted to reflect the percentage change for such 5-year period in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the Department of Labor. 15 U.S.C. 8206(5). - "Home State": (A) In General.-Except as provided in subparagraph (B), the term "home State" means, with respect to an insured- (i) the State in which an insured maintains its principal place of business or, in the case of an individual, the individual's principal residence; or (ii) if JOO percent of the insured risk is located out of the State referred to in clause (i), the State to which the greatest percentage of the insured's taxable premium for that insurance contract is allocated.

131 Memorandum E October 18, 20 I 1 Page4 (B) Affiliated Groups.-If more than I insured from an affiliated group are named insureds on a single nonadmitted insurance contract, the term "home State" means the. home State, as determined pursuant to subparagraph (A), of the member of the affiliated group that has the largest percentage of premium attributed to it under such insurance contract. 15 U.S.C. 8206(6). - "Independently procured insurance": The term "independently procured insurance" means insurance procured directly by an insured from a nonadmitted insurer. 15 U.S.C. 8206(7). - "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. 15 U.S.C. 8206(9). - "Nonadmitted insurer": The term "nonadmitted insurer"- (A) means, with respect to a State, an insurer not licensed to engage i~ the business of insurance in such State; but (B) does not include a risk retention group, as that term is defined in section 2(a)(4) of the Liability Risk Retention Act of 1986 (15 U.S.C. 390l(a)(4)). 15 U.S.C. 8206(11). - "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 government entity directly or indirectly 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. 15 U.S.C. 8206(12). - "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: (A) The person is an employee of, or third-party consultant retained by, the commercial policyholder. (B) The person provides skilled services in loss prevention, loss reduction, or risk and insurance coverage analysis, and purchase ofinsurance. (C) The person- (i) (I) has a bachelor's degree or higher from an accredited cpllege or university in risk management, business administration, finance, economics, or any other field determined by a State insurance commissioner or other State regulatory official or entity to demonstrate minimum competence in risk management; and (II) (aa) has 3 years of experience in risk financing, claims administration, loss prevention, risk and insurance analysis, or purchasing commercial lines of insurance; or (bb) has- (AA) a designation as a Chartered Property and Casualty Underwriter (in this subparagraph referred to as "CPCU") issued by the American Institute for CPCU/Insurance Institute of America; (BB) a designation as an Associate in Risk Management (ARM) issued by the American Institute for CPCU/lnsurance Institute of America; (CC) a designation as Certified Risk Manager (CRM) issued by the National Alliance for Insurance Education & Research; (DD) a designation as a RIMS Fellow (RF) issued by the Global Risk Management Institute; or (EE) 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;

132 Memorandum 20 l 1-4E October 18, 2011 Page 5 (ii) (I) has at least 7 years of experience in risk fmancing, claims administration, loss prevention, risk and insurance coverage analysis, or purchasing commercial lines of insurance; and (II) has any 1 of the designations specified in subitems (AA) through (EE) of clause (i)(ii)(bb); (iii) has at least 10 years of experience in risk financing, claims administration, loss prevention, risk and insurance coverage analysis, or purchasing commercial lines of insurance; or (iv) has a graduate degree from an accredited college or university in risk management, business administration, finance, economics, or any other field determined by a State insurance commissioner or other State regulatory official or entity to demonstrate minimum competence in risk management. 15 U.S.C. 8206(13). - "Surplus lines broker": The term "surplus lines broker" means an individual, fnm, or corporation which is licensed in a State to sell, solieit, or negotiate insurance on properties, risks, or exposures located or to be performed in a State with nonadmitted insurers. 15 U.S.C. 8206(15). - "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. 15 U.S.C. 8206(16).

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137 C.L. BUTCH OTTER Governor State of Idaho DEPARTMENT OF INSURANCE 700 West State Street, 3rd Floor P.O. Box Boise, Idaho Phone (208) FAX (208) WILLIAM W. DEAL Director BULLETIN NO DATE: November 28, 2011 TO: FROM: SUBJECT: All insurers eligible to write nonadmitted insurance in Idaho, all licensed surplus line brokers, all insureds independently procuring nonadmitted insurance, and stamping offices William W. Deal, Director Amendments to the Idaho Surplus Line Law, Title 41, Chapter 12, Idaho Code, and Implementation of the Federal Nonadmitted and Reinsurance Reform Act of 2010 On July 21, 2010, the President signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L , which includes the Nonadmitted and Reinsurance Reform Act of 2010 (NRRA), 15 U.S.C. 8201, et seq. The NRRA provides that only an insured s home state may require the payment of premium tax for nonadmitted insurance. Moreover, the NRRA subjects the placement of nonadmitted insurance solely to the statutory and regulatory requirements of the insured s home state. It further provides that only the insured s home state may require a surplus line broker to be licensed to sell, solicit or negotiate nonadmitted insurance with respect to such insured. 15 U.S.C. 8201, et seq. Nonadmitted insurance, as defined in 15 U.S.C. 8206(9), applies only to property and casualty insurance (excluding workers compensation). In consideration of the NRRA and its impact on Idaho, the Idaho Legislature passed, and the Governor signed into law on April 5, 2011, amendments to the surplus line law contained in title 41, chapter 12, Idaho Code. See, 2011 Idaho Sess. Laws 517. The amendments are as follows: Idaho Code limits Idaho s surplus line law to apply only when the insured s home state is Idaho; section enacts certain definitions of terms as stated in the NRRA; and section establishes the conditions for export. The amendments were effective July 1, 2011, except for changes to section , Idaho Code, which were effective July 21, The purpose of this bulletin is to explain these amendments and to outline national and state regulatory changes that affect the placement of nonadmitted insurance in the state of Idaho. Equal Opportunity Employer

138 WHAT IS THE SCOPE OF THE NRRA? The NRRA states that the placement of nonadmitted insurance is subject to the statutory and regulatory requirements solely of the insured s home state and that the NRRA 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. 15 U.S.C. 8201, et seq. (P.L ). The NRRA does not expand the scope of the kinds of insurance that an insurer may write in the nonadmitted insurance market, and each state continues to determine what kinds of insurance an insurer may write in that state. The NRRA preempts certain state laws with respect to nonadmitted insurance but does not have any impact on insurance offered by insurers licensed or authorized in this state. WHAT IS THE INSURED S HOME STATE FOR PURPOSES OF A PARTICULAR PLACEMENT? Idaho is the insured s home state if the insured s principal place of business is maintained here or, in the case of an individual, the individual s principal residence is here. If Idaho is considered the insured s home state, only Idaho s requirements regarding the placement of such business will apply. If 100% of the insured risk is located outside of Idaho, then the insured s home state is the state to which the greatest percentage of the insured s taxable premium for that insurance contract is allocated. See, 15 U.S.C. 8201, et seq. If more than one insured from an affiliated group is a named insured on a single nonadmitted insurance placement, Idaho will be considered the home state for that placement when Idaho is the home state of the member of the affiliated group having the largest percentage of premium attributed to it under such insurance contract. HOW WILL THESE RULES BE APPLIED? New and renewal policies with an effective date prior to July 1, 2011, will be subject to the laws and regulations of Idaho and other jurisdictions, as applicable, as of the policy effective date. The laws and regulations of Idaho and other jurisdictions, as applicable, as of the policy effective date will also apply to any modification to that policy during the policy period, such as all endorsements (including risk- and premiumbearing endorsements), installment payments and premium audits. New and renewal policies with an effective date on or after July 1, 2011, and any modifications thereto, will be subject only to the laws and regulations of Idaho if Idaho is the home state of the insured. In addition, on and after July 21, 2011, the allocation of premium tax will change in accordance with the newly amended section , Idaho Code. The tax rate of 1.5% will remain the same.

139 WHAT ARE THE REQUIREMENTS FOR PREMIUM TAX ALLOCATION AND PAYMENT IN IDAHO? As of July 21, 2011, the NRRA permits only the insured s home state to require the payment of premium tax for nonadmitted insurance. Until July 21, 2011, the laws and regulations of the state of Idaho and other jurisdictions, as applicable, apply to premium tax due on multi-state placements. The Idaho tax rate and allocation should be applied to new and renewal policies with an effective date on or after July 21, 2011, when Idaho is the insured s home state. The Department of Insurance will issue additional bulletins if and when Idaho begins participating in a tax sharing arrangement. On and after July 21, 2011, the following process and tax rate will be applicable in Idaho in accordance with section , Idaho Code: (1) On or before the first day of March of each year each broker shall remit to the director a tax on the premiums, exclusive of sums collected to cover federal and state taxes and examination fees, on surplus line insurance subject to tax transacted by [the broker] with unauthorized insurers during the preceding calendar year as shown by his annual statement filed with the director, and at the rate of one and five-tenths percent (1.5%). Such tax shall be in lieu of all other taxes upon such insurers with respect to the business so reported. (2) For property and casualty insurance other than worker s compensation insurance, if Idaho is the insured s home state, then the tax so payable shall be computed upon the entire premium under subsection (1) of this section, without regard to whether the policy covers risks or exposures that are located in Idaho. For all other lines of insurance, if a surplus line policy covers risks or exposures only partially in Idaho, the tax so payable shall be computed upon the proportion of the premium that is properly allocable to the risks or exposures located in Idaho. WHAT ARE THE LICENSE REQUIREMENTS FOR BROKERS? Only the insured s home state may require a surplus line broker to be licensed to sell, solicit or negotiate nonadmitted insurance with respect to a particular placement. If Idaho is the insured s home state, the surplus line broker must be licensed in Idaho. The NRRA provides that Idaho may continue to collect licensing fees for surplus line brokers after July 21, 2012, because Idaho participates in the National Association of Insurance Commissioners (NAIC) national insurance producer database, otherwise known as the National Insurance Producer Registry. See, 15 U.S.C. 8201, et seq. A nonresident person who sells, solicits or negotiates a surplus line insurance contract for commercial property and casualty risks primarily located in another state,

140 where that person is properly licensed as a producer and the policy covers commercial property and casualty risks in Idaho, does not need to be licensed as an Idaho surplus line broker. See, Idaho Code (2)(f). Where a diligent search is not required, Idaho allows a nonresident person to apply for a surplus line broker s license without obtaining the underlying Idaho producer s license, as explained below. WHEN IS A DILIGENT SEARCH REQUIRED OR NOT REQUIRED? The full amount or kind of insurance required must not be procurable from insurers who are authorized to do business in Idaho. The amount of insurance on risks located in Idaho exported shall only be the excess over the amount procurable from authorized insurers in Idaho unless the excess is not available without support from other coverages provided that a diligent search is completed among insurers authorized in Idaho to transact and actually write that particular kind and class of insurance. See, Idaho Code (4). Exempt Commercial Purchaser. On and after July 1, 2011, a surplus line broker seeking to procure or place nonadmitted insurance on behalf of an exempt commercial purchaser is not required to perform a diligent search if: (1) The broker has disclosed to the exempt commercial purchaser that insurance may or may not be available from the admitted market that may provide greater protection with more regulatory oversight; and (2) The exempt commercial purchaser has subsequently requested in writing that the broker procure or place such insurance from a nonadmitted insurer. Except for the exempt commercial purchaser as noted above, all other diligent search requirements under Idaho law remain in force. See, IDAPA Export List. The Director has published a list of classes of insurance coverage or risks eligible for export where he has found there is no reasonable or adequate market among authorized insurers in Idaho. See, Idaho Code The export list as authorized by the Director is published at IDAPA Rule Insurance written in those classes or risks as provided on the export list need not comply with sections (2), (3) and , Idaho Code, but must comply with all other requirements of the Idaho Code. Insurance written on those classes or risks not listed in the export list are to be carefully processed to assure all concerned that the intent of sections and , Idaho Code, have been fully satisfied along with compliance with all other requirements of the Idaho Code. IDAPA Rule

141 WHAT ARE THE ELIGIBLITY REQUIREMENTS FOR NONADMITTED INSURERS? The NRRA restricts the eligibility requirements a state may impose on nonadmitted insurers. See, 15 U.S.C. 8201, et seq. For nonadmitted insurers domiciled in a U.S. jurisdiction, a broker is only permitted to place nonadmitted insurance with such insurers provided that said insurers: (1) are authorized to write such business in their state of domicile and maintain the minimum capital and surplus requirements under Idaho law or $15,000,000, whichever is greater [See, Idaho Code (6)]; and (2) are on the White List as provided by law. [See, Idaho Code and IDAPA ] For nonadmitted insurers domiciled outside the United States, a broker may place business with such insurers provided the insurers are listed on the Quarterly Listing of Alien Insurers maintained by the International Insurers Department of the NAIC and are on the Idaho White List. See, sections and (6)(b), Idaho Code. WHAT ARE THE KEY DEFINITIONS FROM IDAHO LAW AND THE NRRA? Idaho Code (5) defines the term exempt commercial purchaser as follows: (a) Exempt commercial purchaser means any person purchasing commercial insurance who, at the time of placement, meets the following requirements: (i) The person employs or retains a qualified risk manager to negotiate insurance coverage. (ii) The person has paid aggregate nationwide commercial property and casualty insurance premiums in excess of one hundred thousand ($100,000) in the immediately preceding twelve (12) months. (iii) The person meets at least one (1) of the following criteria: 1. The person possesses a net worth in excess of twenty million dollars ($20,000,000) as such amount is adjusted pursuant to the provisions of paragraph (b) of this subsection. 2. The person generates annual revenues in excess of fifty million dollars ($50,000,000) as such amount is adjusted pursuant to the provisions of paragraph (b) of this subsection. 3. The person employs more than five hundred (500) full-time or full-time equivalent employees per individual insured or is a member of an affiliated group employing more than one thousand (1,000) employees in the aggregate. 4. The person is a nonprofit organization or public entity generating annual budgeted expenditures of at least thirty

142 million dollars ($30,000,000) as such amount is adjusted pursuant to the provisions of paragraph (b) of this subsection. 5. The person is a municipality with a population in excess of fifty thousand (50,000) persons. (b) The amounts provided in subparagraph (iii) 1., 2., and 4. of paragraph (a) of this subsection must be adjusted to reflect the percentage change for the five (5) year period in the consumer price index for all urban consumers published by the bureau of labor statistics of the United States department of labor. Idaho Code (5). See, also, 15 U.S.C. 8201, et seq. Idaho Code (7) defines the term home state as follows: (7)(a) Home state means: (i) The state in which an insured maintains its principal place of business or, in the case of an individual, the individual s principal residence; or (ii) If one hundred percent (100% ) of the insured risk is located out of state, the state to which the greatest percentage of the insured s taxable premium for that insurance contract is allocated. (b) If more than one (1) insured from an affiliated group are named insureds on a single nonadmitted insurance contract, then home state means the home state, as determined pursuant to the provisions of paragraph (a) of this subsection, of the member of the affiliated group that has the largest percentage of premium attributed to it under such insurance contract. (c) For the purposes of this subsection, principal place of business means the state where the insured maintains its headquarters and where the insured s high level officers direct, control and coordinate the business activities of the insured. Idaho Code (7). See, also, 15 U.S.C. 8201, et seq. Idaho Code (8) defines the term qualified risk manager as follows: (8) Qualified risk manager means, with respect to a policyholder of commercial insurance, a person who meets all of the following requirements: (a) The person is an employee of, or a third party consultant retained by, the commercial policyholder; (b) The person provides skilled services in loss prevention, loss reduction or risk and insurance coverage analysis, and purchase of insurance; and (c) The person:

143 (i) Has at least ten (10) years of experience in risk financing, claim administration, loss prevention, risk and insurance coverage analysis or purchasing commercial lines of insurance; or (ii) Has a graduate degree from an accredited college or university in risk management, business administration, finance, economics or any other field determined by a state insurance director or other state regulatory official or entity to demonstrate minimum competence in risk management; or (iii) Has at least seven (7) years of experience in risk financing, claims administration, loss prevention, risk and insurance coverage analysis or purchasing commercial lines of insurance and has one (1) of the designations specified in subparagraph (iv)1. through 5. of this paragraph; or (iv) Has a bachelor s degree or higher education from an accredited college or university in risk management, business administration, finance, economics or any other field determined by a state insurance director or other state regulatory official or entity to demonstrate minimum competency in risk management; and either has three (3) years of experience in risk financing, claims administration, loss prevention, risk and insurance analysis or purchasing commercial lines of insurance, or has one (1) of the following designations: 1. A designation as a chartered property and casualty underwriter (CPCU) issued by the American institute for CPCU and insurance institute of America; 2. A designation as an associate in risk management (ARM) issued by the American institute for CPCU and insurance institute of America; 3. A designation as a certified risk manager (CRM) issued by the national alliance for insurance education and research; 4. A designation as a RIMS fellow (RF) issued by the global risk management institute; or 5. Any other designation, certification or license determined by a state insurance director or other state insurance regulatory official or entity to demonstrate minimum competency in risk management. Idaho Code (8). See, also, 15 U.S.C. 8201, et seq. Other general terms applicable here are defined as follows:

144 Independently procured insurance means insurance procured directly by an insured from a nonadmitted insurer. See, Idaho Code and See, also, 15 U.S.C. 8201, et seq. Nonadmitted insurance means any property and casualty insurance permitted to be placed directly or through a surplus line broker with a nonadmitted insurer eligible to accept such insurance. See, 15 U.S.C. 8201, et seq. Nonadmitted insurer means, with respect to a State, an insurer not licensed to engage in the business of insurance in such State; but does not include a risk retention group, as that term is defined in section 2(a)(4) of the Liability Risk Retention Act of See, 15 U.S.C. 8201, et seq. Premium tax means, with respect to surplus lines or independently procured insurance coverage, any tax, fee, assessment, or other charge imposed by a government entity directly or indirectly 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. See, 15 U.S.C. 8201, et seq. See, also, Idaho Code Surplus line broker means a surplus line broker duly licensed as such under this chapter, including resident surplus line brokers and nonresident surplus line brokers. Idaho Code (3).

