Subtitle B-State-Based Insurance Reform
SEC. 511. SHORT TITLE.
This subtitle may be cited as the "Nonadmitted and Reinsurance
Reform Act of 2010".
SEC. 512. EFFECTIVE DATE.
Except as otherwise specifically provided in this subtitle, this
subtitle shall take effect upon the expiration of the 12-month period
beginning on the date of the enactment of this subtitle.
PART I—NONADMITTED INSURANCE
SEC. 521. REPORTING, PAYMENT,
AND ALLOCATION OF PREMIUM TAXES.
(a)
Home State's Exclusive Authority.—No State other than
the home State of an insured may require any premium tax payment
for nonadmitted insurance.
(b)
Allocation of Nonadmitted Premium Taxes.—
(1) In General.
—The States may enter into a compact
or otherwise establish procedures to allocate among the States
the premium taxes paid to an insured’s home State described
in subsection (a).
(2) Effective Date.
—Except as expressly otherwise provided
in such compact or other procedures, any such compact
or other procedures—
(A) if adopted on or before the expiration of the 330-
day period that begins on the date of the enactment of
this subtitle, shall apply to any premium taxes that, on
or after such date of enactment, are required to be paid
to any State that is subject to such compact or procedures;
and
(B) if adopted after the expiration of such 330-day
period, shall apply to any premium taxes that, on or after
January 1 of the first calendar year that begins after
the expiration of such 330-day period, are required to be
paid to any State that is subject to such compact or procedures.
(3) Report.
—Upon the expiration of the 330-day period
referred to in paragraph (2), the NAIC may submit a report
to the Committee on Financial Services and the Committee
on the Judiciary of the House of Representatives and the Committee
on Banking, Housing, and Urban Affairs of the Senate
identifying and describing any compact or other procedures
for allocation among the States of premium taxes that have
been adopted during such period by any States.
(4) Nationwide System.
—The Congress intends 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 nonadmitted insurance consistent with this section.
(c) Allocation Based
on Tax Allocation Report.—To facilitate
the payment of premium taxes among the States, an insured’s
home State may require surplus lines brokers and insureds who
have independently procured insurance to annually file tax allocation
reports with the insured’s home State detailing the portion
of the nonadmitted insurance policy premium or premiums attributable
to properties, risks, or exposures located in each State.
The filing of a nonadmitted insurance tax allocation report and
the payment of tax may be made by a person authorized by the
insured to act as its agent.
SEC. 522. REGULATION OF NONADMITTED INSURANCE
BY INSURED’S HOME STATE.
(a) Home State Authority.
—Except as otherwise provided
in this section, the placement of nonadmitted insurance shall be
subject to the statutory and regulatory requirements solely of the
insured’s home State.
(b) Broker Licensing.
—No State other than an insured’s home
State may require a surplus lines broker to be licensed in order
to sell, solicit, or negotiate nonadmitted insurance with respect
to such insured.
(c) Enforcement Provision.
—With respect to section 521 and
subsections (a) and (b) of this section, any law, regulation, provision,
or action of any State that applies or purports to apply to nonadmitted
insurance sold to, solicited by, or negotiated with an
insured whose home State is another State shall be preempted
with respect to such application.
(d) Workers’ Compensation Exception.
—This section may
not be construed to preempt any State law, rule, or regulation
that restricts the placement of workers’ compensation insurance
or excess insurance for self-funded workers’ compensation plans
with a nonadmitted insurer.
SEC. 523. PARTICIPATION IN NATIONAL
PRODUCER DATABASE.
After the expiration of the 2-year period beginning on the
date of the enactment of this subtitle, a State may not collect
any fees relating to licensing of an individual or entity as a surplus
lines broker in the State unless the State has in effect at such
time laws or regulations that provide for participation by the State
in the national insurance producer database of the NAIC, or any
other equivalent uniform national database, for the licensure of
surplus lines brokers and the renewal of such licenses.
SEC. 524. UNIFORM STANDARDS FOR SURPLUS
LINES ELIGIBILITY.
