109th CONGRESS
2d Session
H. R. 5637
To streamline the regulation of nonadmitted insurance and reinsurance,
and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
June 19, 2006
Ms. GINNY BROWN-WAITE of Florida (for herself, Mr. MOORE of Kansas, Mr.
BAKER, Ms. HOOLEY, Mr. FEENEY, Ms. WASSERMAN SCHULTZ, Mr. SESSIONS, Mr.
HOLDEN, Mr. FOSSELLA, Mr. SCOTT of Georgia, Mr. BACHUS, Ms. BEAN, Mr. RENZI,
Mr. ISRAEL, Mr. FITZPATRICK of Pennsylvania, Mr. CROWLEY, and Mrs. BIGGERT)
introduced the following bill; which was referred to the Committee on Financial
Services, and in addition to the Committee on the Judiciary, for a period
to be subsequently determined by the Speaker, in each case for consideration
of such provisions as fall within the jurisdiction of the committee concerned
A BILL
To streamline the regulation of nonadmitted insurance and reinsurance,
and for other purposes.
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled,
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
(a) Short Title- This Act may be cited as the `Nonadmitted and Reinsurance
Reform Act of 2006'.
(b) Table of Contents- The table of contents for this Act is as follows:
Sec. 1. Short title and table of contents.
TITLE I--NONADMITTED INSURANCE
Sec. 101. Reporting, payment, and allocation of premium taxes.
Sec. 102. Regulation of nonadmitted insurance by insured's home State.
Sec. 103. Participation in national producer database.
Sec. 104. Uniform standards for surplus lines eligibility.
Sec. 105. Streamlined application for commercial purchasers.
TITLE II--CREDIT FOR REINSURANCE
Sec. 201. Prohibiting extraterritorial application of State laws.
Sec. 202. Solvency regulation.
SEC. 2. DEFINITIONS.
For purposes of this Act, the following definitions shall apply:
(1) INSURER- The term `insurer'--
(A) means an entity chartered and licensed as an insurance company and
authorized to engage in the business of insurance under the laws of
at least 1 State; and
(B) includes any entity that, under the laws of a State, is considered
to be an insurer specifically for purposes of this title.
(2) STATE- The term `State' includes any State, the District of Columbia,
the Commonwealth of Puerto Rico, Guam, the Northern Mariana Islands, the
Virgin Islands, and American Samoa.
TITLE I--NONADMITTED INSURANCE
SEC. 101. REPORTING, PAYMENT, AND ALLOCATION OF PREMIUM TAXES.
(a) Home State's Exclusive Authority-
(1) IN GENERAL- No State other than the home State of an insured may require
any premium tax payment for nonadmitted insurance.
(2) AMOUNT OF PAYMENT- The amount of any premium tax payment for nonadmitted
insurance permitted under paragraph (1) shall be determined on the basis
of any compact or procedures entered into under subsection (b).
(b) Allocation of Nonadmitted Premium Taxes- 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).
(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. 102. REGULATION OF NONADMITTED INSURANCE BY INSURED'S HOME STATE.
(a) Home State Authority- Except as otherwise provided in this title, nonadmitted
insurance is subject to the applicable 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- 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.
SEC. 103. PARTICIPATION IN NATIONAL PRODUCER DATABASE.
After the expiration of the 2-year period beginning on the date of the enactment
of this Act, a State may not collect any fees relating to licensing of an
individual or entity as nonresident insurance 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. 104. UNIFORM STANDARDS FOR SURPLUS LINES ELIGIBILITY.
After the expiration of the 2-year period beginning on the date of the enactment
of this Act, 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 section 5C(2)(a) of the Non-Admitted Insurance
Model Act; and
(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 Insurance Division of the NAIC.
SEC. 105. STREAMLINED APPLICATION FOR COMMERCIAL PURCHASERS.
A surplus lines broker seeking to procure or place nonadmitted insurance
in a State for an exempt commercial purchaser shall not be required to satisfy
any State requirement to make a due diligence search to determine whether
the full amount or type of insurance sought by such exempt commercial purchaser
can be obtained from admitted insurers if--
(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. 106. DEFINITIONS.
For purposes of this title, the following definitions shall apply:
(1) EXEMPT COMMERCIAL PURCHASER- The term `exempt commercial purchaser'
means any person purchasing commercial insurance that meets the following
requirements:
(A) The person employs or retains a qualified risk manager to negotiate
insurance coverage.
(B) The person meets at least 2 of the following criteria:
(i) The person possesses a net worth in excess of $20,000,000.
(ii) The person generates annual revenues in excess of $50,000,000.
(iii) The person employs more than 500 full time or full time equivalent
employees per individual insured or is a member of affiliated group
employing more than 1,000 employees in the aggregate.