145 ALL UNAUTHORIZED INSURERS PARTICIPATING IN SURPLUS LINES LICENSED SURPLUS PRODUCERS, AND SURPLUS ASSOCIATION OF ILLINOIS FROM: JACK MESSMORE, ACTING DIRECTO "'- DATE: JULY 13, 2011 RE: COMPANY BULLETIN IMPLEMENTATION OF FEDERAL NONADMITTED AND REINSURANCE REFORM ACT IN ILLINOIS The purpose of this bulletin is to outline nationwide regulatory changes that will affect the placement of nonadmitted insurance in Illinois. The Nonadmitted and Reinsurance Reform Act of 2010 ("NRRA"), 15 U.S.C et seq., provides that only an insured's "Home State" may require the payment of premium tax for nonadmitted insurance. Moreover, the NRRA subjects the placement of nonadmitted insurance solely to the statutory and regulatory requirements of the insured's Home State, and provides that only the insured's Home State may require a surplus lines broker to be licensed to sell, solicit or negotiate nonadmitted insurance with respect to such insured. 15 U.S.C. 8202(a), (b). "Nonadmitted insurance," as defined in 15 U.S.C. 8206(9), applies only to property and casualty insurance (excluding workers' compensation). The NRRA becomes effective on July 21, For nonadmitted insurance business placed on or after July 21, 2011, the following information is provided for the benefit of insurers, producers, and insureds: What is the scope of the NRRA? The NRRA states that "the placement of nonadmitted insurance is subject to the statutory and regulatory requirements solely of the insured's home state" and that the NRRA "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." 15 U.S.C The NRRA does not expand the scope of the kinds of insurance that an insurer may write in the nonadmitted insurance market and each state continues to determine which kinds of insurance an insurer may write in that state. Although the NRRA preempts certain state laws with respect to nonadmitted insurance, it does not have any impact on insurance offered by insurers licensed or authorized in this state.

146 What is the insured's Home State purposes of a particular placement? Illinois is the insured's Home State if the insured maintains its principal place of business the case an individual, the individual's principal residence is here. insured's Home State, only Illinois' requirements regarding the placement of business apply. 100% of the insured risk is located outside of insured's Home State is the state to which the greatest percentage of the insured's taxable premium for that insurance contract is allocated. If more than one insured from an affiliate group are named insureds on a single nonadmitted insurance placement, Illinois will be considered the Home State for that placement if Illinois is the Home State of the member of the affiliated group that has the largest percentage of premium attributed to it under such insurance contract. How will these rules be applied? New and renewal policies with an effective date prior to July 21, 2011 will be subject to the laws and regulations of Illinois and other jurisdictions, as applicable, as of the policy effective date. The laws and regulations of Illinois and other jurisdictions, as applicable, as of the effective date of such a policy will also apply to any modification to that policy during the policy period, such as all endorsements (including risk- and premium-bearing endorsements), installment payments and premium audits. New and renewal policies with an effective date on or after July 21, 2011, and any modifications thereto, will be subject only to the laws and regulations of Illinois if Illinois is the Home State of the insured. What are the requirements for premium tax allocation and payment in Illinois? As of July 21, 2011, the NRRA permits only the insured's Home State to require the payment of premium tax for nonadmitted insurance. Until July 21, 2011, the laws and regulations of Illinois and other jurisdictions, as applicable, will continue to apply to premium tax due on multi-state placements. It is the intent of the Department to issue additional bulletins if and when Illinois begins participating in a tax sharing arrangement. Until additional bulletins are issued, the Illinois tax rate should be applied to new and renewal policies with an effective date on or after July 21, 2011, when Illinois is the insured's Home State. For any surplus line policy or renewal effective July 21, 2011 or later, where Illinois is the home state (as defined by the NRRA), the Illinois surplus line tax applies to 100% of premium and the Illinois Fire Marshal tax applies to 100% of the premium as adjusted by the published schedule.

147 are license Only insured's State may a surplus broker to negotiate nonadmitted insurance with respect to a particular placement. insured's Home State, the surplus lines broker must be licensed Illinois. NRRA provides that Illinois may not collect licensing fees for surplus lines brokers as of July 21, 20 unless participates the NAIC's national insurance producer database or any other equivalent uniform national database. 15 U.S.C Illinois anticipates that it will participate the National Insurance Producer Registry (NIPR), which provides such a database, within the required deadline. When are the requirements for a diligent search and when is a diligent search not required? The Surplus Line producer must exert diligent effort to procure the policies or contracts required by the insureds from companies which are authorized to transact business in Illinois (Section 445 of The Code). Diligent effort by the Surplus Line producer shall be deemed to have been exercised if the Surplus Line producer or the referring insurance producer shall submit a risk to three or more authorized companies, which are engaged in writing in Illinois the type of coverage sought, or if there are no companies actually engaged in writing such coverage, the risk shall be submitted to companies which, in the Surplus Line producer's or the insurance producer's professional judgment, are the most likely to accept the risk. The surplus line producer must maintain with the copy of the insurance that was placed a record of such diligent effort which must state the name of the authorized companies and the individuals contacted at each company who declined the risk. If the diligent effort was made by the insurance producer, the surplus line producer must maintain a written record signed by the insurance producer that the insurance producer made such diligent effort, and the insurance producer must maintain a record that states the name of the authorized companies and the individuals contacted at each company who declined the risk. On or after July 21, 2011, a surplus lines broker seeking to procure or place nonadmitted insurance on behalf of an "exempt commercial purchaser" is not required to perform a diligent search if: 1) the broker has disclosed to the exempt commercial purchaser that insurance may or may not be available from the admitted market that may provide greater protection with more regulatory oversight; and 2) the exempt commercial purchaser has subsequently requested in writing for the broker to procure or place such insurance from a nonadmitted insurer. "Exempt commercial purchaser" is defined below. What are the eligibility requirements for nonadmitted insurers? The NRRA restricts the eligibility requirements a state may impose on nonadmitted insurers. See 15 U.S.C For nonadmitted insurers domiciled in a U.S. jurisdiction, a broker is permitted to place nonadmitted insurance with such insurers provided they are authorized to write such business in their state of domicile and maintain minimum capital and surplus of $15 million [or the minimum capital and surplus amount required in Illinois whichever is greater].

148 domiciled a place business insurer is listed on the Quarterly Listing of Insurers maintained by Department NAIC. What are the key definitions from the NRRA? NRRA includes several definitions relevant to Key definitions include the following: - "Exempt commercial purchaser": The term "exempt commercial purchaser" means any person purchasing commercial insurance that, at the time of placement, meets the following requirements: (A) The person employs or retains a qualified risk manager to negotiate insurance coverage. (B) The person has paid aggregate nationwide commercial property and casualty insurance premiums in excess of $100,000 in the immediately preceding 12 months. (C) (i) The person meets at least 1 of the following criteria: (I) The person possesses a net worth in excess of $20,000,000, as such amount is adjusted pursuant to clause (ii). (II) The person generates annual revenues in excess of $50,000,000, as such amount is adjusted pursuant to clause (ii). (III) The person employs more than 500 full-time or full-time equivalent employees per individual insured or is a member of an affiliated group employing more than 1,000 employees in the aggregate. (IV) The person is a not-for-profit organization or public entity generating annual budgeted expenditures of at least $30,000,000, as such amount is adjusted pursuant to clause (ii). (V) The person is a municipality with a population in excess of 50,000 persons. (ii) Effective on the fifth January 1 occurring after the date of enactment of this subtitle and each fifth January 1 occurring thereafter, the amounts in subclauses (I), (II), and (IV) of clause (i) shall be adjusted to reflect the percentage change for such 5-year period in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the Department of Labor. 15 U.S.C. 8206(5). - "Home State": (A) In General.-Except as provided in subparagraph (B), the term "home State" means, with respect to an insured- (i) the State in which an insured maintains its principal place of business or, in the case of an individual, the individual's principal residence; or (ii) if 100 percent of the insured risk is located out of the State referred to in clause (i), the State to which the greatest percentage of the insured's taxable premium for that insurance contract is allocated. (B) Affiliated Groups.-If more than 1 insured from an affiliated group are named insureds on a single nonadmitted insurance contract, the term "home State" means the

149 home State, as to..,......,..,... group that has the largest percentage premium attributed to it under such contract. 15 U.S.C. 8206(6). - "Independently procured insurance": The term"independently procured insurance" means insurance procured directly by an insured a nonadmitted insurer. 15 U.S.C. 8206(7). - "Nonadmitted insurance": term "nonadmitted insurance" means any property casualty insurance permitted to be placed directly or through a surplus lines broker with a nonadmitted insurer eligible to accept such insurance. 15 U.S.C. 8206(9). - "Nonadmitted insurer": The term "nonadmitted insurer"- (A) means, with respect to a State, an insurer not licensed to engage in the business of insurance in such State; but (B) does not include a risk retention group, as that term is defined in section 2(a)(4) of the Liability Risk Retention Act of 1986 (15 U.S.C. 3901(a)(4)). 15 U.S.C. 8206(11). - "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 government entity directly or indirectly 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. 15 U.S.C. 8206(12). - "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: (A) The person is an employee of, or third-party consultant retained by, the commercial policyholder. (B) The person provides skilled services in loss prevention, loss reduction, or risk and insurance coverage analysis, and purchase of insurance. (C) The person- (i) (I) has a bachelor's degree or higher from an accredited college or university in risk management, business administration, finance, economics, or any other field determined by a State insurance commissioner or other State regulatory official or entity to demonstrate minimum competence in risk management; and (II) (aa) has 3 years of experience in risk financing, claims administration, loss prevention, risk and insurance analysis, or purchasing commercial lines of insurance; or (bb) has- (AA) a designation as a Chartered Property and Casualty Underwriter (in this subparagraph referred to as "CPCU") issued by the American Institute for CPCU /Insurance Institute of America; (BB) a designation as an Associate in Risk Management (ARM) issued by the American Institute for CPCU/Insurance Institute of America;

150 (ii) (CC) a designation as issued by the National Alliance for Insurance Education & Research; (DD) a designation as a RIMS Fellow issued by the Global Risk Management Institute; or any other designation, certification, or license determined by a State insurance commissioner or State insurance regulatory official or entity to demonstrate minimum competency in risk management; (I) has at least 7 years of experience in risk financing, claims administration, loss prevention, risk and insurance coverage analysis, or purchasing commercial lines of insurance; and (II) has any 1 of the designations specified in subitems (AA) through (EE) of clause (i)(ii)(bb ); (iii) has at least l 0 years of experience in risk financing, claims administration, loss prevention, risk and insurance coverage analysis, or purchasing commercial lines of insurance; or (iv) has a graduate degree from an accredited college or university in risk management, business administration, finance, economics, or any other field determined by a State insurance commissioner or other State regulatory official or entity to demonstrate minimum competence in risk management. 15 U.S.C. 8206(13). - "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. 15 U.S.C. 8206(15). - "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. 15 U.S.C. 8206(16).

151 General Bulletin #39 Changes to the Illinois Surplus Line Law NRRA Conforming Language, Repeal of Surplus Line Producer License Bond & Other Changes To: From: All Illinois Surplus Line Producers & Interested Parties David L. Ocasek 100 S. Wacker Drive Suite 350 Chicago, IL fax On August 14, 2012, Governor Quinn signed House Bill 1577 into law (Public Act ). The bill made changes to the Illinois surplus line law to bring it into conformity with the federal Nonadmitted and Reinsurance Reform Act (NRRA) and made several other changes. Below is a summary of the changes to the law: The law makes various changes to the statute, bringing it into conformity with the NRRA. At this point, the effect of these changes on Illinois surplus line producers is minimal since, under Illinois Department of Insurance Bulletin # , Illinois was already operating under these NRRA-compliant rules and has been since July 21, It eliminates the requirement for a surplus line producer license bond. The Illinois Department of Insurance has informed us that bonds currently in force may be canceled effective 8/14/12. It eliminates the surplus line producer prelicensing course requirement. It makes a technical change to the tax wording bringing the statute into alignment with a court decision. It eliminates a conflict between the statute and Illinois regulations, codifying the long standing practice that surplus line taxes are due and payable based on filings with the Surplus Line Association of Illinois. It clarifies how Illinois domestic surplus line insurers should be categorized with regard to the federal NRRA. Feel free to contact us with any questions about this change. David L. Ocasek Executive Director Richard J. Dunlap Asst. Executive Director The materials and information contained herein are only synopses of laws, regulations and other information and do not constitute legal advice. It is recommended that you consult your legal advisers regarding application of the Illinois surplus line laws and regulations to any particular situation. The Surplus Line Association does not undertake and hereby disclaims any obligation to advise you of any change to state or federal laws or regulations, or the procedures of the Surplus Line Association. 18-Sep-2012

152 COMMONWEALTH OF KENTUCKY DEPARTMENT OF INSURANCE Frankfort, Kentucky ADVISORY OPINION The following Advisory Opinion is to advise the reader of the current position of the Kentucky Department of Insurance (the Department ) on the specified issue. The Advisory Opinion is not legally binding on either the Department or the reader. TO: FROM: ALL SURPLUS LINES BROKERS TRANSACTING NON-ADMITTED INSURANCE ON MULTI-STATE RISKS SHARON P. CLARK, COMMISSIONER KENTUCKY DEPARTMENT OF INSURANCE DATE: JUNE 3, 2011 RE: NON-ADMITTED INSURANCE ON MULTI-STATE RISKS HB 167 ************************************************************************ The 111 th United States Congress enacted the Non-Admitted and Reinsurance Reform Act of 2010, Title V, Subtitle B of the Dodd-Frank Wall Street Reform and Consumer Protection Act, referred to hereinafter as NRRA. NRRA established certain rules and requirements regarding the placement of non-admitted insurance business on multi-state risks. In particular, NRRA specified that no state, other than the Home State of an insured, may require any premium tax payment for non-admitted insurance. NRRA further suggested that each state adopt nationwide uniform requirements, forms, and procedures, such as an interstate compact, that provide for the reporting, payment, collection, and allocation of premium taxes for non-admitted insurance. NRRA becomes effective July 21, During the 2010 Kentucky General Assembly, HB 167 was enacted. This bill authorizes the State of Kentucky to become a Compacting State and to comply with the 1

153 rules and requirements established by the Surplus Lines Insurance Multi-State Compliance Compact Commission (the Commission ). Sections 2, 3, and 4 of HB 167 amend provisions of KRS 91A.080, KRS and to establish one uniform tax rate that would apply to non-admitted insurance on multi-state risks. This uniform tax rate is in lieu of separate taxes imposed by local governments, the Kentucky Revenue Cabinet, and the Department of Insurance. Section 5 of HB 167 provides that Sections 2, 3, and 4 of the bill will take effect only upon the following: 1. Legislative enactment of the compact into law by two compacting states; and 2. The Commission becomes effective, which shall occur when: a. There are a total of ten compacting and contracting states; or b. There are compacting and contracting states representing greater than 40% of the surplus lines insurance premium volume based on records of the percentage of surplus lines insurance. At the time of publication of this Advisory Opinion, Sections 2, 3, and 4 are not effective and are not expected to become effective by June 8, 2011, the date that most legislation passed by the 2010 Kentucky General Assembly will be effective. Consequently, this Advisory Opinion clarifies the Department s expectations up to and until Sections 2, 3, and 4 of HB 167 become effective. This Advisory Opinion also outlines those provisions of NRRA that preempt current Kentucky state law governing non-admitted insurance on multi-state risks. After July 21, 2011, NRRA preempts the following provisions of Kentucky law: 1. Home State NRRA provides that the placement of non-admitted insurance shall be subject to the statutory and regulatory requirements solely of the insured s Home State 1. This provision of the NRRA prevents the Kentucky Department of Insurance from applying provisions of KRS Chapter 304, Subtitle 10 to non-admitted insurance or surplus lines transactions where Kentucky is not the Home State of the insurance risk. Rather, the statutory and regulatory requirements of the insured s Home State will govern these transactions. 1 Home State is defined as (1) the state in which an insured maintains its principal place of business or, in the case of an individual, the individual s principal residence or (2) if 100% of the insured risk is located outside of the principal place of business or resident state, the state to which the greatest percentage of the insured's taxable premium for that insurance contract is allocated. 2

