HR 1065
6-25-07, House Agreed to Bill by Voice Vote
Referred to Senate Committee
on Banking, Housing & Urban Affairs
110th CONGRESS
1st Session
H. R. 1065
IN THE SENATE OF THE UNITED STATES
June 26, 2007
Received; read twice and referred to the Committee on Banking, Housing,
and Urban Affairs
AN ACT
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 2007'.
(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.
Sec. 106. GAO study of nonadmitted insurance market.
TITLE II--REINSURANCE
Sec. 201. Regulation of credit for reinsurance and reinsurance agreements.
Sec. 202. Regulation of reinsurer solvency.
TITLE III--RULE OF CONSTRUCTION
Sec. 301. Rule of Construction.
SEC. 2. EFFECTIVE DATE.
Except as otherwise specifically provided in this Act, this Act shall take
effect upon the expiration of the 12-month period beginning on the date of
the enactment of this Act.
TITLE I--NONADMITTED INSURANCE
SEC. 101. REPORTING, PAYMENT, AND ALLOCATION OF PREMIUM TAXES.
(a) Home State's Exclusive Authority- No State other than the home State of
an insured may require any premium tax payment for nonadmitted insurance.
(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 Act, shall apply to any premium
taxes that, on or after such date of enactment, are required to be paid
to any State that is subject to such compact or procedures; 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 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 a nationwide
or uniform procedure, such as an interstate compact, that provides for the
reporting, payment, collection, and allocation of premium taxes for nonadmitted
insurance consistent with this section.
(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 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- 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. 103. PARTICIPATION IN NATIONAL PRODUCER DATABASE.
After the expiration of the 2-year period beginning on the date of the enactment
of this Act, a State may not collect any fees relating to licensing of an
individual or entity as a surplus lines broker in the State unless the State
has in effect at such time laws or regulations that provide for participation
by the State in the national insurance producer database of the NAIC, or any
other equivalent uniform national database, for the licensure of surplus lines
brokers and the renewal of such licenses.
SEC. 104. UNIFORM STANDARDS FOR SURPLUS LINES ELIGIBILITY.
(1) impose eligibility requirements on, or otherwise establish eligibility
criteria for, nonadmitted insurers domiciled in a United States jurisdiction,
except in conformance with section 5A(2) and 5C(2)(a) of the Non-Admitted
Insurance Model Act; 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 Insurers Department 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. GAO STUDY OF NONADMITTED INSURANCE MARKET.
(a) In General- The Comptroller General of the United States shall conduct
a study of the nonadmitted insurance market to determine the effect of the
enactment of this title on the size and market share of the nonadmitted insurance
market for providing coverage typically provided by the admitted insurance
market.
(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 Act;
(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 Financial Services of the House of
Representatives and the Committee on Banking, Housing, and Urban Affairs of
the Senate regarding the findings of the study not later than 30 months after
the effective date of this Act.
SEC. 107. DEFINITIONS.
For purposes of this title, 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) 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 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 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 Act 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 five-year period in the Consumer
Price Index for All Urban Consumers published by the Bureau of Labor Statistics
of the Department of Labor.
(3) HOME STATE- The term `home State' means the State in which an insured
maintains its principal place of business or, in the case of an individual,
the individual's principal residence.
(4) INDEPENDENTLY PROCURED INSURANCE- The term `independently procured insurance'
means insurance procured directly by an insured from a nonadmitted insurer.
(5) NAIC- The term `NAIC' means the National Association of Insurance Commissioners
or any successor entity.
(6) NONADMITTED INSURANCE- The term `nonadmitted insurance' means any property
and casualty insurance permitted to be placed directly or through a surplus
lines broker with a nonadmitted insurer eligible to accept such insurance.
(7) NON-ADMITTED INSURANCE MODEL ACT- The term `Non-Admitted Insurance Model
Act' means the provisions of the Non-Admitted Insurance Model Act, as adopted
by the NAIC on August 3, 1994, and amended on September 30, 1996, December
6, 1997, October 2, 1999, and June 8, 2002.
(8) NONADMITTED INSURER- The term `nonadmitted insurer' means, with respect
to a State, an insurer not licensed to engage in the business of insurance
in such State.
(9) QUALIFIED RISK MANAGER- The term `qualified risk manager' means, with
respect to a policyholder of commercial insurance, a person who meets all
of the following requirements:
(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.
(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 three years of experience in risk financing, claims administration,
loss prevention, risk and insurance analysis, or purchasing commercial
lines of insurance; or
(bb) has one of the following designations:
(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.