(iv) The person pays annual aggregate nationwide insurance premiums
in excess of $100,000 for covered lines of insurance.
(v) The person is a not-for-profit organization or public entity generating
annual budgeted expenditures of at least $30,000,000.
(vi) The person is a municipality with a population in excess of 50,000
persons.
(2) HOME STATE- The term `home State' means the State in which an insured
maintains its principal place of business or principal residence.
(3) INDEPENDENTLY PROCURED INSURANCE- The term `independently procured
insurance' means--
(A) insurance procured directly by an insured from a nonadmitted insurer
on properties, risks, or exposures located or to be performed in whole
or in part in the home State of the insured; or
(B) a multi-State insurance policy with a nonadmitted insurer, that
covers properties, risks, or exposures only partially located or to
be performed in a State, placed by a surplus lines broker in another
State.
(4) NAIC- The term `NAIC' means the National Association of Insurance
Commissioners or any other association that regularly establishes insurance
model acts or insurance standards.
(5) 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.
(6) 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, except that
such term shall not include any--
(A) changes to the Non-Admitted Insurance Model Act subsequent to the
adoption of this Act;
(B) State-specific deviations or alternative standards; or
(7) NONADMITTED INSURER- The term `nonadmitted insurer' means, with respect
to a State, an insurer not licensed to engage in the business of insurance
in such State.
(8) PREMIUM TAX- The term `premium tax' means, with respect to surplus
lines or independently procured insurance coverage, any tax, fee, assessment,
or other charge imposed by a State on an insured based on any payment
made as consideration for an insurance contract for such insurance, including
premium deposits, assessments, registration fees, and any other compensation
given in consideration for a contract of insurance.
(9) SURPLUS LINES BROKER- The term `surplus lines broker' means an individual,
firm, or corporation which sells, solicits, or negotiates insurance on
properties, risks, or exposures located or to be performed in a State
with nonadmitted insurers.
TITLE II--CREDIT FOR REINSURANCE
SEC. 201. PROHIBITING EXTRATERRITORIAL APPLICATION OF STATE LAWS.
(a) No Limit on Domiciliary State Regulation- This section may not be construed
to limit the State of domicile of a ceding insurer from applying such State's
laws and regulation to the ceding insurer.
(b) Preemption of State Law- Except as provided in subsection (a) with respect
to the State of domicile of a ceding insurer, all laws, regulations, provisions,
or other actions of a State are preempted to the extent that they--
(1) restrict or eliminate the rights of a ceding insurer or reinsurer
to resolve disputes pursuant to contractual arbitration to the extent
such contractual provision is not inconsistent with the provisions of
title 9, United States Code;
(2) require that a certain State's law shall govern the reinsurance contract,
disputes arising from the reinsurance contract, or requirements of the
reinsurance contract;
(3) attempt to enforce a reinsurance contract on terms different than
those set forth in the reinsurance contract, to the extent that the terms
are not inconsistent with this title; or
(4) apply the laws of the State to ceding insurers not domiciled in that
State.
SEC. 202. SOLVENCY REGULATION.
(a) Domiciliary State Regulation- The State of domicile of a reinsurer shall
be solely responsible for regulating the financial solvency of the reinsurer
if such State is an NAIC accredited State.
(b) Nondomiciliary States-
(1) LIMITATION ON FINANCIAL INFORMATION REQUIREMENTS- If the State of
domicile of a reinsurer is an NAIC accredited State, a State that is not
the State of domicile of such reinsurer may not require the reinsurer
to provide any additional financial information other than the information
required to be filed with or by the domiciliary State.
(2) RECEIPT OF INFORMATION- No provision of this section shall be construed
as preventing or prohibiting a State that is not the State of domicile
of a reinsurer from receiving a copy of any financial statement or information
provided to the domiciliary State of the reinsurer.
(3) CREDIT FOR REINSURANCE- If a reinsurer qualifies for credit for reinsurance
in the State of domicile of the reinsurer, each State other than the State
of domicile shall accept such credit for reinsurance.
SEC. 203. DEFINITIONS.
For purposes of this title, the following definitions shall apply:
(1) DOMICILIARY STATE- The terms `State of domicile' and `domiciliary
State' means, with respect to an insurer or reinsurer, the State in which
the insurer or reinsurer is incorporated or entered through, and licensed.
(2) REINSURANCE- The term `reinsurance' means the sharing of underwriting
risk by insurers and reinsurers, under which part of all of an insurer's
risk is assumed by the reinsurer in return for consideration.
(3) REINSURER- The term `reinsurer' means an insurer engaged in the business
of assuming insurers' risk.
END