154 2. Licensure Requirements NRRA provides that no state, other and 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. Kentucky law at KRS provides that if certain insurance coverages cannot be procured from authorized insurers, such coverage may be procured from unauthorized (or non-admitted) insurers provided the insurance must be procured through a licensed surplus lines broker. KRS is preempted by NRRA to the extent that Kentucky can no longer require a surplus lines broker license where Kentucky is not the Home State and where the non-admitted insurance risk is only partially located in Kentucky. 3. Exempt Commercial Purchaser NRRA provides that a surplus lines broker seeking to procure or place nonadmitted insurance in a state for an exempt commercial purchaser 2, 3 shall not be required to satisfy any state requirement to make a diligent search to determine whether the full amount or type of insurance sought by such exempt commercial purchaser can be obtained from admitted insurers if: a. 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; and b. The exempt commercial purchaser has subsequently requested in writing the broker to procure or place such insurance from a nonadmitted insurer. 2 An exempt commercial purchaser is defined by the NRRA as any person purchasing commercial insurance that, at the time of placement, meets the following requirements: a. The person employs or retains a qualified risk manager to negotiate insurance coverage; b. The person has paid aggregate nationwide commercial property and casualty insurance premiums in excess of $100,000 in the immediately preceding 12 months; c. The person meets at least one of the following criteria: i. The person possess a net worth in excess of $20 million, as adjusted in accordance with the footnote 3; ii. The person generates annual revenues in excess of $50 million, as adjusted in accordance with footnote 3. iii. The person employees more than 500 full-time equivalent employees per individual insured or is a member of an affiliated group employing more than 1,000 employees in the aggregate; iv. The person is a not-for-profit organization or public entity generating annual budgeted expenditures of at least $30 million, as adjusted in accordance with footnote 3; or v. The person is a municipality with a population in excess of 50,000 persons. 3 Adjustment: Effective on the fifth January 1 occurring after the date of the enactment of [the NRRA] and each fifth January 1 occurring thereafter, the amounts in c.i, c.ii, and c.iv. of footnote 2 above shall be adjusted to reflect the percentage change for such 5-year period in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the U.S. Department of Labor. 3

155 Kentucky law, at KRS (2) requires that a diligent effort be made to procure insurance on all risks from among the insurers authorized to transact and actually write that kind and class of insurance before an insurance risk may be procured from the non-admitted market. To the extent that a prospective insured meets the definition of an exempt commercial purchaser, Kentucky s due diligence requirement in is preempted. Further, Kentucky law at KRS (2)(c) provides a definition of an exempt commercial policyholder. The definitions of an exempt commercial purchaser under the NRRA and an exempt commercial policyholder under Kentucky law differ slightly. To the extent that an insured meets the definition of an exempt commercial purchaser under the NRRA, federal law will govern the multi-state non-admitted insurance transaction covering the exempt commercial policyholder. In this event, the surplus lines broker placing the coverage shall comply with the taxation requirements applicable to other multi-state nonadmitted insurance transactions. 4. Taxation on Non-Admitted Insurance on Multi-State Risks NRRA provides that the placement of non-admitted insurance shall be subject to the statutory and regulatory requirements solely of the insured s Home State. Kentucky law, at KRS , provides that each surplus lines broker shall pay a 3% surplus lines tax, a premium surcharge tax in accordance with KRS , and local government premium taxes in accordance with KRS 91A.080 on surplus lines insurance placed with an unauthorized insurer. KRS (2) provides that if a surplus lines policy covers risks or exposures only partially in the State of Kentucky, the tax payable shall be computed upon the proportion of the premium which is properly allocable to the risks or exposures located in Kentucky. To the extent that Kentucky is not the Home State, the taxes imposed by KRS are preempted. However, where Kentucky is the Home State, the taxes imposed by KRS are applicable on the premium associated with the entire multi-state risk. KRS (2) related to the apportionment of premium on multi-state risks is preempted by NRRA in its entirety. Section 1, Article IV of HB 167 provides that each compacting state may charge its own rate of taxation on the premium allocated to such state based on the applicable Allocation Formula provided that the state establishes one single rate of taxation applicable to all non-admitted insurance transactions on multi-state risks. When the Commission becomes effective, Sections 2, 3, and 4 of HB 167 establish one tax rate of 11.8% applicable to non-admitted insurance on multistate risks. The surplus lines broker will be required to collect this tax and remit it to the Department of Insurance. 4

156 Questions regarding this Advisory Opinion may be directed to the Property & Casualty Division at (502) /s/ Sharon P. Clark. Sharon P. Clark, Commissioner Kentucky Department of Insurance On this 3 rd day of June,

157 LOUISIANA DEPARTMENT OF INSURANCE JAMES J. DONELaN COMMISSIONER BULLETIN NO TO: ALL INSURERS, BROKERS, PRODUCERS AND OTHERS INVOLVED IN SURPLUS LINES OR NONADMITTED INSURANCE IN LOUISIANA FROM: RE: JAMES J. DONELON, COMMISSIONER OF INSURANCE IMPLEMENTATION OF THE NONADMITTED AND REINSURANCE REFORM ACT WITH RESPECT TO SURPLUS LINES INSURANCE IN LOUISIANA DATE: JULY 21,2011 Bulletin outlines the effect of the Nonadmitted and Reinsurance Reform Act of 2010 ("NRRA"), PL , Title V, Subtitle B ( 511 et seq.), July 21, 2010,124 Stat (15 U.S.C et seq.), on surplus lines or nonadmitted insurance in Louisiana. The effective date of the NRRA is July 21, The NRRA assigns regulatory and premium tax jurisdiction to the home state of the insured, as defined in the NRRA. Scope of the NRRA As stated above, the NRRA assigns regulatory and premium tax jurisdiction to the home state of the insured as defined in the NRRA. 15 U.S.C (a) and 8202(a). 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. 15 U.S.C. 8206(16). The term "nonadmitted insurer"-(a) means, with respect to a State, an insurer not licensed to engage in the business of insurance in such State; but (B) does not include a risk retention group, as that term is defined in section 2(a)(4) of the Liability Risk Retention Act of 1986 (15 U.S.C (a)(4)). 15 U.S.C. 8206(11). 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. 15 U.S.C. 8206(9). Louisiana law designates nonadmitted or approved unauthorized insurance as surplus lines. LSA-R.S. 22:432. As used throughout Bulletin , surplus lines shall mean nonadmitted and/or approved unauthorized insurance. P. O. Box BATON ROUGE, LOUISIANA J4 PHONE (225) FAX (225)

158 BULLETIN NO July 21,2011 Page 2 The NRRA makes surplus lines insurance subject to the statutory and regulatory requirements solely of the insured's home state. However, the NRRA does not preempt any state law, rule, or regulation that restricts the procurement of workers' compensation insurance or excess insurance for self-funded workers' compensation plans from a surplus lines insurer. 15 U.S.C In Louisiana, LSA"R.S. 23:1161 governs the procurement of surplus lines insurance for workers' compensation in certain circumstances. With regard to surplus lines insurance policies for which the home state of the insured is Louisiana, a surplus lines broker may only place a surplus lines insurance policy with a foreign or alien surplus lines insurer that is on the Louisiana list of approved unauthorized insurers (commonly referred to as the white list). Subject to the NRRA, Louisiana will continue to maintain the above referenced list of approved unauthorized insurers (white list). All surplus lines insurers must file with the LDI an application verifying eligibility as a surplus lines insurer. Foreign surplus lines insurers must include a certificate of compliance from its domiciliary state Which clearly indicates the line or lines of insurance that the applicant is authorized to write in its domiciliary state, evidence of satisfaction of the capital and surplus requirements of the NRRA, and appropriate contact information. Alien surplus lines insurers must include a copy of the letter that advised the insurer that it has been placed on the NAIC Quarterly Listing of Alien Insurers, and appropriate contact information. The NRRA does not change the kinds of insurance that an insurer may write in the surplus lines insurance market and each state continues to determine the kinds of insurance, whether admitted or surplus lines, that an insurer may write in that state. Although the NRRA preempts certain state laws with respect to surplus lines insurance, the NRRA does not affect insurance written on Louisiana properties, risks, or exposures by insurers admitted in Louisiana. The Home State of the Insured Louisiana is the insured's home state if the insured's principal place of business is in Louisiana, or, in the case of a natural person, the insured's principal residence is in Louisiana. If Louisiana is the insured's home state, only Louisiana's requirements regarding the procurement of surplus lines insurance will apply. If Louisiana is the principal place of business or residence and 100% of the insured properties, risks, or exposures are outside of Louisiana, the insured's home state is the state that receives the greatest allocation of the insured's taxable premium for that surplus lines insurance contract. The NRRA defines "home state" at 15U.S.C. 8206(6). Principal place of business means, with respect to determining the home state of the insured, (a) the state where the insured maintains its headquarters and where the insured's high-level officers direct, control and coordinate the business

159 BULLETIN NO July 21,2011 Page 3 activities; or (b) if the insured's high-level officers direct, control and coordinate the business activities in more than one state, the state in which the greatest percentage of the insured's taxable premium for that insurance contract is allocated; or (c) if the insured maintains its headquarters or the insured's highlevel officers direct, control and coordinate the business activities outside any state, the state to which the greatest percentage of the insured's taxable premium for that insurance contract is allocated. Principal residence means, with respect to determining the home state of the insured, (a) the state where the insured resides for the greatest number of days during a calendar year; or (b) if the insured's principal residence is located outside any state, the state to which the greatest percentage of the insured's taxable premium for that insurance contract is allocated. If more than one insured from an affiliated group are the named insureds on a single surplus lines insurance contract, Louisiana will be the home state for that contract if Louisiana is the principal place of business of the member of the affiliated group that has the largest percentage of premium attributed to it under such surplus lines insurance contract. Applicability The laws and regulations of Louisiana and other applicable jurisdictions will apply to new and renewal surplus lines insurance policies with an effective date prior to July 21, 2011 and to any modification to such policies during the policy period, such as all endorsements (including risk-bearing and premium-bearing endorsements), installment payments and premium audits. The laws and regulations of Louisiana will apply to new and renewal surplus lines insurance policies with an effective date on or after July 21, 2011, and any modifications thereto, if Louisiana is the home state of the insured. Premium Tax Allocation and Payment 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 government entity directly or indirectly 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. 15 U.S.C. 8206(12). On and after July 21, 2011, the NRRA permits only the insured's home state to require the payment of premium tax for surplus lines insurance. There will be no change to the current surplus lines tax rate, forms, and procedures for singlestate policies covering properties, risk, or exposures only located in Louisiana.

160 BULLETIN NO July 21, 2011 Page 4 Until July 21, 2011, the laws and regulations of Louisiana and other jurisdictions, as applicable, will continue to apply to premium tax due on multi-state policies. On July 1, 2011, Louisiana entered the Nonadmitted Insurance Multi-State Agreement (NIMA) pursuant to Acts 2011, No. 361 which amended and reenacted LSA-R.S. 22:439, so that Louisiana will participate in the NIMA tax sharing arrangement for multi-state surplus lines insurance policies. The Louisiana Department of Insurance will prescribe tax forms that conform to the requirements of the recently enacted changes to LSA~R.S. 22:439 and NIMA. For the period of July 1-20, 2011, there will be no tax sharing arrangement and Louisiana will only collect surplus lines premium taxes on the Louisiana portion of multi-state premiums for which Louisiana is the home state of the policyholder. The recently enacted amendments to LSA-R.S. 22:439, effective July 1, 2011, change the tax formula on multi-state surplus lines insurance policies to conform to the requirements of the NRRA and to facilitate a tax sharing arrangement. The tax required shall be on the gross premiums charged for any surplus lines insurance policy covering properties, risks, or exposures in more than one state and for which Louisiana is the home state of the insured. The surplus lines broker or independently procuring insured shall compute the sum payable based upon all of the following: (1) An amount equal to five percent (5%) on that portion of the gross premiums allocated to this state. (2) Plus an amount equal to the portion of the premiums allocated to other states or territories on the basis of the tax rates and fees applicable to properties, risks, or exposures located or to be performed in other states and territories that participate in a reciprocal allocation procedure as authorized herein. (3) Less the amount of gross premiums allocated to this state and returned to the insured. (4) Less the net premium tax collected on properties, risks, or exposures allocable to states or territories that do not participate in a reciprocal allocation procedure with this state. License Requirements for Brokers Only the insured's home state may require a surplus lines broker to possess a license to sell, solicit or negotiate surplus lines insurance with respect to a particular policy. 15 U.S.C. 8202(a) & (b). 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. 15 U.S.C. 8206(15). If Louisiana is the

161 BULLETIN NO July 21,2011 Page 5 insured's home state, the surplus lines broker must possess a Louisiana surplus lines broker license. The NRRA provides that Louisiana may not collect licensing fees for surplus lines brokers as of July 21,2012, unless Louisiana participates in the NAIC's national insurance producer database or any other equivalent uniform national database. 15 U.S.C Louisiana is a participant in the National Insurance Producer Registry (NIPR), which provides such a database, such that Louisiana will collect licensing fees for surplus lines brokers who operate in Louisiana. Diligent Search; Exemption There continues to exist in Louisiana the requirement that an insurance producer conduct a diligent search among the admitted insurers authorized to transact business and that are actually writing the particular kind of insurance in this state prior to placing coverage with a surplus lines insurer, except as noted below. LSA-R.S. 22:453(A) (3). On or after July 21, 2011, a surplus lines broker seeking to procure surplus lines insurance on behalf of an exempt commercial purchaser is not required to perform a diligent search if: 1) the broker has disclosed to the exempt commercial purchaser that insurance mayor may not be available from the admitted market that may provide greater protection with more regulatory oversight; and 2) the exempt commercial purchaser has subsequently requested in writing for the surplus lines broker to procure insurance from a surplus lines insurer. 15 U.S.C The NRRA defines exempt commercial purchaser. 15 U.S.C.8206(5). Eligibility Requirements for Surplus Lines Insurers The NRRA restricts the eligibility requirements a state may impose on a surplus lines insurer. A surplus lines broker may place surplus lines insurance with an insurer domiciled in a U.S. jurisdiction authorized to write such business in the state of domicile and that maintains minimum capital and surplus of $15 million. Pursuant to the NRRA, a surplus lines broker may place business with a surplus lines insurer domiciled outside the U.S. when such insurer is on the Quarterly Listing of Alien Insurers maintained by the International Insurers Department of the NAIC. 15 U.S.C With regard to Bulletin , any questions regarding a surplus lines insurance tax issue should be directed to the Assistant Director, Surplus Linesllnsurance Premium Taxes, Office of Financial Solvency, Louisiana Department of Insurance at (225) or any questions regarding a surplus lines insurer licensing issue should be directed to the Assistant Commissioner,

162 BULLETIN NO July 21,2011 Page 6 Office of Licensing and Compliance, Louisiana Department of Insurance at (225) Baton Rouge, Louisiana, this 21 st day of July, 2011.

163 LOUISIANA DEPARTMENT OF INSURANCE JAMES J. DONELON COMMISSIONER BULLETIN NO TO: FROM: RE: DATE: ALL SURPLUS LINES INSURERS, BROKERS AND PRODUCERS JAMES J. DONELON, COMMISSIONER OF INSURANCE REVISED INFORMATION REGARDING SURPLUS LINES TAX PAYMENTS TO BE PAID BY SURPLUS LINES BROKERS, PRODUCERS AND THOSE INSUREDS INDEPENDENTLY PROCURING SURPLUS LINES INSURANCE; AND LOUISIANA'S IMPLEMENTATION OF THE NONADMITTED AND REINSURANCE REFORM ACT OF 2010 DECEMBER 29, 2011 Continuing the instructions set forth in Bulletin No , surplus lines brokers, surplus lines producers and those insureds independently procuring surplus lines insurance should follow these instructions from the Louisiana Department of Insurance (LDI) regarding the collection and remittance of surplus lines taxes on multistate surplus lines policies where Louisiana is the home state of the insured as defined in the federal Nonadmitted and Reinsurance Reform Act of 2010 (NRRA). Brokers, producers or insureds independently procuring surplus lines insurance shall collect and remit the Louisiana surplus lines premium tax at the five percent (5%) rate for the portion of the properties, risks, or exposures allocable to Louisiana. The instructions in Bulletin No for multi-state policies for which Louisiana is the home state of the insured were also to collect and remit surplus lines taxes on the portion of premium allocable to properties, risks, or exposures in participating states of the Nonadmitted Insurance Multi-State Agreement (NIMA) at the rates assessed by those states. Pursuant to recent amendments to NIMA, the tax allocation arrangement is scheduled to take effect on or after July 1, 2012, when a multi-state clearinghouse for surplus lines taxes begins operation. Until further notice, for any multi-state surplus lines policy that has an effective date on or after July 21, 2011, and for which Louisiana is the home state of the insured, all brokers, producers or independently procuring insureds shall collect and remit surplus lines premium taxes only on that portion of the premium allocable to Louisiana in accordance with La. R.S. 22:439 and Bulletin No P. 0. Box BATON ROUGE, LOUISIANA PHONE (225) fax (225)

164 BULLETIN NO December 29, 2011 Page2 This is a change from the previous instructions of the LDI set forth in Bulletin No regarding the effective date of the NIMA tax allocation arrangement. Brokers, producers, and insureds independently procuring surplus lines insurance shall continue to remit the premium tax on any surplus lines policy for which Louisiana is the home state of the insured on the Quarterly Tax Statement, Form 1265 or 1265B, no later than the dates specified in La. R.S. 22:439(A). The LDI will issue instructions regarding the NIMA clearinghouse and tax allocation procedures before the clearinghouse becomes operational. There is no authority in La. R.S. 22:439 to collect and remit surplus lines taxes on behalf of a state other than Louisiana until a NIMA tax allocation arrangement is in effect. If you have already charged and collected surplus lines taxes for other NIMA states on surplus lines policies for which Louisiana is the home state, you should refund those taxes to the insured as soon as practicable. In 2012 the NIMA states plan to establish a clearinghouse to collect multi-state surplus lines premium taxes for policies with properties, risks, or exposures allocable to two or more NIMA participating states. Once the clearinghouse becomes operational, brokers, producers and insureds independently procuring surplus lines insurance will use the forms and procedures provided by the clearinghouse. As of today, the following states and U. S. territories have joined NIMA: Alaska, Connecticut, Florida, Hawaii, Louisiana, Mississippi, Nebraska, Nevada, Puerto Rico, South Dakota, Utah and Wyoming. Again, for single-state Louisiana properties, risks, or exposures, all brokers, producers and insureds independently procuring surplus lines insurance will continue to use Form 1265 or Form 1265B in accordance with La. R.S. 22:439(A) and (B). Please conduct yourselves accordingly. For information about Bulletin No , please contact the LDI, Office of Financial Solvency, Surplus Lines/Insurance Premium Tax Division at taxdivision@ldi.la.gov or (225) Baton Rouge, Louisiana, this 29 1 h day of December 2011.