(10) PREMIUM TAX- The term `premium tax' means, with respect to surplus
lines or independently procured insurance coverage, any tax, fee, assessment,
or other charge imposed by a State on an insured based on any payment made
as consideration for an insurance contract for such insurance, including
premium deposits, assessments, registration fees, and any other compensation
given in consideration for a contract of insurance.
(11) SURPLUS LINES BROKER- The term `surplus lines broker' means an individual,
firm, or corporation which is licensed in a State to sell, solicit, or negotiate
insurance on properties, risks, or exposures located or to be performed
in a State with nonadmitted insurers.
(12) STATE- The term `State' includes any State of the United States, the
District of Columbia, the Commonwealth of Puerto Rico, Guam, the Northern
Mariana Islands, the Virgin Islands, and American Samoa.
TITLE II--REINSURANCE
SEC. 201. REGULATION OF CREDIT FOR REINSURANCE AND REINSURANCE AGREEMENTS.
(a) Credit for Reinsurance- If the State of domicile of a ceding insurer is
an NAIC-accredited State, or has financial solvency requirements substantially
similar to the requirements necessary for NAIC accreditation, and recognizes
credit for reinsurance for the insurer's ceded risk, then no other State may
deny such credit for reinsurance.
(b) Additional Preemption of Extraterritorial Application of State Law- In
addition to the application of subsection (a), all laws, regulations, provisions,
or other actions of a State that is not the domiciliary State of the ceding
insurer, except those with respect to taxes and assessments on insurance companies
or insurance income, are preempted to the extent that they--
(1) restrict or eliminate the rights of the ceding insurer or the assuming
insurer to resolve disputes pursuant to contractual arbitration to the extent
such contractual provision is not inconsistent with the provisions of title
9, United States Code;
(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) otherwise apply the laws of the State to reinsurance agreements of ceding
insurers not domiciled in that State.
SEC. 202. REGULATION OF REINSURER SOLVENCY.
(a) Domiciliary State Regulation- If the State of domicile of a reinsurer
is an NAIC-accredited State or has financial solvency requirements substantially
similar to the requirements necessary for NAIC accreditation, such State shall
be solely responsible for regulating the financial solvency of the reinsurer.
(b) Nondomiciliary States-
(1) LIMITATION ON FINANCIAL INFORMATION REQUIREMENTS- If the State of domicile
of a reinsurer is an NAIC-accredited State or has financial solvency requirements
substantially similar to the requirements necessary for NAIC accreditation,
no other State may require the reinsurer to provide any additional financial
information other than the information the reinsurer is required to file
with its domiciliary State.
(2) RECEIPT OF INFORMATION- No provision of this section shall be construed
as preventing or prohibiting a State that is not the State of domicile of
a reinsurer from receiving a copy of any financial statement filed with
its domiciliary State.
SEC. 203. DEFINITIONS.
For purposes of this title, the following definitions shall apply:
(1) CEDING INSURER- The term `ceding insurer' means an insurer that purchases
reinsurance.
(2) DOMICILIARY STATE- The terms `State of domicile' and `domiciliary State'
means, with respect to an insurer or reinsurer, the State in which the insurer
or reinsurer is incorporated or entered through, and licensed.
(3) REINSURANCE- The term `reinsurance' means the assumption by an insurer
of all or part of a risk undertaken originally by another insurer.
(A) IN GENERAL- The term `reinsurer' means an insurer to the extent that
the insurer--
(i) is principally engaged in the business of reinsurance;
(ii) does not conduct significant amounts of direct insurance as a percentage
of its net premiums; and
(iii) is not engaged in an ongoing basis in the business of soliciting
direct insurance.
(B) DETERMINATION- A determination of whether an insurer is a reinsurer
shall be made under the laws of the State of domicile in accordance with
this paragraph.
(5) STATE- The term `State' includes any State of the United States, the
District of Columbia, the Commonwealth of Puerto Rico, Guam, the Northern
Mariana Islands, the Virgin Islands, and American Samoa.
TITLE III--RULE OF CONSTRUCTION
SEC. 301. RULE OF CONSTRUCTION.
Nothing in this Act or amendments to this Act shall be construed to modify,
impair, or supersede the application of the antitrust laws. Any implied or
actual conflict between this Act and any amendments to this Act and the antitrust
laws shall be resolved in favor of the operation of the antitrust laws.
Passed the House of Representatives June 25, 2007.
Attest:
LORRAINE C. MILLER,
Clerk.
END