A State may not—
(1) impose eligibility requirements on, or otherwise establish
eligibility criteria for, nonadmitted insurers domiciled in
a United States jurisdiction, except in conformance with such
requirements and criteria in sections 5A(2) and 5C(2)(a) of
the Non-Admitted Insurance Model Act, unless the State has
adopted nationwide uniform requirements, forms, and procedures
developed in accordance with section 521(b) of this subtitle
that include alternative nationwide uniform eligibility
requirements; or
(2) prohibit a surplus lines broker from placing nonadmitted
insurance with, or procuring nonadmitted insurance
from, a nonadmitted insurer domiciled outside the United
States that is listed on the Quarterly Listing of Alien Insurers
maintained by the International Insurers Department of the
NAIC.
SEC. 525. STREAMLINED APPLICATION
FOR COMMERCIAL PURCHASERS.
A surplus lines broker seeking to procure or place nonadmitted
insurance in a State for an exempt commercial purchaser shall
not be required to satisfy any State requirement to make a due
diligence search to determine whether the full amount or type
of insurance sought by such exempt commercial purchaser can
be obtained from admitted insurers if—
(1) the broker procuring or placing the surplus lines insurance
has disclosed to the exempt commercial purchaser that
such insurance may or may not be available from the admitted
market that may provide greater protection with more regulatory
oversight; and
(2) the exempt commercial purchaser has subsequently
requested in writing the broker to procure or place such insurance
from a nonadmitted insurer.
SEC. 526. GAO STUDY OF NONADMITTED
INSURANCE MARKET.
(a) In General.
—The Comptroller General of the United States
shall conduct a study of the nonadmitted insurance market to
determine the effect of the enactment of this part on the size
and market share of the nonadmitted insurance market for providing
coverage typically provided by the admitted insurance
market.
(b) Contents.
—The study shall determine and analyze—
(1) the change in the size and market share of the nonadmitted
insurance market and in the number of insurance
companies and insurance holding companies providing such
business in the 18-month period that begins upon the effective
date of this subtitle;
(2) the extent to which insurance coverage typically provided
by the admitted insurance market has shifted to the nonadmitted insurance market;
(3) the consequences of any change in the size and market
share of the nonadmitted insurance market, including differences
in the price and availability of coverage available
in both the admitted and nonadmitted insurance markets;
(4) the extent to which insurance companies and insurance
holding companies that provide both admitted and nonadmitted
insurance have experienced shifts in the volume of business
between admitted and nonadmitted insurance; and
(5) the extent to which there has been a change in the
number of individuals who have nonadmitted insurance policies,
the type of coverage provided under such policies, and
whether such coverage is available in the admitted insurance
market.
(c) Consultation
With NAIC.—In conducting the study under
this section, the Comptroller General shall consult with the NAIC.
(d) Report.
—The Comptroller General shall complete the study
under this section and submit a report to the Committee on
Banking, Housing, and Urban Affairs of the Senate and the Committee
on Financial Services of the House of Representatives
regarding the findings of the study not later than 30 months after
the effective date of this subtitle.
SEC. 527. DEFINITIONS.
For purposes of this part, the following definitions shall apply:
(1) Admitted
insurer.—The term "admitted insurer"
means, with respect to a State, an insurer licensed to engage
in the business of insurance in such State.
(2) Affiliate.
—The term "affiliate" means, with respect
to an insured, any entity that controls, is controlled by, or
is under common control with the insured.
(3) Affiliated
group.—The term "affiliated group" means
any group of entities that are all affiliated.
(4) Control.
—An entity has "control" over another entity
if—
(A) the entity directly or indirectly or acting through
1 or more other persons owns, controls, or has the power
to vote 25 percent or more of any class of voting securities
of the other entity; or
(B) the entity controls in any manner the election
of a majority of the directors or trustees of the other entity.
(5) 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.
(6)
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 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.
(7) Independently
procured insurance.—The term
"independently procured insurance" means insurance procured
directly by an insured from a nonadmitted insurer.
(8) NAIC.
—The term "NAIC" means the National Association
of Insurance Commissioners or any successor entity.
(9) 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.
(10) Non-admitted
insurance model act.—The term
"Non-Admitted Insurance Model Act" means the provisions of
the Non-Admitted Insurance Model Act, as adopted by the NAIC on August 3, 1994, and amended on September 30,
1996, December 6, 1997, October 2, 1999, and June 8, 2002.
(11) 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)).
(12) 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.
(13) 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
(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.
(14) Reinsurance.
—The term "reinsurance" means the
assumption by an insurer of all or part of a risk undertaken
originally by another insurer.
(15) 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.
(16) 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.
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