165 LOUISIANA DEPARTMENT OF INSURANCE JAMES J. DONELON COMMISSIONER BULLETIN NO TO: FROM: RE: ALL SURPLUS LINES INSURERS, BROKERS, PRODUCERS AND POLICYHOLDERS INDEPENDENTLY PROCURING SURPLUS LINES INSURANCE JAMES J. DONELON, COMMISSIONER OF INSURANCE INSTRUCTIONS FOR FILING SURPLUS LINES TAXES DATE: JUNE 14, 2012 The purpose of Bulletin No is for the Louisiana Department of Insurance (LOI) to provide guidance regarding the Nonadmitted Insurance Multi State Agreement (NIMA) tax-sharing arrangement, the implementation of the procedures for the paying of surplus lines taxes and fees through and the filing of policy data with the Surplus Lines Clearinghouse ("the clearinghouse") effective July 1, Bulletin No is specific to surplus lines insurance policies for which Louisiana is the home state pursuant to the Nonadmitted and Reinsurance Reform Act of 2010 (NARA) and for which there is premium allocated to at least one other state or territory, whether a NIMA participating state or not. Further, Bulletin No supplements Bulletin No and Bulletin No on the subject of surplus lines insurance taxation. Establishment and Operation of the Surplus Lines Clearinghouse Effective July 1, 2012, the participating states of NIMA will activate the taxsharing arrangement of NIMA. Tax filers, which include brokers, producers and policyholders independently procuring coverage, shall begin filing tax-related data regarding transactions for which Louisiana is the home state as defined in the NARA and for which there is premium allocated to at least one other state or territory, whether a NIMA participating state or not. The filing of tax-related data with the clearinghouse on July 1, Tax filers shall file all transaction data for the calendar quarter with the clearinghouse before the start of the next calendar quarter. The calendar quarters end on March 31, June 30, September 30 and December 31 of each year. The clearinghouse will invoice tax filers immediately following the end of the quarter and payment is due within 45 days of the end of the quarter. P. 0. Box BATON ROUGE, LOUISIANA PHONE (225) FAX (225) hap://wnw./di.la.;;ov

166 Bulletin No June 14, 2012 Page 2 For multi-state surplus lines insurance policies issued or renewed after June 30, 2012, and any subsequent endorsements on those policies for which Louisiana is the home state, NIMA shall govern the allocation of premium, the payment of premium taxes and the filing of policy data. Accordingly, for any such multi-state surplus lines insurance policy issued or renewe.d with an effective date of July 1, 2012, or thereafter, and endorsements to those policies, the tax filer will pay taxes through and file the policy data with the clearinghouse on all such multistate policies for which Louisiana is the home state. For subsequent endorsements on policies with effective dates prior to July 1, 2012, the tax filer should file with the LOI in accordance with the laws in force prior to July 1, Furthermore, surplus lines tax filers should take notice of the policy information that the clearinghouse will require to make these filings. This information differs from that currently required by the LOI. A listing of the required policy data elements is posted at Additionally, the clearinghouse will require licensed brokers and producers to provide their National Producer Number (NPN) upon registration with the clearinghouse. This number is assigned by the National Insurance Producer Registry (NIPR). You may find your NPN at The clearinghouse offers a means for tax filers to submit policy data in a single upload. Tax filers may now download the XML Batch Filing Schema and Documentation from the Surplus Lines Clearinghouse website at: 1. and 2. The clearinghouse procedures, as authorized by NIMA, require brokers and producers to collect a transaction fee from the insured and to remit it to the clearinghouse. This fee is payable by the insured directly for those independently procuring insurance or through brokers and producers on each transaction processed through the clearinghouse to cover the cost of its operations and activities. A web-based Multi-State Tax Calculator to assist tax filers in estimating the taxes due for transactions submitted to the clearinghouse will be available on the clearinghouse website at The calculator will provide estimates to tax filers for all applicable surplus lines taxes, assessments, and transaction fees due for a multi-state placement for which the home state is a NIMA participating state.

167 Bulletin No June 14, 2012 Page 3 Examples Below are examples that illustrate the analysis that determines the method of premium tax payments and the information requirements for Louisiana homestate surplus lines insurance policies, effective July 1, Example #1: Single-State Policy; Louisiana A surplus lines policy is single-state for risk allocated only to Louisiana, regardless of the principal place of business or residence of the insured. The tax filer pays surplus lines premium taxes to Louisiana at the Louisiana rate on the entire premium using the current Louisiana forms and procedures. Explanation of Example #1: Single-State Policy; Louisiana Pursuant to the NRRA, the home state of a single-state surplus lines policy is the state in which the risk is present regardless of the residence or principal place of business of the insured. Louisiana law applies to such surplus lines policies and the entire premium is subject to Louisiana tax jurisdiction. Louisiana taxes all such policies at the Louisiana rate on the entire premium. When the entire risk is outside the state of the insured's principal place of business or residence, the NRRA provides that the home state is the state with the greatest portion of allocated premium. There is no change to the filing requirements for Louisianaonly policies. Example #2: Multi-State Policy; Louisiana and a NIMA Participating State A surplus lines policy is multi-state for risk located in Louisiana and Florida, both NIMA participating states. The principal place of business or residence of the insured is Louisiana. A portion of the insured risk is allocated to Louisiana. Using the clearinghouse and its procedures, the tax filer pays surplus lines premium tax at Louisiana's rate on that portion of the premium allocated to Louisiana and at Florida's rate on that portion of the premium allocated to Florida. The tax filer pays the clearinghouse an additional transaction fee computed on the total premium for the surplus lines policy. Explanation of Example #2: Multi-State Policy; Louisiana and a NIMA Participating State Pursuant to the NRRA, the home state of a policy with risk in two or more states is the state in which the principal place of business or residence of the insured is

168 Bulletin No June 14, 2012 Page4 located when there is risk allocated to that state-in this example, Louisiana. Louisiana law applies to such policies, and the entire premium is subject to Louisiana tax jurisdiction pursuant to the NARA and La. R.S. 22:439. Pursuant to NIMA and La. R.S. 22:439, Louisiana exercises its tax jurisdiction over the entire premium at the Louisiana tax rate for Louisiana's allocated portion and at the Florida tax rate for Florida's allocated portion. All filings and payments are made through the clearinghouse using its procedures. Example #3: Multi-State Policy; Louisiana and a NIMA Nonparticipant State A surplus lines policy is multi-state for risk located in Louisiana and a NIMA nonparticipant state. The principal place of business or residence of the insured is Louisiana. Some portion of the insured risk is allocated to Louisiana. The tax filer pays surplus lines premium tax to Louisiana at Louisiana's rate on that portion of the premium allocated to Louisiana using the clearinghouse. For that portion of the premium allocated to the NIMA nonparticipant state, the tax filer pays no premium tax. All filings and premium tax payments are made through the clearinghouse. The NIMA nonparticipant state is not entitled to any premium tax payment or policy information filing for a surplus lines policy for which it is not the home state. The tax filer pays the clearinghouse a transaction fee computed on the total premium for the entire surplus lines policy. Explanation of Example #3: Multi-State Policy; Louisiana and a NIMA Nonparticipant State Pursuant to the NARA, the home state of a policy with risk in two or more states is the state in which the principal place of business or residence of the insured is located when there is risk allocated to that state-in this example, Louisiana. Louisiana law applies to such policies, and the entire surplus lines premium is subject to Louisiana tax jurisdiction. Surplus lines premium tax is due only on that portion of the surplus lines premium allocated to Louisiana. Louisiana refrains from exercising its tax jurisdiction over that portion of the surplus lines premium allocated to the NIMA nonparticipant state. Example #4: Multi-State Policy; Louisiana, NIMA Participating State and a NIMA Nonparticipant State A surplus lines policy is multi-state for risk located in Louisiana and Florida, both NIMA participating states, and a third state that is a NIMA nonparticipant state. The principal place of business or residence of the insured is Louisiana. A portion of the insured risk is allocated to Louisiana. Using the clearinghouse and its

169 Bulletin No June 14, 2012 Page 5 procedures, the tax filer pays premium tax at Louisiana's tax rate on that portion of the premium allocated to Louisiana and at Florida's tax rate on that portion of the premium allocated to Florida. For that portion of the premium allocated to the NIMA nonparticipant state, the tax filer pays no premium tax. The tax filer pays the clearinghouse a transaction fee computed on the total premium associated with this surplus lines policy, including the portion of the premium allocated to the NIMA nonparticipant state. All filings and payments are made through the clearinghouse using its procedures. Explanation of Example #4: Multi-State Policy; Louisiana, NIMA Participating State and a NIMA Nonparticipant State Pursuant to the NRRA, the home state of a policy with risk in two or more states is the state in which the principal place of business or residence of the insured is located when there is risk allocated to that state-in this example, Louisiana. Louisiana law applies to such policies, and the entire surplus lines premium is subject to Louisiana tax jurisdiction pursuant to the NRRA and La. R.S. 22:439. Pursuant to La. R.S. 22:439, Louisiana exercises tax jurisdiction over the surplus lines premium at the Louisiana rate for Louisiana's allocated portion and at the Florida rate for Florida's allocated portion. Louisiana refrains from exercising its tax jurisdiction over that portion of the surplus lines premium allocated to the NIMA nonparticipant state; The tax filer makes all filings and payments through the clearinghouse using its procedures. Example #5: Multi-State Policy; No Risk in State of Principal Place of Business or Residence of Insured; Louisiana Has the Greatest Percentage of Risk A surplus lines policy is multi-state for risk allocated to Louisiana and one or more other states. The principal place of business or residence of the insured is not in Louisiana or any other state listed on the policy. Louisiana has the greatest percentage of the total premium allocated between all the states with allocated risk covered by the policy. According to the NRRA, Louisiana is the home state. The tax filer pays the premium tax and files the required policy information in accordance with either Example #2, #3 or #4, as appropriate. Explanation of Example #5: Multi-State Policy; No Risk in State of Principal Place of Business or Residence of Insured; Louisiana Has the Greatest Portion of Risk

170 Bulletin No June 14, 2012 Page6 Pursuant to the NRRA, the home state of the policy when the principal place of business or residence of the insured is not in a state where the risk covered by the policy is located is the state that has the greatest portion of allocated surplus lines premium. In this example, the home state is Louisiana, and Louisiana has jurisdiction over the policy and its taxation as the home state. Either Example #2, #3 or #4 provides the guidance for the payment of the surplus lines premium tax depending on the presence or absence of at least one other NIMA participating state on the surplus lines insurance policy. Example #6: Multi-State Policy; Louisiana is the Principal Place of Business or Residence; No Premium Allocated to Louisiana A surplus lines policy is multi-state for risk allocated to two or more states, and Louisiana is not one of those states. The principal place of business or residence of the insured is in Louisiana. Louisiana is not the home state according to the NRRA as it defines the home state in such instances as the state with the greatest percentage of allocated surplus lines premium. The law of the home state governs the paying of premium taxes and the filing of information, including the applicability of any tax-sharing arrangement such as NIMA. Explanation of Example #6: Multi-State Policy; Louisiana is the Principal Place of Business or Residence; No Premium Allocated to Louisiana Pursuant to the NRRA, the home state of the policy is the state with the greatest portion of allocated premium when none of the premium is allocated to the state with the principal place of business or residence of the insured. In this example, Louisiana is not the home state. Louisiana does not have jurisdiction over the payment of premium tax. Example #7: Multi-State Policy; Affiliated Group A surplus lines policy covers as named insureds more than one member of an affiliated group of entities and has premium allocated to more than one state. The group headquarters and principal place of business is in a state other than Louisiana. The member of the affiliated group with the largest percentage of premium attributed to it under the policy has its principal place of business in Louisiana. If any premium is allocated to Louisiana, then Louisiana is the home state of the policy. The payment of premium tax would be through the clearinghouse in accordance with Example #2, #3 or #4, as appropriate, and the insured would pay a clearinghouse transaction fee on the entire policy premium.

171 Bulletin No June 14, 2012 Page 7 Explanation of Example #7: Multi-State Policy; Affiliated Group According to NIMA and the NRRA, the home state of a policy for an affiliated group of entities with more than one group member named as an insured is the home state of the member with the greatest percentage of premium attributed to it. In the above example the group member with the greatest attributed premium is in Louisiana. Because there is premium attributable to Louisiana, the home state is Louisiana as defined in NIMA and NRRA and demonstrated in Examples #2, #3, and #4. If no premium was attributable to Louisiana, then the home state would have been determined in accordance with Example #6. The NRRA defines "affiliated group" and "control." Example #8: Group Insurance A surplus lines group policy covers members of a group. Each member pays some portion of the premium for the insurance. A member has its principal place of business or residence in Louisiana, and some premium is allocated to Louisiana with the remainder to other states. According to NIMA, Louisiana is the home state of the policy with respect to the coverage of the Louisiana group member in this example. The payment of premium taxes and fees would be through the clearinghouse. Explanation of Example #8: Group Insurance According to NIMA, the home state of group insurance depends on who pays the premium. If the group pays the premium out of its funds, then the home state of the group as defined in the NRRA governs the payment of premium taxes. If a member pays any portion of the premium, then the member's home state as defined by the NRRA governs the payment of premium taxes. The NRRA does not address group insurance purchased in the nonadmitted market and does not define "group" or "group insurance." In Example #8, if the premium were all allocated to Louisiana, then the payment of taxes and fees would be through the LOI using single-state procedures. Example #9: Non-U.S. Premium A policy covers Louisiana and one or more non-u.s. jurisdictions or Louisiana and other states and one or more non-u.s. jurisdictions. The non-u.s. premium for either policy is not reportable to either the LOI or to the clearinghouse. If the policy is a single-state Louisiana policy without the non-u.s. premium, the tax filer files with the LOI using its forms and procedures. If the policy is multi-state

172 Bulletin No June 14, 2012 Page 8 without the non-u.s. premium, the tax filer determines the home state for the U.S. portion of the premium according to the NRRA and files with the home state or the clearinghouse as appropriate. Explanation for Example #9: Non-U.S. Premium Louisiana has not in the past taxed premium allocated outside of its territorial jurisdiction. The NRRA provides that "No State other than the home State of an insured may require any premium tax payment for nonadmitted insurance." The NRRA does not change previous constitutional limitations on the power of a state to tax premium. It merely assigns to one state the power to require the payment of surplus lines premium tax. The current La. R.S. 22:439 limits the tax required to that owed to Louisiana on single-state premium and to that owed on multistate premium allocated to Louisiana and to states participating in a tax-sharing arrangement, such as NIMA, with Louisiana. Allocation Method NIMA provides a uniform method for allocating premium between or among the relevant states on a multi-state surplus lines policy. The NIMA board adopted a revised allocation method on May 22, Tax filers may apply either the revised allocation method or the previous NIMA allocation method to policies quoted before July 1, For all policies quoted after June 30, 2012, tax filers shall use the NIMA allocation method in effect on the effective date of the policy. The Surplus Lines Clearinghouse maintains a current copy of the NIMA allocation method on its website, Definitions "Allocated" when referring to "premium" means that portion of the total gross premium attributed to a state or territory in accordance with the published NIMA allocation schedule, whether or not a NIMA participating state. "Broker'' and "producer'' in Bulletin means those persons licensed by the LDI to place surplus lines insurance in Louisiana.

173 Bulletin No June 14, 2012 Page 9 The ''transaction fee" is a fee of 0.30% (three-tenths of one percent) of the total gross premium of each nonadmitted insurance transaction reported through the clearinghouse. For example, the fee would be $3.00 per $1, of total gross premium, $30.00 per $10,000.00, or $ per $100, NIMA Participating States The participating states of NIMA as of the date of Bulletin are Florida, Louisiana, Nevada, Puerto Rico, South Dakota, Utah and Wyoming. Future Guidance The LOI and the Surplus Lines Clearinghouse will issue additional instructions regarding clearinghouse operations and training for users. If a tax filer has questions or issues regarding compliance with NIMA, it is important to note that tax filing for Louisiana multi-state policies is not due until the end of the quarter. There is ample time to obtain the necessary information or guidance. Tax filers should contact the LOI or the clearinghouse for answers to questions or solutions to other problems. The Surplus Lines Clearinghouse will continue to provide information regarding the clearinghouse implementation, educational tools and training opportunities for tax filers as that information becomes available. If you have any questions, you may call the clearinghouse office toll-free by telephone at (877) Please conduct yourselves accordingly. If you need more information from the LOI about Bulletin No or the implementation of the NRRA and NIMA, please contact the Director, Premium Tax Division, Office of Financial Solvency, either by at taxdivision@ldi.la.gov or by telephone at (225) Baton Rouge, Louisiana, this 14th day of June 2012.

