Regulatory Changes


While the Nonadmitted and Reinsurance Reform Act of 2010 (NRRA) will eventually simplify the process of taxing and regulating the placement of surplus lines business, the near-term challenges are enormous for brokers.


“Notwithstanding the surplus lines tax complexities, for clients this should be a home run over the middle to long run simply because it allows clients to get easier access to and consider surplus lines options.”


David Bresnahan, Lexington Insurance Company


The NRRA, which became effective on July 21, 2011, provides that only the “home state” of an insured may impose a premium tax on surplus lines placements. The law authorizes states to enter into interstate compacts or establish other procedures to allocate those taxes. Currently, two forms of interstate mechanisms have been adopted by various states: the Surplus Lines Insurance Multi-State Compliance Compact (SLIMPACT) and Nonadmitted Insurance Multi-State Agreement (NIMA). A compromise proposal to reconcile NIMA and SLIMPACT has been discussed but has not been reached as of this date. Accordingly, neither of the tax clearinghouses created (NIMA or SLIMPACT) is operational as of yet.


Copyright © 2012 by A.M. Best Company, Inc. All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.


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