174 LOUISIANA DEPARTMENT OF INSURANCE JAMES J. DONELON COM MISSIONER BULLETIN TO: FROM: RE: ALL SURPLUS LINES INSURANCE BROKERS JAMES J. DONELON, COMMISSIONER OF INSURANCE NIMA WITHDRAWAL AND SURPLUS LINES TAX REPORTING DATE: JULY15, 2015 Pursuant to Acts 2015 No. 386, effective October 1, 2015, Louisiana will withdraw from the Nonadmitted Insurance Multi-state Agreement (NIMA) and the NIMA sponsored Surplus Lines Clearinghouse. Furthermore, Louisiana will no longer share surplus lines tax revenue with the NIMA participating states. Bulletin provides guidance for calculating, reporting, and paying surplus lines taxes as a consequence of the withdrawal of Louisiana from NIMA and the reduction of the surplus lines tax rate. Bulletin also provides notice of changes in Form 438 necessitated by Acts 2015 No. 193, and codified at La. R.S. 22:438. The tax on all surplus lines transactions that have an effective date on or after October 1, 2015 shall be at the rate of 4.85% in lieu of the current rate of 5.00%, pursuant to Acts 2015 No. 386, and codified at La. R.S. 22:439. Before Withdrawal from NIMA New and renewal multi-state policies dated before October 1, 2015 remain subject to the NIMA rules and to reporting through the Surplus Lines Clearinghouse. Effective July 1, 2015, the transaction fee charged by the Surplus Lines Clearinghouse will be reduced to 0.175% instead of 0.3%. There is no change to the reporting and paying of the surplus lines tax for a new or renewal, single-state policy with an effective date before October 1, P. 0. Box BATON ROUGE. LOUISIANA PHONE (225) FAX (225)

175 Bulletin July 15, 2015 Page 2 of 4 Any surplus lines policy with an effective date before October 1, 2015 shall continue to be taxed at the rate of 5.00%, and any endorsement, cancellation, change in coverage, or other premium transaction related to such policy that has an invoice date before October 1, 2015 and that causes an addition to or refund of tax or additional or return premium attributable to such policy shall also be taxed or refunded at the rate of 5.00%. For a single-state policy with an effective date before October 1, 2015 to obtain a refund for taxes paid at the 5.00% rate, it will be necessary for the broker to amend the surplus lines tax return for the quarter in which the tax was originally reported and paid. After Withdrawal from NIMA For a new or renewal policy, or any other taxable transaction, with an effective date on and after October 1, 2015 the surplus lines broker will calculate, report, and pay surplus lines premium taxes at the 4.85% tax rate for any multistate policy for which Louisiana is the home state of the policyholder as defined in La. R.S. 22:46(8.1) in the same manner as for a single-state policy. The gross taxable premium for all such surplus lines transactions shall consist of the entire premium, as defined in La. R.S. 22:46(13), whether allocable to Louisiana or any other jurisdiction, unless there is a specific exemption. Quarterly Tax Reporting and "Zero Reports" Effective October 1, 2015, there will be several changes to surplus lines reporting. A surplus lines broker placing Louisiana home-state business shall file a quarterly surplus lines tax report for the quarter in which the business is transacted and shall file an annual certification of the accurate reporting of all Louisiana home-state business during the calendar year no later than March 1 of the following year. For a prior calendar quarter in which a surplus lines broker has no Louisiana homestate surplus lines premium to report, the broker is not required to file a quarterly surplus lines tax report or "zero report." A surplus lines broker is required to file an annual report no later than March 1 of the following year wherein the broker must certify the reporting of all surplus lines business conducted during the prior calendar year, or certify the absence of any business during the prior calendar year.

176 Bulletin July 15, 2015 Page 3 of 4 Tax Exemptions Effective July 1, 2015, La. R.S. 22:439(0 ), as amended and reenacted by Acts 2015 No. 386, exempts two categories of purchasers from the tax on surplus lines insurance. The first category is any "college, university, school, institution, or program that is under the supervision or management of a system board of supervisors provided for in [La.] R.S. 17:3215 through " The boards referred to are those for Louisiana State University, Southern University, University of Louisiana, and the Louisiana Community and Technical College. The second category is any political subdivision "having a population of not less than three hundred fifty thousand persons according to the latest federal decennial census." According to the 2010 U.S. Census, only East Baton Rouge Parish and Jefferson Parish meet the population requirement. There is no definition of "political subdivision" in the Louisiana Insurance Code. There are many definitions throughout the Revised Statutes that relate to specific purposes and programs. According to Art. VI 44(2) of the La. Const. of 1974, "political subdivision" means a parish, municipality, and any other unit of local government, including a school board and a special district, authorized by law to perform governmental functions. Any purchaser of insurance claiming the political subdivision exemption must provide legal authority to the surplus lines broker to substantiate the purchaser's legal status as a political subdivision. Effective October 1, 2015, Acts 2015 No. 386 repeals the exemption for "subjects located, resident, or to be performed wholly outside of this state, or on vehicles or aircraft owned and principally garaged outside of this state." This repeal is necessary for the expansion of Louisiana's tax jurisdiction to include multistate surplus lines premium allocable to property, risk, or exposure located outside Louisiana. Form 438 Acts 2015 No. 193 becomes effective August 1, 2015 and creates a new category of insurer -- the domestic surplus lines insurer. With the addition of "domestic surplus lines insurer" to the vocabulary, references to "approved unauthorized" and "eligible unauthorized" insurers are changed where appropriate to simply state "surplus lines insurers," as now defined at La. R.S. 22:46(17).

177 Bulletin July 15, 2015 Page 4 of 4 The Acknowledgement of Applicant for Personal Lines Insurance in the Surplus Lines Market, Form 438, incorporates the changed terminology, and an updated version of Form 438 will be promulgated simultaneously with the issuance of Bulletin and will be posted on the LOI website. Questions or clarifications regarding Bulletin should be directed to the Director, Premium Tax Division, Office of Management and Finance, either by at taxdivision@ldi.la.gov or by telephone at (225) Baton Rouge, Louisiana, this 15th day of July ISSIONER OF INSURANCE

178 Revised Information Regarding Surplus Lines Producers and Louisiana s Implementation of the Non-Admitted and Reinsurance Reform Act (NRRA) October 24, 2011 Effective July 21, 2011 producers should collect and remit surplus lines taxes according to these instructions on multi-state surplus lines policies where Louisiana is the home state as defined in the NRRA. The producer must collect and remit surplus lines taxes for Louisiana at the 5% rate for the portion of the risk that is allocable to Louisiana. The original instruction for multistate policies for which Louisiana is the home state was to also charge and collect surplus lines taxes at the rates for the portion of premium allocable to other states that are participating states of the Non-Admitted Insurance Multistate Agreement (NIMA). A recent vote of the NIMA states will delay this procedure until the 1 st Quarter of As of October 24, 20, 2011, the following states and U. S. territories have joined NIMA: Alaska, Connecticut, Florida, Hawaii, Louisiana, Mississippi, Nebraska, Nevada, Puerto Rico, South Dakota, Utah and Wyoming. The NIMA states will establish a clearinghouse to collect multi-state surplus lines taxes for policies with two or more NIMA participating states. It is the intent of the Louisiana Department of Insurance that producers collect the multi-state taxes and remit them to the NIMA clearinghouse using the forms provided by the clearinghouse. However, the clearinghouse will not be operational until early Therefore, for surplus lines policies with effective dates from July 21, 2011 through December 31, 2011, where Louisiana is the home state, do not charge or collect taxes on the portion of the premiums allocable to any state other than Louisiana. This is a change from our previous instructions. You should remit the Louisiana tax on the Quarterly Form 1265 as usual. It is expected that the clearinghouse will be set up in time to process multistate policies beginning in the first quarter of If you have already charged and collected tax for other NIMA states, you should refund the tax to the insured. For policies with effective dates beginning January 1, 2012, we anticipate that you will remit multistate taxes for policies with two or more NIMA participating states using the clearinghouse s forms and instructions. For single state surplus lines policies, where all of the risk is in Louisiana, the Form 1265 and Form 1265B should be used in the usual manner. It is expected that additional instructions will be issued once the clearinghouse is up and running. If you need more information about Louisiana s implementation of the NRRA, please contact Tommy Coco, Director of the Tax Division of the Louisiana Department of Insurance at tcoco@ldi.state.la.us or (225)

179 Bulletin 378 : Bureau of Insurance Page 1 of 6 7/31/2011 BULLETIN 378 Changes to the Nonadmitted Insurance Laws The purpose of this Bulletin is to outline nationwide regulatory changes that will affect the placement of nonadmitted insurance on Maine risks. One of the provisions of last year s Dodd-Frank Wall Street Reform and Consumer Protection Act is the Nonadmitted and Reinsurance Reform Act of 2010 ( NRRA ), 1 which establishes federal standards for surplus lines coverage and other nonadmitted insurance. On June 14, 2011, Governor LePage signed An Act To Implement the Requirements of the Federal Nonadmitted and Reinsurance Reform Act of 2010, 2 which provides for the implementation of the NRRA in Maine and conforms Maine s nonadmitted insurance laws to federal law. Both the NRRA and the Maine Implementation Act take effect July 21, The NRRA provides that only an insured s Home State may require the payment of premium tax for nonadmitted insurance. 4 Moreover, the NRRA subjects the placement of nonadmitted insurance solely to the statutory and regulatory requirements of the insured s Home State, and provides that only the insured s Home State may require a surplus lines broker to be licensed to sell, solicit, or negotiate nonadmitted insurance with respect to that insured. 5 What is the scope of the NRRA? Nonadmitted insurance, as defined in the NRRA, includes both surplus lines and independently procured insurance, but is restricted to property and casualty insurance. 6 In addition, the NRRA does not preempt state laws requiring primary or excess workers compensation insurance to be placed in the admitted market. 7 Maine s laws prohibiting the sale of life, health, and workers compensation insurance in the nonadmitted market, and regulating the reinsurance market for workers compensation self-insurers, remain in effect and are not preempted, modified, or repealed by the NRRA or by the Maine Implementation Act. 8 Specifically, the NRRA states that the placement of nonadmitted insurance is subject to the statutory and regulatory requirements solely of the insured s home state, but that the NRRA 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. 9 The NRRA does not expand the scope of the kinds of insurance that an insurer may write in the nonadmitted insurance market, and each state continues to determine which kinds of insurance an insurer may write in that state. Although the NRRA preempts certain state laws with respect to nonadmitted insurance, it does not have any impact on insurance on Maine risks offered by insurers licensed or authorized in Maine. When is Maine the insured s Home State for purposes of a particular placement? If Maine is considered the insured s Home State, only Maine s requirements regarding the placement of nonadmitted business will apply. Maine is the insured s Home State if the insured maintains its principal place of business here or, in the case of an individual, the individual s principal residence is here, unless 100% of the insured risk is located outside Maine. In addition, if 100% of the insured risk is located outside the state of the insured s principal place of business or principal residence, then Maine is the insured s Home State if it is the state to which the greatest percentage of the insured s taxable premium for that insurance contract is allocated. If more than one insured from an affiliated group are named insureds on a single nonadmitted insurance placement, and the insureds have different Home States, Maine will be considered the Home State for that placement if Maine is the Home State of the insured that has the largest percentage of premium attributed to it under the insurance contract. How will these rules be applied? New and renewal policies with an effective date before July 21, 2011 will be subject to the laws and regulations of Maine and other jurisdictions, as applicable, as of the policy effective date. The laws and regulations of Maine and other jurisdictions, as applicable, as of the effective date of any such policy will also apply to any modification to that policy during the policy period, such as all endorsements (including risk- and premium-bearing endorsements), installment payments, and premium audits. New and renewal policies with an effective date on or after July 21, 2011, and any modifications thereto, will be subject only to the laws and regulations of Maine, as amended by the Maine Implementation Act, if Maine is the Home State

180 Bulletin 378 : Bureau of Insurance Page 2 of 6 7/31/2011 of the insured. If Maine is not the Home State of the insured, and the insurer is not admitted in Maine, then Maine law will not apply to property and casualty insurance, with the exception of primary or excess workers compensation insurance covering benefits under the Maine Workers Compensation Act. What are the requirements for premium tax allocation and payment in Maine? Until July 21, 2011, the laws and regulations of Maine and other jurisdictions, as applicable, will continue to apply to premium tax due on multi-state placements. Under current Maine law, only the portion of the premium attributable to Maine risk is subject to Maine premium tax, and this applies whether or not Maine is the insured s Home State. 10 As of July 21, 2011, the NRRA permits only the insured s Home State to require the payment of premium tax for nonadmitted insurance. When Maine is the insured s Home State, Maine s 3% nonadmitted insurance premium tax will apply to the entire premium. 11 The changes made by the Maine Implementation Act to the procedures for reporting and collecting premium taxes take effect on July 21, 2011, and apply to all premiums received by the insurer or its representative on or after July 1, Under current law, surplus lines tax returns and tax payments are submitted to Maine Revenue Services by the surplus lines producer or surplus lines brokerage (in industry terminology, the wholesaler ), while insureds independently procuring nonadmitted insurance report premiums and pay taxes to the Bureau of Insurance. 13 Beginning July 21, 2011, Maine Revenue Services will handle all premium tax reporting and payments with respect to nonadmitted insurance premiums. 14 Premium tax forms and information may be found on the Maine Revenue Services Web site at the following address: The NRRA authorizes states to enter into a compact or agreement for allocation of premium taxes on multistate risks. 15 The Maine Implementation Act gives the State Tax Assessor the authority to enter into a multistate agreement on behalf of the State of Maine, after consultation with the Bureau of Insurance, if the Assessor has: A. Completed a fiscal analysis of the impact of the agreement that examines the expected effects on the State s gross receipt of premium tax; and B. Concluded, after consultation with representatives of surplus lines insurers, admitted insurers and surplus lines producers, that entering into the agreement: (1) Is in this State s financial best interest; (2) Does not significantly increase administrative burden and cost to the State, surplus lines insurers and insureds; and (3) Is consistent with the requirements of the federal Nonadmitted and Reinsurance Reform Act of 2010, Public Law The Bureau will issue additional guidance if Maine enters into a tax allocation agreement. What are the license requirements for surplus lines producers? Only the insured s Home State may require a surplus lines producer to be licensed to sell, solicit, or negotiate nonadmitted insurance with respect to a particular placement. 17 If Maine is the insured s Home State, the surplus lines producer must be licensed in Maine. The NRRA provides that Maine may not collect licensing fees for surplus lines producers on or after July 21, 2012, unless Maine participates in the NAIC s national insurance producer database or any other equivalent uniform national database U.S.C Maine complies with this requirement by participating in the National Insurance Producer Registry (NIPR). What are the requirements for a diligent search and when is a diligent search required? With limited exceptions (wet marine and transportation, out-of-state risks, railroad and aircraft operations in interstate commerce), Maine law currently provides that coverage may only be placed in the surplus lines market if The insurance is not available after diligent effort has been made to place the coverage with authorized insurers. 19 Maine does not mandate any specific procedures for performing a diligent search. On or after July 21, 2011, the NRRA provides that a surplus lines producer seeking to procure or place nonadmitted insurance on behalf of an exempt commercial purchaser is not required to perform a diligent search if: 1) the producer has disclosed to the exempt commercial purchaser that insurance that may provide greater protection with more regulatory oversight may or may not be available from the admitted market; and 2) the exempt commercial purchaser has subsequently requested in

181 Bulletin 378 : Bureau of Insurance Page 3 of 6 7/31/2011 writing for the producer to procure or place the insurance from a nonadmitted insurer. The Maine Implementation Act provides that when these conditions are met, a surplus lines producer may procure insurance from eligible surplus lines insurers without adherence to the procedures set forth in section 2004 or any other requirement to determine whether the full amount or type of insurance sought can be obtained from admitted insurers, and incorporates by reference the NRRA s definition of exempt commercial purchaser. 20 What are the eligibility requirements for nonadmitted insurers? Under current Maine law, the Superintendent maintains a list of eligible surplus lines insurers, and a surplus lines producer may not place Maine business with an insurer that is not listed. 21 The NRRA restricts the eligibility requirements a state may impose on nonadmitted insurers. Nonadmitted insurers domiciled outside the U.S. are eligible if they are listed on the Quarterly Listing of Alien Insurers maintained by the International Insurers Department of the NAIC. For nonadmitted insurers domiciled in the United States, state eligibility requirements must be in conformance with the financial criteria of the NAIC Nonadmitted Insurance Model Act. 22 Accordingly, the Maine Implementation Act adds new Subsections 3 through 5 to 24-A M.R.S.A. 2007, providing that as of July 21, 2011: 3. The superintendent shall approve a United States insurer s request for eligibility if the insurer: A. Is authorized to write such insurance in its domiciliary jurisdiction; B. Has established satisfactory evidence of good repute and financial integrity; and C. Maintains capital and surplus, or its equivalent under the laws of its state of domicile, in an amount at least equal to the greater of: (1) The minimum capital and surplus that would be required if the insurer were licensed in this State; and (2) $15,000, The superintendent may list an insurer as eligible if it does not meet the minimum capital and surplus requirements of subsection 3 upon an affirmative finding of acceptability by the superintendent. The finding must be based upon such factors as quality of management, capital and surplus of any parent company, company underwriting profit and investment income trends, market availability and company record and reputation within the industry. The superintendent may not make an affirmative finding of acceptability if the nonadmitted insurer's capital and surplus is less than $4,500, A non-united States insurer is considered eligible to write insurance on an unauthorized basis in this State if it is listed on the quarterly listing of alien insurers maintained by the National Association of Insurance Commissioners. June 17, 2011 Eric A. Cioppa Acting Superintendent of Insurance NOTE: This bulletin is intended solely for informational purposes. It is not intended to set forth legal rights, duties, or privileges, nor is it intended to provide legal advice. Readers should consult applicable statutes and rules and contact the Bureau of Insurance if additional information is needed. Appendix: Key Definitions from the NRRA Exempt commercial purchaser (NRRA 527(5) (15 U.S.C. 8026(5); see 24-A M.R.S.A. 2003(6)): The term exempt commercial purchaser means any person purchasing commercial insurance that, at the time of placement, meets the following requirements: (A) The person employs or retains a qualified risk manager to negotiate insurance coverage. (B) The person has paid aggregate nationwide commercial property and casualty insurance premiums in excess of $100,000 in the immediately preceding 12 months. (C) (i) The person meets at least 1 of the following criteria:

182 Bulletin 378 : Bureau of Insurance Page 4 of 6 7/31/2011 (I) The person possesses a net worth in excess of $20,000,000, as such amount is adjusted pursuant to clause (ii). (II) The person generates annual revenues in excess of $50,000,000, as such amount is adjusted pursuant to clause (ii). (III) The person employs more than 500 full-time or full-time equivalent employees per individual insured or is a member of an affiliated group employing more than 1,000 employees in the aggregate. (IV) The person is a not-for-profit organization or public entity generating annual budgeted expenditures of at least $30,000,000, as such amount is adjusted pursuant to clause (ii). (V) The person is a municipality with a population in excess of 50,000 persons. (ii) Effective on the fifth January 1 occurring after the date of the enactment of this subtitle and each fifth January 1 occurring thereafter, the amounts in subclauses (I), (II), and (IV) of clause (i) shall be adjusted to reflect the percentage change for such 5-year period in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the Department of Labor. Home State (NRRA 527(6) (15 U.S.C. 8026(6); see 24-A M.R.S.A. 2003(4) (5) & (7)): (A) In General. Except as provided in subparagraph (B), the term home State means, with respect to an insured (i) the State in which an insured maintains its principal place of business or, in the case of an individual, the individual s principal residence; or (ii) if 100 percent of the insured risk is located out of the State referred to in clause (i), the State to which the greatest percentage of the insured s taxable premium for that insurance contract is allocated. (B) Affiliated Groups. If more than 1 insured from an affiliated group are named insureds on a single nonadmitted insurance contract, the term home State means the home State, as determined pursuant to subparagraph (A), of the member of the affiliated group that has the largest percentage of premium attributed to it under such insurance contract. Independently procured insurance (NRRA 527(7) (15 U.S.C. 8026(7); see 24-A M.R.S.A. 2101(2)(F)): The term independently procured insurance means insurance procured directly by an insured from a nonadmitted insurer. Nonadmitted insurance (NRRA 527(9) (15 U.S.C. 8026(9); see 24-A M.R.S.A. 2003(8)): 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. Nonadmitted insurer (NRRA 527(11) (15 U.S.C. 8026(11); see 24-A M.R.S.A. 2003(9)): The term nonadmitted insurer (A) means, with respect to a State, an insurer not licensed to engage in the business of insurance in such State; but (B) does not include a risk retention group, as that term is defined in section 2(a)(4) of the Liability Risk Retention Act of 1986 (15 U.S.C. 3901(a)(4)). Premium tax (NRRA 527(12) (15 U.S.C. 8026(12)): 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 government entity directly or indirectly 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. Qualified risk manager (NRRA 527(13) (15 U.S.C. 8026(13)): The term qualified risk manager means, with respect to a policyholder of commercial insurance, a person who meets all of the following requirements: (A) The person is an employee of, or third-party consultant retained by, the commercial policyholder.

183 Bulletin 378 : Bureau of Insurance Page 5 of 6 7/31/2011 (B) The person provides skilled services in loss prevention, loss reduction, or risk and insurance coverage analysis, and purchase of insurance. (C) The person (i) (I) has a bachelor s degree or higher from an accredited college or university in risk management, business administration, finance, economics, or any other field determined by a State insurance commissioner or other State regulatory official or entity to demonstrate minimum competence in risk management; and (II) (aa) has 3 years of experience in risk financing, claims administration, loss prevention, risk and insurance analysis, or purchasing commercial lines of insurance; or (bb) has (AA) a designation as a Chartered Property and Casualty Underwriter (in this subparagraph referred to as CPCU ) issued by the American Institute for CPCU/Insurance Institute of America; (BB) a designation as an Associate in Risk Management (ARM) issued by the American Institute for CPCU/Insurance Institute of America; (CC) a designation as Certified Risk Manager (CRM) issued by the National Alliance for Insurance Education & Research; (DD) a designation as a RIMS Fellow (RF) issued by the Global Risk Management Institute; or (EE) 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; (ii) (I) has at least 7 years of experience in risk financing, claims administration, loss prevention, risk and insurance coverage analysis, or purchasing commercial lines of insurance; and (II) has any 1 of the designations specified in subitems (AA) through (EE) of clause (i) (II)(bb); (iii) has at least 10 years of experience in risk financing, claims administration, loss prevention, risk and insurance coverage analysis, or purchasing commercial lines of insurance; or (iv) has a graduate degree from an accredited college or university in risk management, business administration, finance, economics, or any other field determined by a State insurance commissioner or other State regulatory official or entity to demonstrate minimum competence in risk management. Surplus lines broker (NRRA 527(15) (15 U.S.C. 8026(15); see 24-A M.R.S.A. 2003(1)): 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. State (NRRA 527(16) (15 U.S.C. 8026(16)): 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.

184 Bulletin 378 : Bureau of Insurance Page 6 of 6 7/31/ Dodd-Frank Act, Title V, Subtitle B ( 511 et seq.). The provisions regulating the nonadmitted insurance market, NRRA & 527, are codified at 15 U.S.C P.L. 2011, ch. 331 (L.D. 1352). 3 With the exception of the provision of the Maine Implementation Act authorizing the State Tax Assessor to enter into a multistate tax allocation agreement, which took effect on June 14, NRRA 521(a) (15 U.S.C. 8201(a)); 36 M.R.S.A. 2531(1) (effective July 21, 2011). 5 NRRA 522(a) & (b) (15 U.S.C. 8201(a) & (b)); 24-A M.R.S.A A (effective July 21, 2011). 6 NRRA 527(9) (15 U.S.C. 8206(9)); 24-A M.R.S.A. 2003(8) (effective July 21, 2011). 7 NRRA 522(d) (15 U.S.C. 8202(d)) A M.R.S.A A(1); 39-A M.R.S.A. 102(19) & 403(10) (11); Bureau of Insurance Rule NRRA 522 (15 U.S.C. 8202) A M.R.S.A. 2016(2) (repealed July 21, 2011) M.R.S.A (as amended effective July 21, 2011). 12 P.L. 2011, ch. 331, A M.R.S.A (repealed July 21, 2011); 36 M.R.S.A & 2521-A M.R.S.A (as amended effective July 21, 2011) & 2531(effective July 21, 2011). 15 NRRA 521(b) & (c) (15 U.S.C. 8021(b) & (c)) M.R.S.A. 2532(2) (effective June 14, 2011). 17 NRRA 522(b) (15 U.S.C. 8022(b)). The NRRA uses the term broker in place of producer. 18 NRRA 523 (15 U.S.C. 8023) A M.R.S.A A(3) & 2004(4) A M.R.S.A A(3)(E) & 2003(6) (effective July 21, 2011) A M.R.S.A NRRA 524 (15 U.S.C. 8024). Last Updated: June 20, 2011

185 MARTIN O MALLEY Governor ANTHONY G. BROWN Lt. Governor THERESE M. GOLDSMITH Commissioner BETH SAMMIS KAREN STAKEM HORNIG Deputy Commissioners NEIL A. MILLER Associate Commissioner Examination and Auditing DATE: September 1, St. Paul Place, Suite 2700, Baltimore, Maryland Direct Dial: Fax: nmiller@mdinsurance.state.md.us TTY: MIA BULLETIN TO: All Insurers Eligible to Write Nonadmitted Insurance in Maryland and All Licensed Surplus Lines Brokers All Insureds Who Independently Procure Insurance with a Nonadmitted Insurer RE: Implementation of the Federal Nonadmitted Reinsurance Reform Act in Maryland Changes to the Nonadmitted Insurance Laws The purpose of this Bulletin is to outline nationwide regulatory changes that will affect the placement of nonadmitted insurance on Maryland risks. One of the components of last year s Dodd-Frank Wall Street Reform and Consumer Protection Act is the Nonadmitted and Reinsurance Reform Act of 2010 ( NRRA ), 1 which established federal standards for surplus lines coverage and other nonadmitted insurance. On May 19, 2011, Governor O Malley signed into law Chapters 520 and 521, Acts 2011, which provide for the implementation of the NRRA in Maryland and conform Maryland s nonadmitted insurance laws to federal law. Chapters 520 and 521 took effect July 1, The NRRA provides that only an insured s Home State may require the payment of premium tax for nonadmitted insurance. 3 Moreover, the NRRA subjects the placement of nonadmitted insurance solely to the statutory and regulatory requirements of the insured s Home 1 Congress enacted the NRRA last year as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, (Title V, Subtitle B, 511 et seq.) The provisions regulating the nonadmitted insurance market, NRRA & 527, are codified at 15 U.S.C Please note that all subsequent footnotes in this Bulletin which cite to statutory provision in the Insurance Article, Annotated Code of Maryland, are citing to the provisions as they were amended by Chapters 520 and 521, Acts NRRA 521(a) (15 U.S.C. 8201(a)). 1

186 State, and provides that only the insured s Home State may require a surplus lines broker to be licensed to sell, solicit, or negotiate nonadmitted insurance with respect to that insured. 4 Key definitions from the NRRA are included in the Appendix to this Bulletin. What is the scope of the NRRA? Nonadmitted insurance, as defined in the NRRA, includes both surplus lines and independently procured insurance, but is restricted to property and casualty insurance. 5 In addition, the NRRA does not preempt state laws restricting workers compensation insurance or excess workers compensation insurance for self-funded plans to be placed in the admitted market. 6 The NRRA does not expand the scope of the kinds of insurance that an insurer may write in the nonadmitted insurance market, and each state continues to determine which kinds of insurance an insurer may write in that state. Although the NRRA preempts certain state laws with respect to nonadmitted insurance, it does not have any impact on insurance on Maryland risks offered by insurers licensed or authorized in Maryland. When is Maryland the insured s Home State for purposes of a particular placement? If Maryland is considered the insured s Home State, only Maryland s requirements regarding the placement of nonadmitted business will apply. 7 Maryland is the insured s Home State if the insured maintains its principal place of business in Maryland or, in the case of an individual, the individual s principal residence is Maryland. However, if 100% of the insured risk is located outside Maryland, the insured s Home State is the state to which the greatest percentage of the insured s taxable premium for that insurance contract is allocated. 8 If more than one insured from an affiliated group are named insureds on a single nonadmitted insurance contract, and the insureds have different Home States, Maryland will be considered the Home State for that contract if Maryland is the Home State of the insured that has the largest percentage of premium attributed to it under the insurance contract. How will these rules be applied? New and renewal policies with an effective date before July 21, 2011 will be subject to the laws and regulations of Maryland and other jurisdictions, as applicable, as of the policy effective date. The laws and regulations of Maryland and other jurisdictions, as applicable, as of the effective date of any such policy will also apply to any modification to that policy during the policy period, such as all endorsements, installment payments, and premium audits. New and renewal policies with an effective date on or after July 21, 2011, and any modifications thereto, 4 NRRA 522(a), (b) (15 U.S.C. 8202(a), (b)). 5 NRRA 527(9) (15 U.S.C. 8206(9)). 6 NRRA 522 (d) (15 U.S.C. 8202(d)). 7 NRRA 522(a) (15 U.S.C. 8202(a)). See 3-324(i) of the Insurance Article, Annotated Code of Maryland. 8 See definition of Home State at NRRA 527(6) (15 U.S.C. 8206(6) and 3-301(e) of the Insurance Article, Annotated Code of Maryland. 2

187 will be subject only to the laws and regulations of Maryland if Maryland is the Home State of the insured. What are the requirements for premium tax allocation and payment in Maryland? Until July 21, 2011, the laws and regulations of Maryland and other jurisdictions, as applicable, will continue to apply to premium tax due on multi-state placements. Under current Maryland law, only the portion of the premium attributable to Maryland risk is subject to Maryland s premium receipts tax, and this applies whether or not Maryland is the insured s Home State. For policies effective on or after July 21, 2011, if Maryland is the insured s home state the entire premium is subject to Maryland s premium receipts tax. 9 The Administration will provide additional information regarding the process for paying premiums receipts taxes in a future bulletin. What are the license requirements for surplus lines brokers? Only the insured s Home State may require a surplus lines broker to be licensed to sell, solicit, or negotiate nonadmitted insurance with respect to a particular contract. 10 If Maryland is the insured s Home State, the surplus lines broker must be licensed in Maryland. 11 The NRRA provides that Maryland may not collect licensing fees for surplus lines brokers on or after July 21, 2012, unless Maryland participates in the NAIC s national insurance broker database or any other equivalent uniform national database. 12 Maryland complies with this requirement by participating in the National Insurance Producer Registry (NIPR). 13 Consequently, Maryland will continue to impose licensing fees upon surplus lines brokers. What are the requirements for a diligent search and when is a diligent search not required? The procurement procedures for surplus lines insurance are set forth in Sections to of the Insurance Article. On or after July 21, 2011, the NRRA provides that a surplus lines broker seeking to procure or place nonadmitted insurance on behalf of an exempt commercial purchaser is not required to perform a diligent search if: 1) the broker has disclosed to the exempt commercial purchaser that insurance that may or may not be available from the admitted market that may provide greater protection with more regulatory oversight; and 2) the exempt commercial purchaser has subsequently requested in writing for the broker to procure or place the insurance from a nonadmitted insurer. 14 Chapters 520 and 521, Acts 2011, conform Maryland law to these 9 Sections 3-324(d) and 4-209(b)(3) of the Insurance Article, Annotated Code of Maryland. 10 NRRA 522 (b) (15 U.S.C. 8022(b)). 11 Section of the Insurance Article, Annotated Code of Maryland. 12 NRRA 523 (15 U.S.C. 8203). 13 Section 3-306(d) of the Insurance Article, Annotated Code of Maryland. 14 NRRA 525 (15 U.S.C. 8205). 3

188 provisions and incorporate by reference the NRRA s definition of exempt commercial purchaser. 15 What are the eligibility requirements for nonadmitted insurers? The NRRA restricts the eligibility requirements a state may impose on nonadmitted insurers. For nonadmitted insurers domiciled in the United States, state eligibility requirements must be in conformance with the financial criteria of the NAIC s Nonadmitted Insurance Model Act. 16 Chapters 520 and 521, Acts 2011, conform the provisions under which the Commissioner may approve insurers domiciled in the United States as surplus lines insurers to that criteria. 17 For nonadmitted insurers domiciled outside the United States, a producer may place business with such insurers provided the insurer is listed on the Quarterly Listing of Alien Insurers maintained by the International Insurers Department of the NAIC. Any questions about this bulletin should be directed to Neil A. Miller, Associate Commissioner, Examination and Auditing, at (410) THERESE GOLDSMITH INSURANCE COMMISSIONER By: Signature on Original Document_ Neil A. Miller Associate Commissioner Examination and Auditing 15 Sections (d) and 3-301(d) of the Insurance Article, Annotated Code of Maryland. 16 NRRA 524 (15 U.S.C. 8204). 17 Section of the Insurance Article, Annotated Code of Maryland. 4

189 Appendix: Key Definitions from the NRRA The NRRA includes several definitions relevant to this State s implementation of its requirements. Key definitions include the following: Exempt commercial purchaser (NRRA 527(5) (15 U.S.C. 8206(5)): The term exempt commercial purchaser means any person purchasing commercial insurance that, at the time of placement, meets the following requirements: (A) The person employs or retains a qualified risk manager to negotiate insurance coverage. (B) The person has paid aggregate nationwide commercial property and casualty insurance premiums in excess of $100,000 in the immediately preceding 12 months. (C) (i) The person meets at least one of the following criteria: (I) The person possesses a net worth in excess of $20,000,000, as such amount is adjusted pursuant to clause (ii). (II) The person generates annual revenues in excess of $50,000,000, as such amount is adjusted pursuant to clause (ii). (III) The person employs more than 500 full-time or full-time equivalent employees per individual insured or is a member of an affiliated group employing more than 1,000 employees in the aggregate. (IV) The person is a not-for-profit organization or public entity generating annual budgeted expenditures of at least $30,000,000, as such amount is adjusted pursuant to clause (ii). (V) The person is a municipality with a population in excess of 50,000 persons. (ii) Effective on the fifth January 1 occurring after the date of the enactment of this subtitle and each fifth January 1 occurring thereafter, the amounts in subclauses (I), (II), and (IV) of clause (i) shall be adjusted to reflect the percentage change for such 5-year period in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the Department of Labor. Home State (NRRA 527(6) (15 U.S.C. 8206(6)): (A) In General. Except as provided in subparagraph (B), the term Home State means, with respect to an insured (i) the State in which an insured maintains its principal place of business or, in the case of an individual, the individual s principal residence; or (ii) if 100 percent of the insured risk is located out of the State referred to in clause (i), the State to which the greatest percentage of the insured s taxable premium for that insurance contract is allocated. 5

190 (B) Affiliated Groups. If more than one insured from an affiliated group are named insureds on a single nonadmitted insurance contract, the term Home State means the Home State, as determined pursuant to subparagraph (A), of the member of the affiliated group that has the largest percentage of premium attributed to it under such insurance contract. Independently procured insurance (NRRA 527(7) (15 U.S.C. 8206(7)): The term independently procured insurance means insurance procured directly by an insured from a nonadmitted insurer. Nonadmitted insurance (NRRA 527(9) (15 U.S.C. 8206(9)): 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. Nonadmitted insurer (NRRA 527(11) (15 U.S.C. 8206(11)): The term nonadmitted insurer (A) means, with respect to a State, an insurer not licensed to engage in the business of insurance in such State; but (B) does not include a risk retention group, as that term is defined in section 2(a)(4) of the Liability Risk Retention Act of 1986 (15 U.S.C. 3901(a)(4)). Premium tax (NRRA 527(12) (15 U.S.C. 8206(12)): 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 government entity directly or indirectly 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. Qualified risk manager (NRRA 527(13) (15 U.S.C. 8206(13)): The term qualified risk manager means, with respect to a policyholder of commercial insurance, a person who meets all of the following requirements: (A) The person is an employee of, or third-party consultant retained by, the commercial policyholder. (B) The person provides skilled services in loss prevention, loss reduction, or risk and insurance coverage analysis, and purchase of insurance. (C) The person (i) (I) has a bachelor s degree or higher from an accredited college or university in risk management, business administration, finance, economics, or any other field determined by a State insurance commissioner or other State regulatory official or entity to demonstrate minimum competence in risk management; and (II) (aa) has 3 years of experience in risk financing, claims administration, loss prevention, risk and insurance analysis, or purchasing commercial lines of insurance; or 6

191 (bb) has (AA) a designation as a Chartered Property and Casualty Underwriter (in this subparagraph referred to as CPCU ) issued by the American Institute for CPCU/Insurance Institute of America; (BB) a designation as an Associate in Risk Management (ARM) issued by the American Institute for CPCU/Insurance Institute of America; (CC) a designation as Certified Risk Manager (CRM) issued by the National Alliance for Insurance Education & Research; (DD) a designation as a RIMS Fellow (RF) issued by the Global Risk Management Institute; or (EE) 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; (ii) (I) has at least seven years of experience in risk financing, claims administration, loss prevention, risk and insurance coverage analysis, or purchasing commercial lines of insurance; and (II) has any one of the designations specified in subitems (AA) through (EE) of clause (i)(ii)(bb); (iii) has at least 10 years of experience in risk financing, claims administration, loss prevention, risk and insurance coverage analysis, or purchasing commercial lines of insurance; or (iv) has a graduate degree from an accredited college or university in risk management, business administration, finance, economics, or any other field determined by a State insurance commissioner or other State regulatory official or entity to demonstrate minimum competence in risk management. Surplus lines broker (NRRA 527(15) (15 U.S.C. 8206(15)): 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. State (NRRA 527(16) (15 U.S.C. 820(16)): 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. 7

192 MARTIN O MALLEY Governor ANTHONY G. BROWN Lt. Governor THERESE M. GOLDSMITH Commissioner KAREN STAKEM HORNIG Deputy Commissioner NEIL A. MILLER Associate Commissioner Examination and Auditing DATE: November 9, St. Paul Place, Suite 2700, Baltimore, Maryland Direct Dial: Fax: nmiller@mdinsurance.state.md.us TTY: MIA BULLETIN TO: All Insurers Eligible to Write Nonadmitted Insurance in Maryland and All Licensed Surplus Lines Brokers All Insureds Who Independently Procure Insurance with a Nonadmitted Insurer RE: Revised Procedures to the Payment of Premium Receipts Tax on Nonadmitted Insurance in Maryland On May 19, 2011, Governor O Malley signed into law Chapters 520 and 521, Acts 2011, which provide for the implementation of the Nonadmitted and Reinsurance Reform Act of 2010 ( NRRA ) 1 in Maryland and conform Maryland s nonadmitted insurance laws to federal law. Chapters 520 and 521 took effect July 1, On September 1, 2011, the Maryland Insurance Administration issued MIA Bulletin entitled Implementation of the Federal Nonadmitted Reinsurance Reform Act in Maryland. That Bulletin outlined nationwide regulatory changes made under the NRRA that will affect the placement of nonadmitted insurance on Maryland risks. The purpose of this Bulletin is to provide additional information regarding the process for paying premium receipts taxes on nonadmitted insurance placements under these new laws. 2 One of the most significant provisions of the NRRA is the way nonadmitted insurance premiums are to be allocated between states for reporting and tax purposes. While premiums for placements where the risk is located entirely within Maryland continue to be allocated entirely to Maryland for reporting and tax purposes, effective July 21, 2011, the allocation of premiums on 1 Congress enacted the NRRA last year as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Title V, Subtitle B, 511 et seq.). The provisions regulating the nonadmitted insurance market, NRRA & 527, are codified at 15 U.S.C Nonadmitted insurance, as defined in the NRRA, includes both surplus lines and independently procured insurance, but is restricted to property and casualty insurance. 1

193 multi-state placements changed. Until July 21, 2011, only the portion of the premium attributable to Maryland risk was allocated to Maryland, and this applied whether or not Maryland was the insured s Home State. 3 For policies effective on or after July 21, 2011, if Maryland is the insured s Home State the entire premium is allocated to Maryland. 4 The Administration has not made any changes to its reporting forms to reflect the change in how premiums on multi-state placements are allocated between states. However, it is expected that surplus lines brokers and persons independently procuring insurance with a nonadmitted insurer will properly allocate premiums and remit the appropriate taxes to Maryland under the laws in effect on the policy effective dates. Additional Reporting Guidance - Surplus Lines Brokers In accordance with Title 3, Subtitle 3 of the Insurance Article of the Annotated Code of Maryland, surplus lines brokers are required to make periodic filings with the Administration related to their surplus lines business, and to remit to the Administration the premium receipts taxes they collected on that business. The Administration will not be making any significant changes to its reporting forms and tax payment processes at this time. However, the Administration has made certain changes to make these processes more efficient, as follows: We have revised the filing instructions on our web site. Please see these revised instructions at: We are asking all surplus lines brokers to file their Quarterly Affidavits and Premium Receipts Tax Reports electronically rather than in paper form; We have added a schedule to the Surplus Lines Quarterly Report to allow reporting of Tax Exempt Premiums (i.e., premiums on risks of the Federal Government, State or political subdivision of Maryland); and 3 The NRRA defines Home State as: (A) In General. Except as provided in subparagraph (B), the term Home State means, with respect to an insured (i) the State in which an insured maintains its principal place of business or, in the case of an individual, the individual s principal residence; or (ii) if 100 percent of the insured risk is located out of the State referred to in clause (i), the State to which the greatest percentage of the insured s taxable premium for that insurance contract is allocated. (B) Affiliated Groups. If more than one insured from an affiliated group are named insureds on a single nonadmitted insurance contract, the term Home State means the Home State, as determined pursuant to subparagraph (A), of the member of the affiliated group that has the largest percentage of premium attributed to it under such insurance contract. (NRRA 527(6) (15 U.S.C. 8206(6)). 4 Sections 3-324(d) and (e) and 4-209(b)(3) of the Insurance Article, Annotated Code of Maryland. 2

194 We have implemented a new Surplus Lines Tax Payment Voucher to be attached to premium receipts tax payments. These forms will allow us to quickly apply tax payments to the proper accounts. Additional Reporting Guidance Persons Independently Procuring Insurance In accordance with Title 4, Subtitle 2 of the Insurance Article, each insured that procures or causes to be procured insurance with a nonadmitted insurance company, other that surplus lines insurance, is required to file with the Administration a report on the insurance procured and remit to the Administration the premium receipts taxes due on that insurance. Chapters 520 and 521 significantly changed the reporting and tax payment deadlines for these procurements. In order to assist insureds in meeting these requirements, we have posted filing instructions on our web site. Linked to those instructions is a revised Report of Independently Procured Insurance with Unauthorized Insurer form to be used in reporting this business. Please see these instructions at: Any questions about this bulletin should be directed to Neil A. Miller, Associate Commissioner, Examination and Auditing, at (410) THERESE M. GOLDSMITH INSURANCE COMMISSIONER By: Signature on original Neil A. Miller Associate Commissioner Examination and Auditing 3

195 Maryland Register Issue Date: February 10, 2012 Volume 39 Issue 3 Pages Title 31 MARYLAND INSURANCE ADMINISTRATION Subtitle 03 INSURANCE PRODUCERS AND OTHER INSURANCE PROFESSIONALS Surplus Lines Authority: Insurance Article, 2-109, 3-304, 3-306, 3-307, , and 3-325(c), Annotated Code of Maryland Notice of Final Action [ F] On January 17, 2012, the Insurance Commissioner adopted amendments to Regulations ,.05,.06,.10, and.11 under COMAR Surplus Lines. This action, which was proposed for adoption in 38:25 Md. R (December 2, 2011), has been adopted as proposed. Effective Date: February 20, THERESE M. GOLDSMITH Insurance Commissioner

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198 Nonadmitted and Reinsurance Reform Act of 2010 FAQs Page 1 of 4 8/6/2012 Nonadmitted and Reinsurance Reform Act of 2010 FAQs July 30, 2012 FAQ s Effective July 21, 2011 the Nonadmitted and Reinsurance Reform Act of 2010 (NRRA) provides that only an insured s Home State may require the payment of premium tax for surplus lines insurance. The NRRA subjects the placement of surplus lines insurance solely to the statutory and regulatory requirements of the insured s Home State. Therefore, the NRRA mandates that only the insured s Home State may require a surplus lines broker to be licensed to sell, solicit, or negotiate surplus lines insurance with respect to such insured. What is the scope of the NRRA? The NRRA does not apply to Foreign Risk Retention and Purchasing Groups. These entities fall under the Federal Liability Risk Retention Act of 1986 and Chapter 18 of the Michigan Insurance Code. If a purchasing group buys a multi-state policy from a non-admitted insurance company, directly or through a surplus lines broker, the purchasing group is required to pay surplus lines taxes to the State of Michigan for the Michigan risks within 30 days of the policy effective date on the Michigan surplus lines tax form FIS 0255 Report of Insurance Purchased From an Unauthorized Insurer. Foreign risk retention groups quarterly pay surplus lines tax to the State of Michigan for business placed in Michigan, directly or through a surplus lines broker, within 30 days of the end of each quarter on the FIS 0260 Report of Risk Retention Group Premium and Tax. What is the insured s Home State for purposes of a particular placement? Michigan is the insured s Home State if the insured maintains its principal place of business in Michigan or An individual s principal place of residence is located in Michigan. If 100% of the insured risk is located outside of Michigan, then the insured s Home State is the State to which the greatest percentage of the insured s taxable premium for that insurance contract is

199 Nonadmitted and Reinsurance Reform Act of 2010 FAQs Page 2 of 4 8/6/2012 allocated. If more than one insured from an affiliate group are named insureds on a single nonadmitted insurance placement, Michigan will be considered the Home State for that placement if Michigan is the Home State of the member of the affiliated group that has the largest percentage of premium attributed to it under such insurance contract. How will these rules be applied? New and renewal policies as well as any modifications to the original policy e.g. endorsements, installment payments, premium audits with an effective date prior to July 21, 2011 will be subject to the laws and regulations of Michigan as of the policy effective date. New and renewal policies with an effective date on or after July 21, 2011 and any modifications to the original policy will be subject only to Michigan laws and regulations if Michigan is the Home State of the insured. What are the requirements for premium tax allocation and payment in Michigan? Only the insured s Home State may require a surplus lines broker to be licensed to sell, solicit, or negotiate surplus lines insurance with respect to a particular placement. The laws and regulations of Michigan will continue to apply to premium reporting and premium tax due on multi-state placements until July 21, It is the intent of the Office of Financial and Insurance Regulation to post additional information on its website if and when Michigan begins participating in a multistate clearinghouse or tax sharing arrangement. Until July 21, 2011, Michigan's combined tax rate should be applied to new and renewal policies. On or after July 21, 2011, when Michigan is the insured's Home State 100% of the tax should be paid to Michigan. What are the license requirements for brokers?

200 Nonadmitted and Reinsurance Reform Act of 2010 FAQs Page 3 of 4 8/6/2012 If Michigan is the insured s Home State, the surplus lines broker must be licensed in Michigan. Michigan participates in the NAIC national producer database (PDB) for surplus lines brokers original licensure and renewals, and is therefore able to collect any associated fees. When are the requirements for a diligent search and when is a diligent search not required? All Michigan diligent search requirements remain in effect as required by MCL with the exception of placing insurance for an exempt commercial purchaser (ECP) as defined by the NRRA. Effective July 21, 2011 a surplus lines licensee seeking to procure or place surplus lines insurance on behalf of a ECP is not required to perform a diligent search if: the licensee has disclosed to the ECP that insurance may or may not be available from the admitted market that may provide greater protection with more regulatory oversight. the ECP has subsequently requested in writing that the licensee procure or place such insurance from a surplus lines insurer. What are the eligibility requirements for surplus lines insurers? Surplus lines insurers domiciled in a U.S. jurisdiction - A surplus lines licensee is permitted to place insurance with such insurers provided that: they are approved to write such business in their State of domicile. they maintain a minimum capital and surplus of $15 million or the minimum capital and surplus amount required in a State. Surplus Lines insurers domiciled outside the U.S. jurisdiction - A surplus lines licensee is permitted to place insurance with such insurers provided that: The insurer is listed on the Quarterly Listing of Alien Insurers Maintained by the International Insurers Department of the

201 Nonadmitted and Reinsurance Reform Act of 2010 FAQs Page 4 of 4 8/6/2012 NAIC. The NAIC Quarterly Listing is available for purchase from the NAIC Both foreign and alien insurers must submit a completed application and fee to OFIR. What are the key definitions from the NRRA? Please refer to the NRRA: The answers provided are not meant to be a substitute for legal advice.

202 June 7, 2011 Surplus Lines Association of Minnesota Post Office Box 86 Mora, Minnesota Phone: Fax: Bulletin 6_07_11 To: All MN Surplus Lines Licensees Subject: Changes to MN Surplus Lines Statutes for 2011 MN Senate File 1045 was signed into law by the governor on May 27, Sections of the bill that apply to Surplus Lines Insurance will become effective July 21, Revisions to the MN Surplus Lines Insurance Act are the result of a conformity measure with the Federal Nonadmitted and Reinsurance Reform Act of 2010 (NRRA). Six key NRRA provisions addressed by SF 1045 as follows: 1. Placement of Nonadmitted Insurance is subject to the statute and regulation of the insured s home state only. Section 9 and section 30 (amending and moving the language of 60A.19, subd. 8 to 60A.198, subd. 7) Section 11 (amending language of 60A.198 subd. 2) 2. Surplus lines brokers are only required to be licensed in the insured s home state. This applies to both single and multistate risks. Section 11 (amending language of 60A.198 subd. 2) 3. States may not collect fees related to the licensing of surplus lines brokers unless the state has laws or regulations that provide for participation in the NAIC national insurance producer database for licensure of surplus lines brokers by July Section 11 (amending language of 60A.198 subd. 7) 4. States may only impose eligibility requirements for nonadmitted insurers domiciled in a US jurisdiction as follows: a. The insurer must be authorized to write the type of insurance in its domiciliary state and Either have minimum capital and surplus of $15 million or the requirements of the state whichever is greater Or minimum capital and surplus of no less than $4.5 million upon affirmative finding of acceptability by the commissioner. Section 20 (amending language of 60A.206 subd. 3) 5. States may not prohibit surplus lines brokers from placing nonadmitted insurance with a nonadmitted insurer domiciled outside the US that is listed on the Quarterly listing of alien insurers as maintained by the NAIC. Section 20 (amending language of 60A.206 subd. 3)

203 6. Surplus lines brokers are not required to satisfy any state due diligence search provisions when placing nonadmitted insurance for an exempt commercial purchaser as defined in the NRRA. Provided that (1) the broker procuring or placing the nonadmitted insurance has disclosed to the exempt commercial purchaser that the insurance may or may not be available from a licensed insurer that may provide greater protection with more regulatory oversight; and (2) the exempt commercial purchaser has subsequently requested in writing for the broker to procure or place the insurance from a nonadmitted insurer. Section 13 (adding a new subdivision #5 to 60A.201) Additionally, SF 1045 updates MN Surplus Lines Insurance Act terms and definitions to be consistent with the terms and definitions used in the NRRA. Section 10 (Update to definitions under 60A.196) Sections 9 and 11 through 29 contain changes to terms used to reflect the updated definitions under section 10. A reference document including these sections of Senate File 1045 is posted on our website under the documents tab, bulletins category. Titled 2011 SF 1045 Reference. The purpose of this Bulletin is to summarize surplus lines related legislation enacted during the 2011 State Legislative Session. The association does not represent that this list is complete. It remains your duty to review new legislation. Please do not hesitate to contact us with any questions or concerns. Sincerely, Nicholas Schroeder Executive Director Surplus Lines Association of MN

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208 MISSISSIPPI INSURANCE DEPARTMENT BULLETIN July 19, 2011 NONADMITTED INSURANCE MULTISTATE AGREEMENT I. Purpose The Nonadmitted Insurance Multistate Agreement ("NIMA") was established on June 15, 2011, upon the agreement of the signatory states: Florida, Hawaii and Mississippi. Since that date, Connecticut, Louisiana and South Dakota have joined NIMA, and other states have indicated they will be joining shortly. A NIMA website has been established that will allow surplus lines insurance producers to verify if a state has joined NIMA: A link to this website may also be found on the homepage of the Mississippi Insurance Department's website. NIMA was established to meet the requirements set forth in the Nonadrnitted and Reinsurance Reform Act ("NRRA") which was passed by Congress and became law on July 21, 2010, and which has brought sweeping reforms to the United States surplus lines market. Pursuant to the NRRA, if the states failed to establish uniform procedures within 330 days of the passage of the NRRA, which was June 15, 2011, then the premium tmces and fees due from surplus lines policies for multi-state risks would only be received by the home state of the insured. In order to comply with the NRRA in establishing uniform procedures for the reporting, payment, collection and allocation of surplus lines tmces and fees, NIMA was established to allow the Participating States to collect and allocate premium tmces and fees through a central clearinghouse where a multi-state risk is involved. The adoption of NIMA meets the federal requirement of uniformity, and allows the participating states to continue to receive their portion of premium taxes and fees due from multi-state surplus lines policies. The provisions of the NRRA are effective on July 21, The Mississippi Insurance Department ("Department") is issuing this Bulletin to provide surplus lines insurance producers with guidance concerning the reporting, payment, collection and allocation of taxes and fees for multistate policies pursuant to the procedures set forth in NIMA. II. Purposes of NIMA The purposes ofnima, by and through the joint action of the Participating States, are to: 1. Facilitate the payment and allocation of premium tmces on nonadmitted insurance for multi-state risks among the participating states in accordance with the premium tmc allocation method and formula contained in NIMA; 2. Require nationwide uniform requirements, forms and procedures which facilitate the reporting, payment, collection and allocation of premium taxes for nonadrnitted insurance for multi-state risks as contemplated by the NRRA; 3. Coordinate reporting of premium taxes and transaction data on multi-state risks among Participating States; and, 4. Establish a Clearinghouse to facilitate the receipt and distribution of premium taxes and transaction data related to nonadrnitted insurance of multi-state risks.

209 For the purposes of this Bulletin, a state that has signed NIMA shall be referred to as a Participating State. Ill. Clearinghouse NIMA requires that a Clearinghouse be established that will collect, reconcile and allocate the appropriate amount of taxes and fees among the participating states. At this time, a vendor has not been selected to operate the Clearinghouse. NIMA Participating States hope to have a Clearinghouse operating by the time the initial quarterly payments are due on November 15, The status of the Clearinghouse will be provided to surplus lines insurance producers by subsequent Bulletin(s). The tax provisions of NIMA will be effective for Mississippi on July 21, 2011, which is the same effective date as the "home state" tax and compliance provisions of the NRRA. Other current Participating States may designate July 1, 2011, as the effective date of the tax provisions of NIMA. Surplus lines insurance producers should check with the NIMA website or with a particular Participating State to verify the correct effective date for that Participating State. There will be a Transition Period from the effective date of the tax provisions of NIMA until the Clearinghouse is operational. Surplus lines insurance producers are directed to begin collecting the participating states' taxes and fees pursuant to the NIMA allocation schedule on and after the date the tax provisions of NIMA become effective, and to hold those collections until such time as the Clearinghouse is operational. When the Clearinghouse is operational, surplus lines insurance producers will be given further instructions as to the reporting and payment of the collected taxes and fees. IV. Premium Tax and Fee Collection under NIMA. NIMA establishes an allocation schedule to govern the method of tax allocation for multi-state risks. A copy of the allocation schedule is attached hereto as Attachment 1. Pursuant to the allocation schedule, a surplus lines insurance producer will allocate the portion of premium due to each state. Each participating state agrees to require the payment of taxes, fees and assessments when the participating state is the home state, as follows: 1. Portion of premium allocated to the home state pursuant to the Allocation Schedule; 2. Portion of premium allocated to the participating state(s) based on the portion of the premium allocated to each Participating State pursuant to the Allocation Schedule; 3. Portion of premium that remains, which will be allocated to the home state. V. Calculation of Taxes and Fees Each participating state is required to provide a blended rate to be used to calculate the taxes, fees and assessments owed to that state. The blended rate for the NIMA states is included in the NIMA Reporting Form and Tax Allocations form attached hereto as Attachment 2. When other states join NIMA, surplus lines insurance producers will be notified of the new participating state's blended rate.

210 Under NIMA, the premium tax and fee to be collected is determined by the following formula: Tax Allocation= (Net tax due to each State/net tax due to all States) x Amount collected Home State Net Taxes = (Taxes collected for the Home State+ Taxes due from other Participating States) - Taxes owed to other Participating States Total Premium Tax to be Collected on Each Multi-State Policy = (Home State's tax rate x Portion of premium allocated to Home State)+ (Home State's tax rate x Premium allocated to Non-Participating State if insurer is nonadmitted in that State) + (Participating States' tax rate x Premium allocated to each Participating State if insurer is nonadmitted in that state) For the purposes of this Bulletin, the following scenario is provided as an example of how an allocation would be made under NIMA on or after July 21, A multi-state policy is issued where State A is the home state and part of the risk resides also in State B and State C. State A and State B are Participating States in NIMA; State C is not. Using the Allocation Schedule, the surplus lines insurance producer would determine the portion of premium allocated to State A, the home state. The surplus lines insurance producer would determine the portion of premium allocated to State B, a Participating State. As State C is not a Participating State nor is it the home state, its portion would be allocated to State A, the home state. The allocation to State A and State B would then be calculated using each Participating State's blended rate of taxes and fees. VI. Contact Information The Department is aware that this transition pursuant to the NRRA and NIMA will be difficult and there will be many issues and questions that will need to be addressed. We urge surplus lines insurance producers or eligible surplus lines companies that have any questions concerning the provisions of the NRRA, NIMA or this Bulletin to contact the Department at (601)

211 ATTACHMENT 1 NONADMITTED INSURANCE PREMIUM TAX ALLOCATION SCHEDULE THIS ATTACHMENT SETS FORTH THE PROVISIONS GOVERNING THE METHOD OF TAX ALLOCATION FOR MULTI-STATE RISKS, AS SPECIFIED IN PART III. IF THE ALLOCATION SCHEDULE DOES NOT IDENTIFY A CLASSIFICATION APPROPRIATE TO THE PROPERTY OR RISK BEING INSURED, THEN THE SURPLUS LINES LICENSEE, OR AN INSURED WHO INDEPENDENTLY PROCURES INSURANCE, CONSISTENTLY SHALL USE AN ALTERNATIVE METHOD OF EQUITABLE ALLOCATION ACROSS SIMILAR TYPES OF INSURANCE POLICIES AND CONTRACTS, AND SHALL MAINTAIN FOR AT LEAST FNE YEARS, DOCUMENTED EVIDENCE OF THE BASES AND OTHER CRITERIA USED BY THE SURPLUS LINES LICENSEE OR INSURED WHO INDEPENDENTLY PROCURES INSURANCE IN ORDER TO SUBSTANTIATE THE METHOD. Exposure Allocation Methodology Property All Property unless more specifically described elsewhere Includes both real and personal property, glass, crop, animals, residual value Aviation Boiler & Machinery Inland Marine Inland Marine Motor Vehicle Physical Damage All Risk including Leakage of Sprinklers, Explosion, Riot & Civil Commotion, Earthquake, Blank et Form, Water Damage, Business Inte1ruption, Time Element or similar time value coverage, Fire and Excess of Loss Physical Damage, All others Direct, Consequential, Engine & Machinery, All others Fine Arts Dealers, Jewelers Block, Furriers Block, Business & Personal Floater, Builders Risk, All Other non appearance & abandonment Motor Truck Cargo TIV (TIV~ PD+ BI) Total Insured Value ~Physical Damage + Business Interruption TIV TIV TIV Garage Location TIV of motor vehicles principally garaged or principally used in states Casualty General Liability I Umbrella I Excess Liability Manufacturers and Contractors payroll in state

212 . M.;-.. a3or.... : : C over:ai:.e-'... '"' _;_ Coverage -_, -- -_-:-:< Type. :._, ,.--- Premises Operations,' , _.,, *Aifooatlqfl B.asis by State. : _ - _ ', - :-.' ', ;_ -~ , ; --- square footage of pren1ises in state Owners and Contractors Protective cost of contract in state Products sales in state Completed Operations receipts in state child care number of children in state contractual recreational if "stand alone" policy, value of sales in state amount of gate receipts in state special events number of events in state Errors & Omissions (E&O) I Professional Liability Medical Malpractice professional liability Includes medical malpractice for individual healthcare providers or facilities, i.e. hospitals, nursing homes, psychiatric centers number of insureds in state Revenues (receipts) or number of professionals by state Revenues (receipts), number of professionals or bed count by state casualty (cont'd) Marine Aviation Financial Risk Employment Practices Liability (EPLI) Muoicipalities, Public Authorities and other Political Subdivisions Environmental Impairment Asbestos Abatement Employee/Member Benefit Program Motor Vehicle Railroad Protective Vessels All other property Aircraft Directors and Officers Liability SEC Liability Kidnap & Ransom Excess SIPC Mortgage Impairment EPLI for all industries automobile liability, excess automobile liability Non-Owned Aircraft, Aircraft Liability General Partnership Liability Unauthorized Trading Headcount by state Number of municipalities, etc. Number of units of exposure Payroll Number of employees/members Number of motor vehicles principally garaged or principally used in states Miles of track in state Principal Berthing location TIV riangar location Revenue generated in state Revenue generated in state Employees Revenue generated in state TIV Financial Risk (cont'd) Patent Infringement Securities Media Liability service contracts/warranties Mail Revenue generated in state TIV TIV Revenue generated in state

213 t\fajor,;,~.. - QVera :'.--~<,, Coverage Type ~-~: ::----~- C :-,.:c'o:o -,_' ~:-.-~-: :.::i-~'~ :_J_'.'\\:: :_;_,. 1 -_- - ~ -: ---- ; ; _ -.. c '< -'.-:>. :_ ,-_.- -,_ :- ; "' :\'' _- >:--:_::-_ :~ '--:-c ---:-< 'A1lo.catiOiIBasis;h.YState _>'--<.. > Tax Opinion Guarantee Revenue generated in state Intellectual Prope11y Revenue generated in state C1ime Crime Blanket Crime, Fidelity Employee count Bond, Individual Bond, Employee Dishonesty, Forgery, Theft, Robbe1y, Burglary, Fraud Accident and Accident and Health Disease, Accidental Location of Employees or Health Injury or Death, Medical Corporate Headquarters Surgical expenses and income payments Credit Credit Value of insured debt in state Fidelity & Performance Bonds Total bond value of contracts Surety *U.S. Premium Only Other Surety Bonds in state Total bond value of contracts in state.

214 ATTACHMENT 2 NIMA Reporting Form and Tax Allocations Name: Mailing Address: Phone Number: Address: Is this an independently procured policy? (Yes I No ) Name: Mailing Address: State of Licensure: Phone Number: License Number: Address: Name: Mailing Address: Office Address: Phone Number: State of Licensure: License Number: Address: Name: Mailing Address: Phone Number: Address: Insured Name: Policy Number/Binder Number if Policy Number is N/A: Home State of Insured: Effective Date: Expiration Date:

215 Insurer Name: Total Policy Premium by lnsurer(s): Coverage Code: Tax Status: Transaction Type (New, Renewal or Endorsement) Tax Allocation Method: PREMIUM ALLOCATION BY STATE AL: AK: AS: AZ.: AR: CA: CO: CT: DE: DC: FL: GA: GU: HI: ID: IL: IN: IA: KS: KY: LA: ME: MD: MA: Ml: MN: MS: MO: MT: NE: NV: NH: NJ: NM: NY: NC: ND: MP: OH: OK: OR: PA: PR: RI: SC: SD: TN: TX: UT: VT: VI: VA: WA: WV: WI: WY: TAX ALLOCATION BY STATE 1 Non-Participating State (The tax will be assessed at the blended tax rate of the insured's home state and remitted to that state) 2 Connecticut: blended tax rate= 4% 3 Florida: blended tax rate = 7% 4 Hawaii: blended tax rate= 4.68% 5 Louisiana: blended tax rate= 5% 6 Mississippi: blended tax rate= 9% 7 South Dakota: blended tax rate= contact state

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229 MSLA Bulletin April 20, 2011 TO ALL LICENSED RESIDENT AND NONRESIDENT SURPLUS LINES PRODUCERS, AND ALL FOREIGN AND ALIEN SURPLUS LINES CARRIERS Mississippi Surplus Lines Association 2630 Ridgewood Road, Suite D Jackson, MS fax RE: LEGISLATIVE CHANGES EFFECTING NONADMITTED POLICY FEES On March 11, 2011, the Mississippi Legislature passed House Bill 785. This bill was passed to conform Mississippi s surplus lines statutes to the requirements of the federal Nonadmitted and Reinsurance Reform Act ( NRRA ). The NRRA s goal was to make the surplus lines market more efficient and more uniform on a national basis. In order to satisfy the uniformity requirements of the NRRA, House Bill 785 extends the nonadmitted policy fee, or as it is commonly referred to, the Windpool Assessment Fee, [Miss. Code Ann (Supp. 2010)] to all surplus lines insurance policies written in Mississippi. Until the passage of House Bill 785, the nonadmitted policy fee was required only on real property and content risks. The 5% nonadmitted policy fee will now be imposed on nonadmitted insurance policies for any and all risks located within this state placed in the nonadmitted market. The imposition of this fee only applies to new or renewal policies; no midterm adjustments are required. The extension of the nonadmitted policy fee to all risks in the nonadmitted market became effective on March 11, The Department expects full systems compliance for the collection of this fee by June 1, In an effort to comply with House Bill 785, MSLA s functionality will be ready on June 1 st. MSLA is reprogramming the on-line filing system (SLIP) to assess the 5% nonadmitted policy fee to all risks - on all new and renewal policies - with a policy effective date of and later. Please note that the extension of the 5% nonadmitted policy fee assesses all premium AND fees (broker fees, etc). Endorsements to policies will not be assessed (under the new rule) in SLIP with an original policy effective date before Policy extensions extending the original term of the policy are considered renewals and not an endorsement of the original policy.

230 Continue to separate and send the MWUA Nonadmitted Policy Fee to the lockbox at the following address: Mississippi Windstorm Underwriting Association P.O. Box Jackson, MS Should you have questions, contact Peggy Dronet, with MSLA, at or at ANY FUTURE CHANGES ASSOCIATED WITH THE NRRA WILL BE ADDRESSED IN A SEPARATE BULLETIN FROM THE MISSISSIPPI INSURANCE DEPARTMENT.

231 INSURANCE BULLETIN To: All insurers eligible to write nonadmitted insurance in Missouri, all licensed surplus lines producers, and all insureds independently procuring nonadmitted insurance From: John M. Huff, Director Re: Implementation of federal Nonadmitted and Reinsurance Reform Act in Missouri This bulletin contains information that may be of interest to the persons to whom this bulletin is addressed. Although this bulletin refers to statutes, regulations or court decisions, this bulletin itself is not a statement of law or legal requirements. This bulletin is for informational purposes only. This bulletin outlines nationwide regulatory changes that will affect the placement of nonadmitted insurance in Missouri. The Nonadmitted and Reinsurance Reform Act of 2010 (NRRA), 15 U.S.C et seq., provides that only an insured s Home State may require the payment of premium tax for nonadmitted insurance. Moreover, the NRRA subjects the placement of nonadmitted insurance solely to the statutory and regulatory requirements of the insured s Home State, and provides that only the insured s Home State may require a surplus lines broker to be licensed to sell, solicit or negotiate nonadmitted insurance with respect to such insured. See 15 U.S.C. 8202(a), (b). Nonadmitted insurance, as defined in 15 U.S.C. 8206(9), applies only to property and casualty insurance (excluding workers compensation as provided in 15 U.S.C. 8202(d)). The NRRA becomes effective on July 21, For nonadmitted insurance business placed on or after July 21, 2011, the following information is provided for the benefit of insurers, self insured and producers: