The Nonadmitted and Reinsurance Reform Act (NRRA) Compliance Guide

Transcription

1 The Nnadmitted and Reinsurance Refrm Act (NRRA) Cmpliance Guide Updated Nvember 11, 2011 Versin The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLP. All Rights Reserved.

2 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Cntents (Click n a link t g t that page.) Please cntact Nicle Allen fr any questins regarding this guide. I. Overview: The NRRA Cmpliance Guide II. NIMA and SLIMPACT III. Surplus Lines Regulatry Issues Addressed in the NRRA Enacted Legislatin by State 1. Surplus Lines Transactins Gverned by the Rules f the Hme State f the Insured 2. Treatment f Surplus Lines Premium Tax 3. Surplus Lines Insurer Eligibility Standards 4. Cmmercial Purchase Exemptin 5. Surplus Lines Brker Licensing Enacted Legislatin by State Attachment A: State-by-State Requirements (table) Attachment B: Exempt Cmmercial Purchase Certificatin Frm Attachment C: Hme State Checklist Attachment D: NIMA Allcatin Frmula Exhibit 1: Infrmatin Required t be Submitted by the Brker r Insured via the Clearinghuse Web Prtal Enacted Legislatin by State Alabama Alaska Arizna Arkansas Califrnia Clrad Cnnecticut Delaware District f Clumbia Flrida Gergia Hawaii Idah Illinis Indiana Iwa Kansas Kentucky Luisiana Maine Maryland Massachusetts Michigan Minnesta Mississippi Missuri Mntana Nebraska Nevada New Hampshire New Jersey New Mexic New Yrk Nrth Carlina Nrth Dakta Ohi Oklahma Oregn Pennsylvania Rhde Island Suth Carlina Suth Dakta Tennessee Texas Utah Vermnt Virginia Washingtn West Virginia Wiscnsin Wyming 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 2

3 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List I. Overview: The Nnadmitted and Reinsurance Refrm Act (NRRA) Cmpliance Guide The Nnadmitted and Reinsurance Refrm Act (NRRA) was enacted int law in July 2010 as part f the Ddd- Frank Wall Street Refrm and Cnsumer Prtectin Act (Ddd-Frank). The NRRA refrms the regulatin f surplus lines insurance by limiting regulatry authrity ver surplus lines transactins t the hme state f the insured and by setting federal standards fr the cllectin f surplus lines premium taxes, insurer eligibility, and cmmercial purchaser exemptins. Mst f the prvisins f the NRRA went int effect n July 21, In anticipatin f that deadline, many states revised their laws and regulatins t cnfrm t the new law. With minr exceptins, the new state laws fcus n surplus lines premium taxatin, which is the mst challenging cmpliance issue fr bth brkers and state regulatrs. In additin t the tax issue, mst f the states have attempted t cnfrm their laws t the ther issues addressed by the NRRA, including the cmmercial purchaser exemptin and surplus lines insurer eligibility standards. A number f state legislatures adjurned withut taking any actin t cnfrm their laws and rules t the NRRA, and therefre their laws d nt necessarily match the federal standards. Whether r nt a state has taken actin, hwever, the NRRA standards apply. Therefre, surplus lines brkers must lk t bth the NRRA and the laws f the hme state f the insured t determine what they need t d t cmply with all applicable rules. This Cmpliance Guide is intended t prvide the basic infrmatin surplus lines brkers need t understand hw t cmply with state surplus lines regulatry requirements in light f the NRRA, the newly-revised state laws and regulatins (in states that have acted t cnfrm their laws t the NRRA), and current laws and regulatins (in states that have nt cnfrmed their laws t the NRRA). The Guide prvides an explanatin f the NRRA s refrms, hw they interact with state laws, and what brkers need t d t cmply. The Cmpliance Guide prvides the fllwing infrmatin: 1. a discussin f the tw general appraches the states are taking t cmply with the NRRA (NIMA and SLIMPACT); 2. an explanatin f the surplus lines regulatry issues addressed in NRRA: Surplus lines premium taxes; Surplus lines transactins gverned by rules f insured s hme state; Surplus lines insurer eligibility standards; Single natinal standard fr cmmercial purchaser exemptin; and Surplus lines brker licensing. 3. a state-by-state discussin f surplus lines laws and rules; 4. a chart summarizing the rules fr cmpliance in each state (Attachment A); 5. a mdel exempt cmmercial purchaser certificatin frm (Attachment B); 6. a Hme State checklist t assist in determining the hme state f the insured (Attachment C); and 7. the NIMA allcatin frmula (Attachment D) The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 3

4 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List II. NIMA and SLIMPACT There are tw principal framewrks that the states are using t implement the NRRA: the Nnadmitted Insurance Multi-State Agreement (NIMA) and the Surplus Lines Insurance Multi-State Cmpliance Cmpact (SLIMPACT). (A number f states have chsen a third ptin: freging bth interstate appraches cmpletely, pting t tax and keep 100% f surplus lines premium tax fr cverage prvided t hme state insureds; ther states have taken n actin at all.) NIMA The Natinal Assciatin f Insurance Cmmissiners (NAIC) develped NIMA, and several states have enacted legislatin giving their state insurance regulatrs authrity t enter int NIMA. See the chart and the state-by-state cmpendium (belw) fr the states that have enacted such authrizing legislatin and fr the states that have entered int NIMA. NIMA creates a central clearinghuse fr reprting and cllecting surplus taxes, and fr distributing surplus lines taxes amng participating states in accrdance with a unifrm risk allcatin frmula. (A cpy f the NIMA allcatin frmula can be fund at the end f this Guide at Attachment D.) As an incentive t get states t participate in NIMA, nly states that sign n t NIMA ( participating states ) will be entitled t utilize the clearinghuse. Mrever, if an insured s hme state is a participating state, n nn-participating state will be entitled t any prtin f the premium tax n the insured s surplus lines plicy, even if a prtin f the cvered risk is lcated in the nn-participating state. Under NIMA, the clearinghuse will distribute surplus lines premium tax accrding t risk allcatin t participating states; any amunts that are allcable t risks in nn-participating states will be retained by the insured s hme state. NIMA requires each state t establish a single tax rate (thus reslving the cmpliance difficulties such as thse psed by Kentucky s jurisdictin-by-jurisdictin tax rates). The tax rate must include any applicable taxes, fees and assessments. Where the hme state f the insured utilizes the services f a stamping ffice, the stamping ffice is permitted t impse stamping fees in additin t the tax. Participating states must agree t require tax filings and payments n a quarterly basis (February 15 fr the quarter ending the preceding December 31; May 15 fr the quarter ending the preceding March 31; August 15 fr the quarter ending the preceding June 30; and Nvember 15 fr the quarter ending the preceding September 30). Participating states are required t use the clearinghuse prcess fr all surplus lines transactins invlving multistate prperty-casualty risks. Participating states may use the clearinghuse fr single state and nn-prperty-casualty risks, but are nt required t d s. The effective date f the Nnadmitted Insurance Multistate Agreement (NIMA) has been delayed until January 1, The change was made by the NIMA signatry jurisdictins (11 states and Puert Ric), wh essentially acknwledged that their clearinghuse will nt be peratinal by Nvember 15, which is date that third quarter 2011 surplus lines premium taxes wuld have been due under the agreement. Delay f the NIMA implementatin date buys time fr the NIMA states t get their clearinghuse up and running befre May 15, 2012, which will be the due date fr first quarter 2012 surplus lines premium taxes. As a result f the change in the NIMA effective date, fr transactins in which the hme state f the insured is a NIMA state, the state s laws will need t be reviewed t determine the amunt and methd fr paying the surplus lines premium tax in the absence f NIMA and its clearinghuse. As discussed mre fully in 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 4

5 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List the state-by-state breakdwn belw, the NIMA states generally fall int the fllwing categries with respect t surplus lines premium tax until NIMA is effective: States that will retain 100% but require sme type f allcatin frmula: Alaska Cnnecticut Flrida (tax cannt exceed the rate impsed by the state where the risk/expsure is lcated) Hawaii Nebraska Wyming States that will tax and retain 100% at the hme state s tax rate: Mississippi Nevada Suth Dakta Utah Pr Rata State: Luisiana In states that are authrized t enter int NIMA but have nt dne s, brkers shuld lk t the laws f the state t determine premium tax payment requirements until such time as the state has entered int NIMA. (Fr example, Arkansas requires payment f 100% f the premium tax t the state at the state s surplus lines premium tax rate f 4% unless the insurance cmmissiner enters int NIMA. When Arkansas enters NIMA, taxes will be paid in accrdance with NIMA.) SLIMPACT NCOIL, a grup f state legislatrs frm acrss the cuntry wh fcus n insurance issues, is pushing fr enactment f the Surplus Lines Insurance Multistate Cmpliance Cmpact (SLIMPACT). SLIMPACT takes an apprach that is bth mre cmprehensive and less defined than NIMA t satisfy the refrms prvided fr in the NRRA. SLIMPACT is mre cmprehensive because it addresses nt nly the tax cllectin and allcatin issues, but als the ther regulatry issues addressed in NRRA such as insurer eligibility, insured hme state determinatins, cmmercial purchaser exemptins, and s frth. At the same time, SLIMPACT is less defined because, althugh it establishes a clearinghuse fr tax payment and allcatin, the agreement itself des nt establish standards fr the clearinghuse r all the regulatry issues it cvers. Instead, the cmpact creates a cmmissin cmprised f the cmpacting states that will, essentially, have authrity t set standards and make decisins in cnnectin with these surplus lines regulatry plicy issues. A state that becmes a member f SLIMPACT (a participating state ) r that cntracts with SLIMPACT (a cntracting state 1 ) will nly be authrized t allcate premium taxes with ther participating and cntracting states. (This mirrrs NIMA s allcatin limitatin.) 1 A cntracting state is a state that uses the SLIMPACT clearinghuse and ther services, but des nt participate in the cmpact s decisin-making prcess The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 5

6 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List SLIMPACT will becme effective fr purpses f adpting rules and creating a clearinghuse when ten states, r states with representing 40% f all surplus lines premium vlume, enter int the cmpact. Despite the fact that SLIMPACT is nt yet effective (as f Octber 31, 2011, nine states have enacted SLIMPACT), NCOIL, alng with the Cuncil f State Gvernments (CSG) and the Natinal Cnference f State Legislatures (NCSL) have begun the prcess f drafting SLIMPACT s allcatin frmula and bylaws, and a rule t adpt, amend, and repeal Cmmissin rules. The prpsed bylaws and rules are based n the life insurance prduct cmpact, the Interstate Insurance Prduct Regulatin Cmmissin (IIPRC). Because SLIMPACT is nt effective, it is nt clear when these dcuments and the allcatin frmula will be adpted. Even when the 10 state r 40% threshld is reached, the clearinghuse will nt becme peratinal fr mre than a year. This means the SLIMPACT clearinghuse will nt be perating until at least January 1, In the meantime, brkers shuld lk t the laws f the insured s hme state t determine premium tax payment requirements. Fr example, Nrth Dakta requires payment f 100% f the premium tax t the state, at the tax rates f the states in which the cvered risks are lcated, and prvides that, nce SLIMPACT is in effect, apprpriate amunts will be allcated t ther states accrding t risk lcatin. Tax payment infrmatin fr each SLIMPACT state is belw The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 6

7 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List III. Surplus Lines Regulatry Issues Addressed in the NRRA 1. Surplus Lines Transactins Gverned by the Rules f the Hme State f the Insured The NRRA establishes a single-state cmpliance regime fr surplus lines insurance transactins. Only the "hme state f the insured," is permitted t require the payment f surplus lines premium tax and t therwise regulate the placement f a surplus lines plicy placed n r after July 21, This means that a brker nly has t cmply with the hme state f the insured's regulatry requirements regarding diligent search, disclsure language, eligibility requirements, filings, brker licensing requirements, and premium tax requirements. What is the Hme State f the Insured? Crrectly identifying the hme state f the insured fr a particular surplus lines placement will be critical fr brkers t cmply with the regulatry requirements that apply t the transactin. The NRRA defines the hme state f the insured as (i) the state in which an insured maintains its principal place f business r, in the case f an individual, the individual s principal residence; r (ii) if 100% f the premium f the insured risk is lcated ut f the state referred t in clause (i), the State t which the greatest percentage f the insured s taxable premium fr that insurance cntract is lcated. The definitin ges n t clarify that, with respect t affiliated grups, [i]f mre than 1 insured frm an affiliated grup are named insureds n a single nn-admitted insurance cntract, the term hme State means the hme State, as determined pursuant t [clauses (i) and (ii) abve], f the member f the affiliated grup that has the largest percentage f premium attributed t it under such insurance cntract. NIMA and SLIMPACT incrprate the NRRA definitin f hme state, including the affiliated grup clarificatin. Bth NIMA and SLIMPACT, hwever, als define additinal terms t address what their drafters cnsidered gaps in the NRRA s hme state definitin. NIMA adds definitins fr principal place f business, principal residence, and grup insurance. SLIMPACT adds definitins fr principal place f business and purchasing grup. A brker will have t determine the hme state f the insured n a transactin-by-transactin basis. Althugh identifying the hme state will likely be straightfrward in mst cases, there may be times when the determinatin is nt clear cut, r when mre than ne state culd claim t be the hme state f an insured with respect t a particular transactin. Fr this reasn, when determining an insured s hme state, it is particularly imprtant t pay clse attentin t the relevant definitins in state law, as well as thse under NIMA and SLIMPACT. (A Hme State checklist t assist in determining the hme state f the insured can be fund at the end f this Guide at Attachment C.) 2. Treatment f Surplus Lines Premium Tax Under the NRRA, the hme state f the insured has sle regulatry authrity ver the cllectin and allcatin f surplus lines premium taxes. The federal law prhibits any state ther than the hme state f the insured frm requiring any premium tax payment fr surplus lines insurance. This means that fr surplus lines plicies placed n and after July 21, surplus lines brkers must lk nly t the law f the hme state f the insured t determine the amunt f premium tax wed n a surplus lines transactin, and fr 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 7

8 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List any ther regulatry requirements the state may impse in cnnectin with the payment f the premium tax, such as the timing f tax payments and whether the state requires the submissin f risk allcatin infrmatin fr multi-state transactins. Als as f July 21, surplus lines brkers are required t submit the premium tax payment n a surplus lines transactin nly t the insured s hme state. In the case f a state that has jined NIMA r SLIMPACT, the payment will be made t the respective clearinghuse in accrdance with the hme state s law. Brkers n lnger have t make separate payments t each state in which a cvered risk lcated fr multi-state placements entered int n r after July 21. Plicy Endrsements: Premium taxes n plicies with new r renewal effective dates prir t July 21, 2011, including assciated premium-bearing endrsements t such plicies entered int subsequent t July 21, 2011, will cntinue t be payable in accrdance with the applicable tax law at the time f the plicy placement r renewal, nt the date f the endrsement. Taxes n plicies with new r renewal effective dates n r after July 21, 2011, including assciated premium-bearing endrsements, will be payable slely t the hme state f the insured. Allcatin: Many states will cntinue t require brkers t submit dcumentatin regarding allcatin by state f the risks cvered by a surplus lines transactin. If the hme state f the insured is a state that has jined NIMA, the brker will be required t use the NIMA risk allcatin frmula. (The NIMA allcatin frmula can be fund at the end f this Guide at Attachment D.) If the hme state is a state that has jined SLIMPACT, the brker will be required t use the SLIMPACT risk allcatin frmula (which has nt been drafted yet). In ther states, the allcatin requirement (if there is ne) will be determined in accrdance with state laws and regulatins. Categrizing the States The states can be categrized as fllws fr surplus lines premium tax purpses: (1) Pr-Rata States: A number f states have nt changed their premium tax laws t cnfrm t the NRRA. Nnetheless, they still must cmply with the NRRA s requirement that nly the hme state f the insured may require surplus line premium tax payments. Mst, if nt all, f these states currently impse tax nly n the prtin f the risk lcated in the state. This means that, fr transactins n and after July 21, if ne f these Pr- Rata States is the hme state f the insured, the brker will be required t pay tax nly n the prtin f the risk lcated in the insured s hme state. (2) 100% Retentin States: As f July 21, a number f states tax 100% f the premium n surplus lines plicies and d nt allcate the taxes t ther states where cvered risks are lcated. This means that, fr transactins n and after July 21, if ne f these 100% Retentin States is the hme state f the insured, the brker will be required t pay tax t the hme state f the insured n the entire amunt f the premium, mst likely at the hme state s tax rate. It is unlikely that these states will require brkers t file risk allcatin reprts because there will be n allcatin f the tax prceeds amng the states. Nnetheless, brkers shuld review the laws and regulatins f the hme state f the insured t cnfirm tax payment and reprting requirements. (3) NIMA States: When NIMA s clearinghuse is peratinal, if a NIMA State is the hme state f the insured, the brker will be required t pay tax and submit allcatin and reprt infrmatin t the NIMA clearinghuse n a quarterly basis (February 15 fr the quarter ending the preceding December 31; May 15 fr the quarter ending the preceding March 31; August 15 fr the quarter ending the preceding June 30; and Nvember 15 fr the quarter ending the preceding September 30) The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 8

9 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Because the NIMA clearinghuse is nt yet peratinal, further guidance frm the NIMA states is needed s that brkers knw the prper prcedures t fllw fr tax payment, reprting and allcatin until the clearinghuse is functinal. In states that are authrized t enter int NIMA but have nt dne s, brkers shuld lk t the laws f each state t determine premium tax payment requirements until such time as the state has entered int NIMA. (Fr example, Arkansas requires payment f 100% f the premium tax t the state at the state s surplus lines premium tax rate f 4% unless the insurance cmmissiner enters int NIMA. At that time, taxes will be paid in accrdance with NIMA.) (4) SLIMPACT States: When SLIMPACT s clearinghuse is peratinal (which will nt be until at least January 2013), if a SLIMPACT State is the hme state f the insured, the brker will be required t pay tax and submit allcatin and reprt infrmatin t the SLIMPACT clearinghuse in accrdance with the rules and timeframes mandated by the SLIMPACT Cmmissin. Althugh these rules and timeframes are currently being drafted, it is nt clear when they will be adpted by the SLIMPACT states. Because SLIMPACT is nt effective, the SLIMPACT Cmmissin has nt established cmpliance rules, and the SLIMPACT clearinghuse is nt peratinal, further guidance frm the SLIMPACT states is needed s that brkers knw the prper prcedures t fllw fr tax payment, reprting and allcatin until the clearinghuse is functinal. 3. Surplus Lines Insurer Eligibility Standards Mst states require that a surplus lines insurer be deemed eligible by meeting certain financial criteria r by having been designated as eligible n a state-maintained list. Prir t the enactment f the NRRA, state eligibility standards varied widely frm state t state. As f July 21, 2011, a surplus lines transactin is subject nly t the eligibility requirements f the insured s hme state: if the insured s hme state des nt have insurer eligibility requirements, n such requirements apply; if, hwever, the hme state des have insurer eligibility requirements, they must cmply with NRRA. Eligibility requirements themselves are made unifrm acrss the cuntry (in thse states that have them) because the NRRA prhibits states frm impsing eligibility requirements n surplus lines insurers except fr (i) standards that cnfrm with the NAIC s Nn-Admitted Insurance Mdel Act r (ii) natinwide unifrm requirements, frms and prcedures enacted pursuant t a cmpact r ther agreement amng the states. At this time, SLIMPACT is the nly interstate cmpact r agreement under cnsideratin by the states that has the ptential t establish natinwide, unifrm insurer eligibility standards. Unless and until SLIMPACT establishes eligibility rules that becme the standard in every state, hwever, the insurer eligibility rules in all states, including SLIMPACT states, will need t cmply with the standards set in the NAIC s Nn-Admitted Insurance Mdel Act. The Mdel Act requires an unauthrized insurer t: (i) be authrized in its dmiciliary state t write the type f insurance that it writes as surplus lines cverage; and 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 9

10 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List (ii) have capital and surplus, r its equivalent under the laws f its dmiciliary jurisdictin, equaling the greater f (1) the minimum capital and surplus requirements under the law f the hme state f the insured, r (2) $15 millin. Under the Mdel Act, the insured s hme state cmmissiner may reduce r waive the capital and surplus requirements (dwn t a minimum f $4.5 millin) after the cmmissiner makes a finding f eligibility based n several factrs. In additin t eligibility requirements fr U.S. dmiciled insurers, the NRRA requires the states t permit the placement f surplus lines cverage with nnadmitted insurers dmiciled utside the United States (alien insurers) that are listed n the NAIC s Quarterly Listing f Alien Insurers. This means that all states must permit NAIC-listed alien insurers t place surplus lines cverage. A state may allw placement f cverage with alien insurers nt n the NAIC list (and have a separate set f requirements fr thse nn-listed insurers), but the states cannt refuse t allw placement with NAIC-listed alien insurers. The NAIC s Quarterly Listing f Alien Insurers is available fr reference and dwnlad n the NAIC s website at 4. Cmmercial Purchaser Exemptin The NRRA establishes a single exempt cmmercial purchaser definitin and exemptin standard that is applicable in every state. As f July 21, 2011, n diligent search in the admitted market is required (and, therefre, a brker can g directly t the surplus lines market) t place a plicy fr an exempt cmmercial purchaser if (i) the brker has disclsed t the exempt cmmercial purchaser that cverage may be available frm the admitted market, which may prvide greater prtectin with mre regulatry versight; and (ii) the exempt cmmercial purchaser has requested in writing that the brker prcure/place such cverage with a surplus lines insurer. An exempt cmmercial purchaser is a purchaser f cmmercial insurance that: (1) emplys r retains a qualified risk manager 2 t negtiate insurance cverage; 2 QUALIFIED RISK MANAGER. The term qualified risk manager means, with respect t a plicyhlder f cmmercial insurance, a persn wh meets all f the fllwing requirements: (A) The persn is an emplyee f, r third-party cnsultant retained by, the cmmercial plicyhlder. (B) The persn prvides skilled services in lss preventin, lss reductin, r risk and insurance cverage analysis, and purchase f insurance. (C) The persn (i) (I) has a bachelr s degree r higher frm an accredited cllege r university in risk management, business administratin, finance, ecnmics, r any ther field determined by a State insurance cmmissiner r ther State regulatry fficial r entity t demnstrate minimum cmpetence in risk management; and (II) (aa) has 3 years f experience in risk financing, claims administratin, lss preventin, risk and insurance analysis, r purchasing cmmercial lines f insurance; r (bb) has (AA) a designatin as a Chartered Prperty and Casualty Underwriter (in this subparagraph referred t as CPCU ) issued by the American Institute fr CPCU/Insurance Institute f America; (BB) a designatin as an Assciate in Risk Management (ARM) issued by the American Institute fr CPCU/Insurance Institute f America; (CC) a designatin as Certified Risk Manager (CRM) issued by the Natinal Alliance fr Insurance Educatin & Research; (DD) a designatin as a RIMS Fellw (RF) issued by the Glbal Risk Management Institute; r 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 10

11 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List (2) has paid aggregate natinwide cmmercial prperty and casualty insurance premiums in excess f $100,000 in the immediately preceding 12 mnths; and (3) meets at least ne f the fllwing criteria: (i) pssesses a net wrth in excess f $20 millin (as adjusted fr inflatin); (ii) generates annual revenues in excess f $50 millin (as adjusted fr inflatin); (iii) emplys mre than 500 full-time (r full-time equivalent) emplyees per individual insured r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; (iv) is a nt-fr-prfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin (as adjusted fr inflatin); r (v) is a municipality with a ppulatin f mre than 50,000. A number f states currently have exemptins fr cmmercial purchasers (called industrial insureds in many states). Thse exemptins are nt preempted by the NRRA. Thus, in thse states, if the industrial insured exemptin is retained, there culd be tw classes f exemptins: ne fr entities that meet the NRRA exempt cmmercial purchaser requirements and ne fr entities that meet the state s industrial insured exemptin. Befre taking advantage f the exemptin, brkers shuld check the law f the hme state f the insured as well as the NRRA definitin t ensure that the exemptin is used crrectly. B. A draft Exempt Cmmercial Purchaser Certificatin Frm can be fund at the end f this Guide at Attachment 5. Surplus lines brker licensing: The federal law prhibits any state except the hme state f the insured frm requiring that a surplus lines brker be licensed in rder t sell, slicit, r negtiate surplus lines insurance with respect t the insured. This means that, as f July 21, 2011, a brker needs nly ne surplus lines prducer license t place a surplus lines plicy a license (resident r nn-resident) in the insured s hme state. In whlesale transactins, the whlesale brker n each such accunt must have the apprpriate license in the "hme state f the insured" fr each state where placements are made. On a related issue, NRRA prhibits a state frm cllecting fees relating t the licensing f a surplus lines brker r business entity unless the state participates in the NAIC s natinal insurance prducer database fr surplus lines prducer licensure by July 21, Effectively, this prvides a strng incentive t the states t utilize the NAIC s unifrm prducer licensing applicatins fr surplus lines prducers and t license surplus lines brkers electrnically thrugh the Natinal Insurance Prducer Registry (NIPR). (ii) (EE) any ther designatin, certificatin, r license determined by a State insurance cmmissiner r ther State insurance regulatry fficial r entity t demnstrate minimum cmpetency in risk management; (I) has at least 7 years f experience in risk financing, claims administratin, lss preventin, risk and insurance cverage analysis, r purchasing cmmercial lines f insurance; and (II) has any 1 f the designatins specified in subitems (AA) thrugh (EE) f clause (i)(ii)(bb); (iii) has at least 10 years f experience in risk financing, claims administratin, lss preventin, risk and insurance cverage analysis, r purchasing cmmercial lines f insurance; r (iv) has a graduate degree frm an accredited cllege r university in risk management, business administratin, finance, ecnmics, r any ther field determined by a State insurance cmmissiner r ther State regulatry fficial r entity t demnstrate minimum cmpetence in risk management The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 11

12 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Enacted Legislatin by State Click a state belw t jump t that state. Alabama Alaska Arizna Arkansas Califrnia Clrad Cnnecticut Delaware District f Clumbia Flrida Gergia Hawaii Idah Illinis Indiana Iwa Kansas Kentucky Luisiana Maine Maryland Massachusetts Michigan Minnesta Mississippi Missuri Mntana Nebraska Nevada New Hampshire New Jersey New Mexic New Yrk Nrth Carlina Nrth Dakta Ohi Oklahma Oregn Pennsylvania Rhde Island Suth Carlina Suth Dakta Tennessee Texas Utah Vermnt Virginia Washingtn West Virginia Wiscnsin Wyming 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 12

13 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Alabama Hme State f the Insured NRRA definitin + principal place f business definitin Premium Tax SLIMPACT; AL will tax and keep 100% at a rate f 6% until SLIMACT peratinal Exempt Cmmercial Purchaser AL industrial insured exemptin + NRRA apprach Eligible Insurer NRRA apprach (licensure in dmiciliary jurisdictin + greater f $15MM capital / surplus r minimum required by AL) unless/until SLIMPACT rule issued Prducer Licensing License required nly fr placements fr AL insureds; silent n participatin in a prducer licensing database Effective Date September 1, 2011 AL H 76 Defining Hme State f the Insured The hme state is where an insured maintains its principal place f business r if the insured is an individual, the individual s principal residence. SLIMPACT Art. II(12). Principal place f business is the state where the insured maintains its headquarters and where the insured s high-level fficers direct, cntrl and crdinate the business activities f the insured. Id. Art. II(23). Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. Id. Art. II(12). If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract. Id. Art. II. Multi-State Risk Surplus Lines Premium Taxes Alabama adpted the SLIMPACT mdel apprach t multi-state premium tax allcatin. Under SLIMPACT, each cmpacting state must adhere t specified tax allcatin frmulas and data reprting requirements. Id. Art. IV(1). The Premium Tax Data Allcatin Frmula determines each cntracting state s premium allcatin. Id. Art. IV(1). Each state may then charge its wn rate f taxatin n that allcatin. Id. Art. IV(5). If a cmpacting state changes its rate f taxatin, the state must give 90 days ntice t the Cmpact Cmmissin (the multi-state gverning bdy fr the SLIMPACT system). Id. Art. IV(6). Until SLIMPACT is peratinal, Alabama will tax 100% f direct premiums, less return premiums and exclusive f sums cllected t cver state r federal taxes. The tax rate is 6% (a). Exempt Cmmercial Purchasers The statute is silent with respect t exempt cmmercial purchasers, but the Cmpact Cmmissin established under SLIMPACT has general authrity t prmulgate rules fr cmpacting states t implement the express prvisins f the NRRA The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 13

14 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List On July 21, 2011, the NRRA exempt cmmercial purchaser prvisin will be in effect. Accrding t the NRRA, an exempt cmmercial purchaser is ne that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin Under the NRRA, a surplus lines brker seeking t prcure r place nnadmitted insurance in Alabama fr an exempt cmmercial purchaser shall nt be required t satisfy any state requirement t make a due diligence search t determine whether the full amunt r type f insurance sught by such exempt cmmercial purchaser can be btained frm admitted insurers if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Alabama currently has an industrial insured exemptin. That exemptin will remain in effect. As f July 21, 2011, the NRRA cmmercial purchaser exemptin will als be effective. Surplus Line Insurer Eligibility Criteria The Cmpact defines insurer eligibility requirements as the criteria, frms, and prcedures established t qualify as a surplus lines insurer under the law f the hme state, prvided that such criteria, frms, and prcedures are cnsistent with the express prvisins f the NRRA n and after July 21, SLIMPACT Art. II(14). The Cmpact Cmmissin is charged with prmulgating unifrm rules fr cmpacting states regarding freign insurer eligibility requirements as authrized by the NRRA. Id. Art. III(3). On July 21, 2011, the NRRA eligibility requirements will be in effect. Under the NRRA, Alabama may nt impse eligibility requirements n, r therwise establish eligibility criteria fr, nnadmitted insurers dmiciled in a U.S. jurisdictin, except: Alabama may require that the insurer be authrized t write the type f insurance in its dmiciliary jurisdictin; and Alabama may require that the insurer have capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin which equals the greater f: The minimum capital and surplus requirements under the law f Alabama; r $15,000,000 The insurance cmmissiner may waive the minimum capital and surplus requirements if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 14

15 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List industry. The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin. Under the NRRA, a state may nt prhibit a surplus lines brker frm placing nnadmitted insurance with, r prcuring nnadmitted insurance frm, a nnadmitted insurer dmiciled utside the U.S. that is listed n the Quarterly Listing f Alien Insurers maintained by the Internatinal Insurers Department f the NAIC. Natinal Prducer Database The statute des nt require participatin in a natinal prducer licensing database, but the statute s preamble recgnizes that within tw years f enactment f the NRRA, all states must participate in the NAIC prducer database, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines licensees and the renewal f such licenses if a state wants t cntinue cllecting fees related t surplus lines licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 15

16 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Alaska Hme State f the Insured Premium Tax Exempt Cmmercial Purchaser Eligible Insurer Prducer Licensing Effective Date July 21, 2011 AK H 164 Defining Hme State f the Insured NRRA definitin + principal place f business definitin Signed NIMA; AK prtin at 2.7% + nn-nima state prtins at rate f 2.7% + NIMA state prtins at rate f state where risk is lcated until NIMA is peratinal NRRA apprach NRRA apprach License required nly fr placements fr AK insureds; AK law silent regarding participatin in electrnic licensing database The hme state is where an insured maintains its principal place f business r if the insured is an individual, the individual s principal residence (14)(A)-(B). Principal place f business means the state where the insured maintains its headquarters and where the insured s high-level fficers direct, cntrl and crdinate the business activities (14)(C). Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract (14)(A)-(B). Multi-State Risk Surplus Lines Premium Taxes The statute authrizes the directr t participate in an agreement with anther state fr the purpses f cllecting and disbursing t the ther state any premium tax cllected and payable t the ther state, and fr receiving frm the ther state premium tax it has cllected and is wed t this state. T the extent that anther state where a prtin f the prperties, risks r expsures reside has failed t enter int an agreement with this state, the directr shall retain all f the net premium tax cllected by this state Pursuant t the statute, Alaska has entered int NIMA. Accrding t guidance issued by the Insurance Department after Alaska entered NIMA, Alaska will tax 100% f premiums n multi-state plicies where Alaska is the hme state. Fr plicies effective n r after July 21, 2011, taxes will be calculated as fllws: prtin f the premium allcated t AK at AK s rate f 2.7%, PLUS prtins allcated t nn-nima states at AK s rate f 2.7%, PLUS, prtins allcated t NIMA states at the rate f the NIMA state where the risk is lcated. Exempt Cmmercial Purchasers Under (13), an exempt cmmercial purchaser is ne that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 16

17 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin. Brkers prcuring r placing insurance fr an exempt cmmercial purchaser are nt required t make a due diligence search t determine whether the full amunt r type f insurance sught by the exempt cmmercial purchaser can be btained frm an admitted insurer if: (b). The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Accrding t (c)(1), a surplus lines brker may place insurance with a nnadmitted insurer if the insurer has the greater f: $15 millin in unimpaired basic capital and surplus r the minimum capital and surplus required in its dmiciliary jurisdictin. Under the NRRA, the nly eligibility requirements that may be placed n freign insurers are: The insurer is authrized t place that type f insurance in its dmiciliary jurisdictin; and The insurer has capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin that is the greater f the minimum capital and surplus requirements under the laws f this state r $15 millin. Therefre, t the extent Alaska s minimum surplus and capital requirements cnflict with the NRRA, they will be preempted by the NRRA apprach. Guidance issued by the Insurance Department indicates that Alaska will require minimum capital and surplus f $15 millin. Under (f), in cmpliance with the NRRA, the insurance cmmissiner may waive the minimum capital and surplus requirements fr unauthrized freign insurers if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin. A surplus lines brker may place insurance with an alien insurer if that insurer is listed n the quarterly list f alien insurers maintained by the NAIC (c)(7). Additinally, alien insurers that are nt n the NAIC list may apply fr apprval frm the Directr. The Directr may apprve an alien insurer s request fr eligibility if the insurer: Establishes satisfactry evidence f gd repute and financial integrity; Maintains capital and surplus f $15 millin; Maintains a trust f $2.5 millin depsited in a U.S. financial institutin; Submits the required applicatin and fee, and cnsents t service r prcess; and Submits designatin f persns t cntact The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 17

18 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Natinal Prducer Database The statute is silent as t whether Alaska will participate in the NAIC prducer database r sme ther equivalent unifrm natinal database fr prducer licensing and renewals. Under the NRRA, Alaska may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in Alaska unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 18

19 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Arizna Hme State f the Insured Premium Tax Exempt Cmmercial Purchaser Eligible Insurer Prducer Licensing Effective Date July 20, AZ H 2112 Defining Hme State f the Insured NRRA definitin Multistate Allcatin Agreement Authrized pending insurance cmmissiner determinatin; 100% t Arizna at rate f 3% unless state enters NIMA NRRA apprach NRRA apprach License required nly fr placements fr AZ insureds; AZ law requires participatin in NAIC r similar database by July 21, 2012 The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence (6)(a). Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium (6)(b). If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract (6)(c). Multi-State Risk Surplus Lines Premium Taxes The statute generally authrizes the insurance directr t enter int a multistate agreement fr the reprting, payment, cllectin and allcatin f surplus lines taxes if the directr cncludes that entering int a multi-state agreement is in the best interests f the state (A). In determining whether an agreement is in the best interest f Arizna, the directr is instructed t cnsider: the impact n the state s grss receipt f premium taxes, the regulatry burden and csts fr insurers and brkers, the cst impact n insureds, and any ther factrs the directr wishes t cnsider (A)(1) (A)(4). If the directr decides nt t enter int a multistate agreement upn a determinatin that it is nt in the best interests f the state, Arizna will keep 100% f surplus lines taxes (H). Arizna taxes surplus lines premiums at a rate f 3%. Per DOI guidance, if the directr des nt enter an agreement, the entire premium will be taxed at the Arizna rate. Exempt Cmmercial Purchasers Exempt cmmercial purchasers are identified by Arizna as industrial insureds in (C)(1). Under (C)(1), industrial insureds are defined as: an insured whse hme state is Arizna that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 19

20 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin. Surplus Line Insurer Eligibility Criteria The directr may publish a list f unauthrized insurers that may write surplus lines insurance in Arizna (G). Thse unauthrized insurers must meet certain eligibility criteria: Unauthrized freign insurers must be authrized t transact insurance n an admitted r surplus lines basis in at least ne ther state and they must pssess a minimum capital and surplus f $15 millin (B). Unauthrized alien insurers must pssess a minimum capital and surplus f $15 millin and maintain within the U.S. in public depsitries r trust institutins assets f at least $2.5 millin (C). The directr may require the alien insurer t keep a larger depsit in the U.S. if he believes the public interest requires it (C). Surplus lines brkers may als place insurance with an alien insurer that is listed n the quarterly listings f alien insurers maintained by the NAIC (C) Natinal Prducer Database The statute requires the insurance directr t participate in the Natinal Insurance Prducer Database f the NAIC r any ther equivalent natinal database fr the licensure and license renewal f surplus lines brkers after July 21, (H) The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 20

21 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Arkansas Hme State f the Insured Premium Tax Exempt Cmmercial Purchaser Eligible Insurer Prducer Licensing Effective Date April 1, AR H 2143 Defining Hme State f the Insured NRRA definitin + principal place f business definitin Multistate allcatin agreement authrized; 100% t AR at 4% until state enters agreement and agreement becmes effective NRRA apprach NRRA apprach License required nly fr placements fr AR insureds; allws participatin in NAIC r similar database by July 21, 2012 The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence (6)(A)(i)(a). Principal place f business is defined as: that state in which the insured maintains its headquarters and where the insured s high-level fficers direct, cntrl, and crdinate the business activities f the insured (6)(A)(i)(b). Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium (6)(A)(ii). If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract (6)(B). Multi-State Risk Surplus Lines Premium Taxes The insurance cmmissiner may enter int written multi-state agreements with ther state jurisdictins t prvide fr cperatin and assistance amng member jurisdictins in the administratin and cllectin f taxes impsed n multistate surplus lines insurance (b). Until the insurance cmmissiner enters int a multistate allcatin agreement (at which time taxes will be paid and allcated accrding t the agreement), n later than 60 days fllwing the end f the mnth in which surplus lines insurance was prcured, the surplus lines brker shall remit t the state treasurer a tax f 4% n the direct premiums written (100% f premium), less return premiums and exclusive f sums cllected t cver state r federal taxes (a). Exempt Cmmercial Purchasers Under (5)(A), an exempt cmmercial purchaser is ne that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 21

22 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin. Brkers prcuring r placing insurance fr an exempt cmmercial purchaser are nt required t make a due diligence search t determine whether the full amunt r type f insurance sught by the exempt cmmercial purchaser can be btained frm an admitted insurer if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer (d)(1) (2). Surplus Line Insurer Eligibility Criteria Accrding t (b)(1) (2)(A), a surplus lines brker may place insurance with a nnadmitted insurer if: The insurer is authrized t place that type f insurance in its dmiciliary jurisdictin; and The insurer has capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin that is the greater f the minimum capital and surplus requirements under the laws f this state r $15 millin. The insurance cmmissiner may waive the minimum capital and surplus requirements fr unauthrized freign insurers if he makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry (c)(1) (2). The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin (c)(3). A surplus lines brker may place insurance with an alien insurer if that insurer is listed n the quarterly list f alien insurers maintained by the NAIC (a). Natinal Prducer Database Under the statute, the cmmissiner may utilize the natinal insurance prducer database f the NAIC r any ther equivalent unifrm natinal database fr the licensure and renewal f an individual r entity as a surplus lines brker in rder t carry ut NRRA requirements (c) The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 22

23 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Califrnia Hme State f the Insured NRRA definitin + principal place f business definitin + principal residence definitin Premium Tax 100% t CA at a rate f 3% Exempt Cmmercial Purchaser CA Industrial Insured + NRRA apprach Eligible Insurer NRRA apprach (w/ minimum cllateral/surplus requirement Prducer Licensing Effective Date July 21, 2011 CA A 315 f $45 millin) License required nly fr placements fr CA insureds; CA law silent regarding participatin in prducer database Defining Hme State f the Insured The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence (e)(1)(A). Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium (e)(1)(B). If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract (e)(4). Fr purpses f determining the hme state f the insured, principal place f business means the state where the insured maintains its headquarters and where the insured s high-level fficers direct, cntrl, and crdinate the business activities; r if the insured s high-level fficers direct, cntrl, and crdinate the business activities in mre than ne state, the state in which the greatest percentage f the insured s taxable premium fr that insurance cntract is allcated; r if the insured maintains its headquarters r the insured s high-level fficers direct, cntrl, and crdinate the business activities utside any state, the state t which the greatest percentage f the insured s taxable premium fr that insurance cntract is allcated (e)(2). Principal residence is the state where the insured resides fr the greatest number f days during a calendar year; r if the insured s principal residence is lcated utside any state, the state t which the greatest percentage f the insured s taxable premium fr that insurance cntract is allcated (e)(3). Multi-State Risk Surplus Lines Premium Taxes The Califrnia statute des nt authrize entry int a multi-state agreement fr tax allcatin purpses. Califrnia will tax 100% f grss premiums, less returned premiums, at a rate f 3% (excluding any prtins f premiums upn business dne invlving the risk finance prtin f any blended finite risk prduct used in the financing element f state r federal Superfund envirnmental settlements invlving remediatin f sil r grundwater cntaminatin) (a). Fr purpses f determining the tax, the ttal premium charged fr all nnadmitted insurance placed in a single transactin with ne underwriter r grup f underwriters, whether in ne r mre plicies, shall be the entire premium charged n all nnadmitted insurance fr the Califrnia hme state insured (b). This prvisin des nt apply t interstate mtr transit peratins cnducted between Califrnia and ther states (b)(1)-(2). Exempt Cmmercial Purchasers 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 23

24 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Califrnia currently has an industrial insured exemptin. That exemptin will remain in effect. As f July 21, 2011, the NRRA cmmercial purchaser exemptin will als be in effect. Califrnia s definitin f cmmercial insureds matches the definitin f cmmercial purchaser under the NRRA (b). A cmmercial insured is ne that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin. Under 1763(h)(1)(A)-(B), a surplus lines brker seeking t prcure r place nnadmitted insurance in Califrnia fr a cmmercial insured shall nt be required t satisfy any requirement t make a due diligence search t determine whether the full amunt r type f insurance sught by such exempt cmmercial purchaser can be btained frm admitted insurers if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Califrnia has adpted insurer eligibility requirements cnsistent with the NRRA. Under (a), as f July 21, 2011, surplus lines brkers may place cverage with freign insurers that: Are licensed t write the type f insurance in its dmiciliary jurisdictin; and Has a capital and surplus that tgether ttal $45,000,000. The insurance cmmissiner may waive the minimum capital and surplus requirements abve if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin (a)(2)(B). If a freign insurer was listed as an eligible surplus line insurer as f January 1, 2011, and did nt have capital and surplus f $45 millin as f January 1, 2011, that insurer shall have at least $30 millin f capital and surplus as f December 31, 2011, and at least $45 millin f capital and surplus as f December 31, (a)(2)(C). Under (b), a surplus lines brker may place insurance with an alien insurer if the insurer is listed n the Quarterly Listing f Alien Insurers maintained by the NAIC and is licensed as an insurer in its dmiciliary jurisdictin. Natinal Prducer Database The Califrnia statute is silent n participatin in a natinal prducer database. Under the NRRA, Califrnia may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in Califrnia unless the state has in 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 24

25 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 25

26 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Clrad Clrad failed t enact surplus lines legislatin t implement NRRA prvisins befre the legislature adjurned. Therefre, n July 21, 2011, the default NRRA prvisins tk effect preempting cnflicting state law. The Insurance Divisin issued guidance n July 25, 2011 cnfirming that Clrad will fllw the NRRA rules as fllws: Hme State f the Insured NRRA definitin Premium Tax Beginning July 21, 2011, CO may nly cllect taxes n SL premiums where CO is the hme state f the insured; CO will tax 3% f net premium n a pr rata basis (per DOI) Exempt Cmmercial Purchaser CO Industrial Insured exemptin + NRRA apprach as f July 21, 2011 Eligible Insurer NRRA apprach as f July 21, 2011 Prducer Licensing License required nly fr placements fr CO insureds; CO law silent regarding participatin in electrnic licensing database Effective Date July 21, 2011 Defining Hme State f the Insured Under the NRRA, the hme state is where an insured maintains its principal place f business r if the insured is an individual, the individual s principal residence. Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract. Multi-State Risk Surplus Lines Premium Taxes Clrad has nt entered int r authrized a multistate agreement r cmpact fr tax allcatin purpses. As f July 21, 2011, Clrad may nly cllect surplus lines premium taxes where it is the hme state f the insured. Accrding t Insurance Divisin guidance, Clrad will tax 3% n the prtin f net premium prperly allcable t the risks r expsures lcated in Clrad (2). The guidance explicitly states that risks r expsures lcated utside f Clrad, even where Clrad is the hme state f the insured, will nt be taxed by Clrad. Exempt Cmmercial Purchasers Clrad currently has an industrial insured exemptin. That exemptin will remain in effect. As f July 21, 2011, the NRRA cmmercial purchaser exemptin will als be in effect The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 26

27 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Accrding t the NRRA, an exempt cmmercial purchaser is ne that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin Under the NRRA, a surplus lines brker seeking t prcure r place nnadmitted insurance in Clrad fr an exempt cmmercial purchaser shall nt be required t satisfy any state requirement t make a due diligence search t determine whether the full amunt r type f insurance sught by such exempt cmmercial purchaser can be btained frm admitted insurers if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Clrad currently impses eligibility requirements n surplus lines insurers. Therefre, under the NRRA, as f July 21, 2011, Clrad may nt impse eligibility requirements n, r therwise establish eligibility criteria fr, nnadmitted insurers dmiciled in a U.S. jurisdictin, except: Clrad may require that the insurer be authrized t write the type f insurance in its dmiciliary jurisdictin; and Clrad may require that the insurer have capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin which equals the greater f: The minimum capital and surplus requirements under the law f Clrad; r $15,000,000 The insurance cmmissiner may waive the minimum capital and surplus requirements abve if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin. Under the NRRA, a state may nt prhibit a surplus lines brker frm placing nnadmitted insurance with, r prcuring nnadmitted insurance frm, a nnadmitted insurer dmiciled utside the U.S. that is listed n the Quarterly Listing f Alien Insurers maintained by the Internatinal Insurers Department f the NAIC. Natinal Prducer Database 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 27

28 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Under the NRRA, Clrad may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in Clrad unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 28

29 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Cnnecticut Hme State f the Insured NRRA definitin Premium Tax Signed NIMA; CT will tax and keep 100% at a rate f 4% until NIMA is peratinal Exempt Cmmercial Purchaser CT industrial insured exemptin + NRRA apprach Eligible Insurer N eligibility requirements. Prducer Licensing License required nly fr placements fr CT insureds; CT law silent regarding participatin in electrnic licensing database Effective Date July 1, 2011 (fr premium taxes) / July 21, 2011 (nn-tax prvisins) CT H 6652 Defining Hme State f the Insured Cnnecticut incrprates the definitin f hme state frm the NRRA. 38a-277(f)(1). Accrding t the NRRA, the hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence. Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract. Multi-State Risk Surplus Lines Premium Taxes The Cmmissiner f Revenue Services may enter int a cperative agreement, reciprcal agreement r cmpact with anther state r states t allcate amng the states the nnadmitted insurance premiums taxes paid t an insured's hme state. 38a-277(l)(1). Pursuant t the statute, Cnnecticut signed NIMA. Until NIMA becmes peratinal, Cnnecticut will tax and keep 100% f grss premiums, irrespective f the fact that the insurance plicy may cver prperties, risks r expsures lcated r t be perfrmed bth within and withut the state. 38a-743(c)(1). Cnnecticut will tax grss premiums at a rate f 4%. 38a-743(c)(2)-(3). Exempt Cmmercial Purchasers Cnnecticut has an industrial insured exemptin. That exemptin will remain in effect. As f July 1, 2011, the NRRA cmmercial purchaser exemptin will als be in effect. Cnnecticut has adpted the NRRA definitin f exempt cmmercial purchaser and the NRRA s exemptin language. 38a-741(b)(2). An exempt cmmercial purchaser is ne that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 29

30 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin Under 38a-741(2)(A)-(B), a surplus lines brker seeking t prcure r place nnadmitted insurance in Cnnecticut fr an exempt cmmercial purchaser shall nt be required t satisfy any state requirement t make a due diligence search t determine whether the full amunt r type f insurance sught by such exempt cmmercial purchaser can be btained frm admitted insurers if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Cnnecticut des nt currently have eligibility requirements fr surplus lines insurers. After July 21, 2011, if Cnnecticut chses t enact eligibility requirements, the requirements must match thse set ut in the NRRA. In additin, under the NRRA, Cnnecticut may nt prhibit a surplus lines brker frm placing nnadmitted insurance with, r prcuring nnadmitted insurance frm, a nnadmitted insurer dmiciled utside the U.S. that is listed n the Quarterly Listing f Alien Insurers maintained by the Internatinal Insurers Department f the NAIC. Natinal Prducer Database Under the NRRA, Cnnecticut may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in Cnnecticut unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 30

31 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Delaware Hme State f the Insured Premium Tax Exempt Cmmercial Purchaser Eligible Insurer Prducer Licensing Effective Date August 16, 2011 DE S 109 Defining Hme State f the Insured NRRA definitin 100% t DE at rate f 2% unless/until state jins a multistate agreement; calls fr a study by January 1, 2012 regarding entrance int an agreement NRRA apprach NRRA apprach: greater f $15MM capital / surplus r minimum required by DE (n licensure requirement) License required nly fr placements fr DE insureds; requires participatin in the NAIC prducer database The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence. Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract. 1904(9). Multi-State Risk Surplus Lines Premium Taxes The cmmissiner is authrized t enter int a multi-state agreement fr purpses f cllecting, allcating, and disbursing surplus lines premium taxes. 1903(a). Hwever, the Insurance Cmmissiner is instructed t first establish an NRRA Implementatin Revenue Study Cmmittee t determine the ptential impact f the state entering int a multistate agreement. By January 2012, the Cmmittee must determine whether jining an agreement wuld result in retentin f surplus lines tax revenue fr the state and if s, which agreement wuld result in higher tax revenue fr the state (a). In the event that a multi-state agreement becmes peratinal and the Cmmissiner determines that the state is likely t lse significant revenue by delaying entrance int an agreement, the Cmmissiner may enter int such an agreement after ntice and hearing (b). Unless and until Delaware enters int a multi-state agreement, the state will tax grss premiums, less returned premiums and exclusive f sums cllected fr taxes and examinatin fees, at a rate f 2%. 1925(b)-(c). Exempt Cmmercial Purchasers Delaware has adpted the NRRA apprach t exempt cmmercial purchasers. Under 1914(b), an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 31

32 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin Under 1914(a), brkers prcuring r placing insurance fr an exempt cmmercial purchaser are nt required t make a due diligence search t determine whether the full amunt r type f insurance sught by the exempt cmmercial purchaser can be btained frm an admitted insurer if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Delaware will impse eligibility requirements cnsistent with the NRRA. Under 1931(a), surplus lines brkers shall nt place cverage with a nnadmitted insurer unless, at the time f placement, the nnadmitted insurer pssesses capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin that equals the greater f the minimum capital and surplus requirements under the laws f Delaware r $15 millin. Delaware des nt impse a licensure eligibility requirement. The cmmissiner may waive the minimum capital and surplus requirement fr a nnadmitted insurer if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin. 1931(a). Brkers may place insurance with alien insurers that are listed n the Quarterly Listing f Alien Insurers maintained by the NAIC. 1931(a). Natinal Prducer Database The statute instructs the cmmissiner t participate in the NAIC prducer database r any equivalent database n and after July 21, (g) The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 32

33 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List District f Clumbia DC failed t enact surplus lines legislatin t implement NRRA prvisins befre July 21, Therefre, n July 21, 2011, the default NRRA prvisins tk effect preempting cnflicting state law. Hme State f the Insured NRRA definitin Premium Tax Beginning July 21, 2011, DC may nly cllect taxes n SL premiums where DC is the hme state f the insured; under current law, DC taxes 2% f net premium n a pr rata basis Exempt Cmmercial Purchaser NRRA apprach as f July 21, 2011 Eligible Insurer N eligibility requirements Prducer Licensing License required nly fr placements fr DC insureds; DC law silent regarding participatin in electrnic licensing database Effective Date July 21, 2011 Defining Hme State f the Insured Under the NRRA, the hme state is where an insured maintains its principal place f business r if the insured is an individual, the individual s principal residence. Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract. Multi-State Risk Surplus Lines Premium Taxes As f July 21, 2011, DC may nly cllect surplus lines premium taxes where it is the hme state f the insured. DC has nt entered int a multistate agreement r cmpact fr tax allcatin purpses. Based n current law and guidance frm the DC insurance department, DC taxes multistate plicies n a pr rata basis (n the prtin f the risk allcable t DC) at a rate f 2%. Exempt Cmmercial Purchasers As f July 21, 2011, the NRRA exemptin fr cmmercial purchasers will be effective in DC. Accrding t the NRRA, an exempt cmmercial purchaser is ne that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 33

34 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin Under the NRRA, a surplus lines brker seeking t prcure r place nnadmitted insurance in DC fr an exempt cmmercial purchaser shall nt be required t satisfy any state requirement t make a due diligence search t determine whether the full amunt r type f insurance sught by such exempt cmmercial purchaser can be btained frm admitted insurers if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria DC des nt currently impse insurer eligibility requirements. If DC chses t impse such requirements in the future, hwever, they must match the NRRA requirements. Under the NRRA, DC may nt impse eligibility requirements n, r therwise establish eligibility criteria fr, nnadmitted insurers dmiciled in a U.S. jurisdictin, except: DC may require that the insurer be authrized t write the type f insurance in its dmiciliary jurisdictin; and DC may require that the insurer have capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin which equals the greater f: The minimum capital and surplus requirements under the law f DC; r $15,000,000 The insurance cmmissiner may waive the minimum capital and surplus requirements abve if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin. Under the NRRA, a state may nt prhibit a surplus lines brker frm placing nnadmitted insurance with, r prcuring nnadmitted insurance frm, a nnadmitted insurer dmiciled utside the U.S. that is listed n the Quarterly Listing f Alien Insurers maintained by the Internatinal Insurers Department f the NAIC The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 34

35 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Natinal Prducer Database Under the NRRA, DC may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in DC unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 35

36 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Flrida Hme State f the Insured Premium Tax Exempt Cmmercial Purchaser Eligible Insurer Prducer Licensing Effective Date 2011 FL S 1816 NRRA definitin Signed NIMA; 100% t Flrida at rate f the state where the risk is lcated until NIMA is peratinal NRRA apprach NRRA apprach License required nly fr placements fr FL insureds; silent n participatin in prducer database May 26, 2011 (fr tax prvisins) Defining Hme State f the Insured Flrida incrprates the definitin f hme state frm the NRRA. Title XXXVII, (3). Thus, the hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence. Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract. Multi-State Risk Surplus Lines Premium Taxes Flrida has signed NIMA. Effective July 1, 2011, taxes are calculated n a grss premium basis at the rates f the states in which the risks are lcated. The service fee is calculated n a grss premium basis at Flrida s current rate schedule. Assessments are calculated based upn the Flrida allcated prtin f the premium. Althugh the statute authrizes the Department f Financial Services and the Office f Insurance Regulatin t enter int NIMA fr the purpse f cllecting and allcating surplus lines taxes fr multistate risks ( (1)), the legislature is given the pwer t instruct the Chief Financial Officer t withdraw frm any such agreement if the legislature finds that the agreement is nt in the best interests f the state (6). Flrida s rate f taxatin n surplus lines premiums is 5% (1). Flrida als impses a 0.3% service fee n the grss premium (3). Exempt Cmmercial Purchasers Flrida law des nt prvide fr exempt cmmercial purchasers. As f July 21, 2011, the NRRA cmmercial purchaser definitin and exemptin will be applicable in Flrida. Accrding t the NRRA, an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 36

37 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin Under the NRRA, a surplus lines brker seeking t prcure r place nnadmitted insurance in Flrida fr an exempt cmmercial purchaser shall nt be required t satisfy any state requirement t make a due diligence search t determine whether the full amunt r type f insurance sught by such exempt cmmercial purchaser can be btained frm admitted insurers if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Flrida currently impses eligibility requirements n surplus lines insurers. Therefre, under the NRRA, as f July 21, 2011, the NRRA eligibility requirements will becme the requirements in Flrida. Under the NRRA, Flrida may nt impse eligibility requirements n, r therwise establish eligibility criteria fr, nnadmitted insurers dmiciled in a U.S. jurisdictin, except: Flrida may require that the insurer be authrized t write the type f insurance in its dmiciliary jurisdictin; and Flrida may require that the insurer have capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin which equals the greater f: The minimum capital and surplus requirements under the law f Flrida; r $15,000,000 The insurance cmmissiner may waive the minimum capital and surplus requirements if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin. Under the NRRA, a state may nt prhibit a surplus lines brker frm placing nnadmitted insurance with, r prcuring nnadmitted insurance frm, a nnadmitted insurer dmiciled utside the U.S. that is listed n the Quarterly Listing f Alien Insurers maintained by the Internatinal Insurers Department f the NAIC. Natinal Prducer Database 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 37

38 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Flrida law is silent n participatin in a natinal prducer database. Under the NRRA, Flrida may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in Flrida unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 38

39 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Gergia Hme State f the Insured NRRA definitin + principal place f business definitin + principal residence definitin Premium Tax 100% t GA at the rate f the state where the risk is lcated unless/until state jins NIMA r SLIMPACT Exempt Cmmercial Purchaser NRRA apprach Eligible Insurer NRRA apprach Prducer Licensing License required nly fr placements fr GA insureds; GA law silent regarding participatin in prducer database Effective Date July 1, 2011 GA H 413 Defining Hme State f the Insured The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence (2)(A). The principal place f business is the state where the insured maintains its headquarters and where the insured s high-level fficers direct, cntrl, and crdinate the business s activities (2)(b)(4). The principal residence is the state where the individual resides fr the greatest number f days during a calendar year (2)(B)(5) Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium (2)(B). If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract (2)(B). Multi-State Risk Surplus Lines Premium Taxes The statute recgnizes that the states are still in flux as t whether they shuld enter int a multistate agreement, and if s, which agreement they shuld jin Therefre, the statute leaves it up t the Gvernr, in cnsultatin with the Insurance Cmmissiner, t enter int an agreement t allcate taxes If the Gvernr decides t enter int an agreement, it shall substantially fllw the frm f SLIMPACT r NIMA The Gvernr is t decide between the tw agreements based n what is in the best financial advantage f the state Each quarter, the prducer shall pay a tax f 4% n all premiums paid t the SL brker during the preceding quarter, less return premiums and exclusive f sums cllected t cver state r federal taxes (a). If the insurance cvers risks, prperties r expsures inside and utside f the state, the premium tax due frm the prducer is 4% n the prtin f the grss premiums allcated t Gergia PLUS an amunt equal t the prtin f the premiums allcated t ther states r territries n the basis f the tax rates and fees applicable t ther prperties, risks, r expsures lcated r t be perfrmed utside f this state (b). Exempt Cmmercial Purchasers 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 39

40 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Under (1), an exempt cmmercial purchasers is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin. Surplus Line Insurer Eligibility Criteria Surplus lines brkers shall nt place cverage with a nnadmitted insurer unless, at the time f placement, the nnadmitted insurer: Is authrized t write such insurance in its dmiciliary jurisdictin; and Pssesses capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin that equals the greater f the minimum capital and surplus requirements under the laws f Gergia r $15 millin (b)(1)(A). The Cmmissiner may waive the minimum capital and surplus requirement fr a nnadmitted insurer if he makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The directr may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin (b)(1)(A). Brkers may nt place insurance with any alien insurer unless the alien insurer appears n the NAIC s quarterly list f alien insurers (C). Natinal Prducer Database Gergia law is silent n participatin in a natinal prducer database. Under the NRRA, Gergia may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in Gergia unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 40

41 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Hawaii Hme State f the Insured NRRA definitin + principal place f business definitin + principal residence definitin Premium Tax Signed NIMA; 100% t Hawaii at the rate f the state where the risk is lcated until NIMA is peratinal Exempt Cmmercial Purchaser NRRA apprach Eligible Insurer NRRA apprach Prducer Licensing License required nly fr placements fr HI insureds; HI law silent regarding participatin in electrnic licensing database Effective Date July 21, 2011 HI H 1052 Defining Hme State f the Insured The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence. 431: Principal place f business means the state where the insured maintains its headquarters and where the insured s high-level fficers direct, cntrl and crdinate the business activities; r if the insured s high-level fficers direct, cntrl, and crdinate the business activities in mre than ne state, the state in which the greatest percentage f the insured s taxable premium fr that insurance cntract is allcated; r if the insured maintains its headquarters r the fficers direct, cntrl and crdinate the business activities utside any state, the state in which the greatest percentage f the insured s taxable premium fr that insurance cntract is allcated. 431: Principal residence is the state where the individual resides fr the greatest number f days during a calendar year; r if the insured s principal residence is lcated utside any state, the state in which the greatest percentage f the insured s taxable premium fr that insurance cntract is allcated. 431: Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. 431: If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract. 431: Multi-State Risk Surplus Lines Premium Taxes Hawaii has signed NIMA. Effective June 1, 2011, taxes are calculated n a grss premium basis at the rates f the states in which the risks are lcated. The statute authrizes the cmmissiner t enter int a cperative agreement, reciprcal agreement, r cmpact with ther states t facilitate and prvide fr the cllectin, allcatin, and disbursement f premium taxes attributable t the placement f surplus lines insurance. 432:8-315(e). Unless and until NIMA becmes peratinal, Hawaii will keep 100% f premium taxes, taxed at the rate f the state where the risk is lcated. 431: 8-315(a). The tax rate shall be in the amunt f 4.68% f grss premiums, less return premiums, n premiums allcated t Hawaii. The tax rate and fees f ther states shall be applied t the grss premiums, less return premiums, allcated t thse states. 431: 8-315(a). Exempt Cmmercial Purchasers 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 41

42 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Under 431:8-102, an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin. Brkers prcuring r placing insurance fr an exempt cmmercial purchaser are nt required t make a due diligence search t determine whether the full amunt r type f insurance sught by the exempt cmmercial purchaser can be btained frm an admitted insurer if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. 431: 8-301(b). Surplus Line Insurer Eligibility Criteria Accrding t 431: 8-302(c)(1), a surplus lines brker may place insurance with a nnadmitted insurer if: The insurer is authrized t place that type f insurance in its dmiciliary jurisdictin; and The insurer has capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin that is the greater f the minimum capital and surplus requirements under the laws f this state r $15 millin. The insurance cmmissiner may waive the minimum capital and surplus requirements fr unauthrized freign insurers if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin. Fr an alien insurer, the insurer shall be listed n the quarterly listing f alien insurers maintained by NAIC. 431: 8-302(c)(2). If an alien insurer isn t n the NAIC s list, the brker must demnstrate that the insurer has an irrevcable trust fund f at least $5.4 millin. 431: 8-302(c)(2)(A)-(B). Natinal Prducer Database Hawaii law is silent n whether Hawaii will participate in the NAIC prducer database r sme ther equivalent unifrm natinal database fr prducer licensing and renewals. Under the NRRA, Hawaii may nt cllect any fees 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 42

43 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List relating t licensing f an individual r entity as a surplus lines brker in Hawaii unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 43

44 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Idah Hme State f the Insured NRRA definitin + principal place f business definitin Premium Tax 100% t Idah at rate f 1.5% Exempt Cmmercial Purchaser NRRA apprach Eligible Insurer NRRA apprach Prducer Licensing License required nly fr placements fr ID insureds; allws participatin in NAIC r similar database by July 21, 2012 Effective Date July 21, ID H 179 Defining Hme State f the Insured The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence (7)(a)(i). Principal place f business is the state where the insured maintains its headquarters and where the insured s high-level fficers direct, cntrl and crdinate the business activities f the insured (7)(c). Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium (7)(a)(ii). If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract (7)(b). Multi-State Risk Surplus Lines Premium Taxes The statute des nt authrize the insurance cmmissiner t enter int a multi-state agreement fr tax allcatin purpses. Idah taxes surplus lines premiums at a rate f 1.5% (1). Under the statute, fr prperty and casualty insurance ther than wrker s cmpensatin insurance, if Idah is the insured s hme state, the tax payable shall be cmputed n the entire premium withut regard t whether the plicy cvers risks r expsures that are lcated in Idah (2). Fr all ther lines f insurance, if the surplus line plicy cvers risks r expsures nly partially in Idah, the tax shall be cmputed upn the prtin f the premium that is prperly allcable t the risks r expsures lcated in Idah (2). Exempt Cmmercial Purchasers As defined in (5)(a), an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 44

45 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin. Under (4), brkers prcuring r placing insurance fr an exempt cmmercial purchaser are nt required t make a due diligence search t determine whether the full amunt r type f insurance sught by the exempt cmmercial purchaser can be btained frm an admitted insurer if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Under (6)(a), a surplus lines brker may place insurance with a freign insurer if: The insurer is authrized t place that type f insurance in its dmiciliary jurisdictin; and The insurer has capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin that is the greater f the minimum capital and surplus requirements under the laws f this state r $15 millin. The insurance cmmissiner may waive the minimum capital and surplus requirement fr unauthrized freign insurers if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry (7). The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin (7). A surplus lines brker may place insurance with an alien insurer if the insurer is listed n the quarterly listing f alien insurers maintained by the NAIC (6)(b). Surplus lines brkers wh vilate these prvisins may be subject t a fine nt less than $100 and nt mre than $5,000 r the brker s license may be revked, suspended r nnrenewed (r bth the fine and a license penalty may be impsed) (9). Natinal Prducer Database The directr may participate in the NAIC prducer database r an equivalent unifrm natinal database if ne is created (5) The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 45

46 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Illinis Illinis failed t enact surplus lines legislatin t implement NRRA. Therefre, n July 21, 2011, the default NRRA prvisins tk effect preempting cnflicting state law. The Illinis Department f Insurance issued guidance n July 13, 2011 detailing hw the NRRA will be implemented in Illinis as f July 21, Hme State f the Insured NRRA definitin Premium Tax Beginning July 21, 2011, IL may nly cllect taxes n SL premiums where IL is the hme state f the insured; per DOI, fr plicies effective n r after July 21, IL will tax and keep 100% at a rate f 3.5% Exempt Cmmercial Purchaser IL Industrial Insured exemptin + NRRA apprach as f July 21, 2011 Eligible Insurer NRRA apprach as f July 21, 2011 Prducer Licensing License required nly fr placements fr IL insureds; IL law silent regarding participatin in electrnic licensing database Effective Date July 21, 2011 Defining Hme State f the Insured Under the NRRA, the hme state is where an insured maintains its principal place f business r if the insured is an individual, the individual s principal residence. Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract. Multi-State Risk Surplus Lines Premium Taxes Illinis has nt entered int a multistate agreement r cmpact fr tax allcatin purpses. As f July 21, 2011, therefre, Illinis may nly cllect surplus lines premium taxes where it is the hme state f the insured. Based n guidance issued by the state insurance department, fr plicies effective after July 21, 2011, Illinis will tax 100% f premiums, regardless f where the risk is lcated, at a rate f 3.5%. 215 Ill. Cmp. Stat. 5/445(3). Exempt Cmmercial Purchasers Illinis currently has an industrial insured exemptin. That exemptin will remain in effect. As f July 21, 2011, the NRRA cmmercial purchaser exemptin will als be in effect. Accrding t the NRRA, an exempt cmmercial purchaser is ne that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 46

47 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin Under the NRRA, a surplus lines brker seeking t prcure r place nnadmitted insurance in Illinis fr an exempt cmmercial purchaser shall nt be required t satisfy any state requirement t make a due diligence search t determine whether the full amunt r type f insurance sught by such exempt cmmercial purchaser can be btained frm admitted insurers if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Illinis currently impses eligibility requirements n surplus lines insurers. Therefre, under the NRRA, as f July 21, 2011, Illinis may nt impse eligibility requirements n, r therwise establish eligibility criteria fr, nnadmitted insurers dmiciled in a U.S. jurisdictin, except: Illinis may require that the insurer be authrized t write the type f insurance in its dmiciliary jurisdictin; and Illinis may require that the insurer have capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin which equals the greater f: The minimum capital and surplus requirements under the law f Illinis; r $15,000,000 The insurance cmmissiner may waive the minimum capital and surplus requirements abve if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin. Under the NRRA, a state may nt prhibit a surplus lines brker frm placing nnadmitted insurance with, r prcuring nnadmitted insurance frm, a nnadmitted insurer dmiciled utside the U.S. that is listed n the Quarterly Listing f Alien Insurers maintained by the Internatinal Insurers Department f the NAIC. Natinal Prducer Database Under the NRRA, Illinis may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in Illinis unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 47

48 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses. The guidance issued by the insurance department indicates that Illinis des expect t participate in a natinal database by the deadline f July 21, The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 48

49 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Indiana Hme State f the Insured Premium Tax Exempt Cmmercial Purchaser Eligible Insurer Prducer Licensing Effective Date July 1, IN S 578 Defining Hme State f the Insured NRRA definitin + principal place f business definitin SLIMPACT; until SLIMPACT implementatin, current law in place: IN taxes pr rata prtin f grss premiums at 2.5% Current IN industrial insured exemptin + NRRA apprach unless/until SLIMPACT rules issued N eligibility requirements unless/until SLIMPACT rules issued License required nly fr placements fr IN insureds; IN law silent regarding participatin in prducer licensing database The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence. IC (1)(A). Principal place f business is the state where the insured maintains its headquarters and where the insured s fficers direct, cntrl and crdinate the business activities f the insured. IC (1)-(2). Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. IC (1)(B). If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract. IC (2). Multi-State Risk Surplus Lines Premium Taxes Indiana adpted the SLIMPACT mdel apprach t multi-state premium tax allcatin. Under SLIMPACT, each cmpacting state must adhere t specified tax allcatin frmulas and data reprting requirements. IC (1). The Premium Tax Data Allcatin Frmula determines each cntracting state s premium allcatin. IC (1). Each state may then charge its wn rate f taxatin n that allcatin. IC (5). If a cmpacting state changes its rate f taxatin, the state must give 90 days ntice t the Cmpact Cmmissin. IC (6). The statute is silent n hw Indiana will handle multi-state risk taxatin prir t SLIMPACT s implementatin. Current Indiana law requires licensed surplus lines prducers t cllect frm the insured and remit t the department fr use and benefit nly in Indiana a tax f 2.5% f all grss premiums upn all plicies and cntracts prcured by the surplus lines prducer. IC (a). This ccurs n r befre February 1 and August 1 f each year. IC (a). In practice, this requirement is interpreted by the Indiana Insurance Department as cvering nly the risks lcated in Indiana (pr rata). Until SLIMPACT is implemented, the current taxatin law is still applicable. Exempt Cmmercial Purchasers Indiana currently has an industrial insured exemptin. That exemptin will remain in effect. As f July 21, 2011, the NRRA cmmercial purchaser exemptin will als be effective The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 49

50 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Althugh the statute is silent n the definitin f exempt cmmercial purchasers, the Cmpact Cmmissin established under SLIMPACT has general authrity t prmulgate rules fr cmpacting states t implement the express prvisins f the NRRA (including the exempt cmmercial purchaser prvisin). IC Under the NRRA, an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin Under the NRRA, a surplus lines brker seeking t prcure r place nnadmitted insurance in Indiana fr an exempt cmmercial purchaser shall nt be required t satisfy any state requirement t make a due diligence search t determine whether the full amunt r type f insurance sught by such exempt cmmercial purchaser can be btained frm admitted insurers if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Indiana des nt impse eligibility requirements n surplus lines insurers. Such requirements culd cme int effect eventually, hwever, thrugh SLIMPACT. The Cmpact Cmmissin is charged with prmulgating unifrm rules fr cmpacting states regarding freign insurer eligibility requirements as authrized by the NRRA. IC Natinal Prducer Database The statute is silent n participatin in a natinal prducer database. Under the NRRA, Indiana may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in Indiana unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 50

51 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Iwa Iwa failed t enact surplus lines legislatin t implement NRRA prvisins befre the legislature adjurned. Therefre, n July 21, 2011, the default NRRA prvisins tk effect preempting cnflicting state law. Hme State f the Insured NRRA definitin Premium Tax Beginning July 21, 2011, IA may nly cllect taxes n SL premiums where IA is the hme state f the insured; where IA is the hme state f the insured, IA will tax premiums n a pr rata basis at 1% Exempt Cmmercial Purchaser NRRA apprach as f July 21, 2011 Eligible Insurer N eligibility requirements Prducer Licensing License required nly fr placements fr IA insureds; IA law silent regarding participatin in electrnic licensing database Effective Date July 21, 2011 Defining Hme State f the Insured Accrding t the NRRA, the hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence. Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract. Multi-State Risk Surplus Lines Premium Taxes Iwa has nt entered int a multistate agreement r cmpact fr tax allcatin purpses. As f July 21, 2011, therefre, Iwa may nly cllect surplus lines premium taxes where Iwa is the hme state f the insured. Under current Iwa law, if a plicy cvers risks r expsures nly partly in the state, the tax payable shall be cmputed n the prtins f the premium which are prperly allcable t the risks r expsures lcated in Iwa. 507A.9(2). Accrding t guidance frm the Insurance Department, Iwa s premium tax rate n surplus lines plicies is 1%. Exempt Cmmercial Purchasers Under the NRRA, an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 51

52 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin Under the NRRA, a surplus lines brker seeking t prcure r place nnadmitted insurance in Iwa fr an exempt cmmercial purchaser shall nt be required t satisfy any state requirement t make a due diligence search t determine whether the full amunt r type f insurance sught by such exempt cmmercial purchaser can be btained frm admitted insurers if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Iwa des nt currently have eligibility requirements fr surplus lines insurers. After July 21, 2011, if Iwa chses t enact eligibility requirements, the requirements must match thse set ut in the NRRA. In additin, under the NRRA, Iwa may nt prhibit a surplus lines brker frm placing nnadmitted insurance with, r prcuring nnadmitted insurance frm, a nnadmitted insurer dmiciled utside the U.S. that is listed n the Quarterly Listing f Alien Insurers maintained by the Internatinal Insurers Department f the NAIC. Natinal Prducer Database Under the NRRA, Iwa may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in Iwa unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 52

53 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Kansas Hme State f the Insured NRRA definitin + principal place f business definitin Premium Tax SLIMPACT; allws Kansas t keep 100% pending SLIMPACT implementatin, taxed at the rate f the state where the risk is lcated Exempt Cmmercial Purchaser NRRA apprach unless/until SLIMPACT rules issued Eligible Insurer NRRA apprach (licensure in dmiciliary jurisdictin + greater f $15MM capital / surplus r minimum required by KS) unless/until SLIMPACT rules issued Prducer Licensing License required nly fr placements fr KS insureds; KS law silent regarding participatin in prducer licensing database Effective Date July 1, KS H 2076 Defining Hme State f the Insured The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence. K.S.A Supp (Art. II)(12). Principal place f business is the state where the insured maintains its headquarters and where the insured s high-level fficers direct, cntrl, and crdinate the business activities f the insured. K.S.A Supp (Art. II)(23). Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. K.S.A Supp (Art. II)(12). If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract. K.S.A Supp (Art. II)(12). Multi-State Risk Surplus Lines Premium Taxes Kansas adpted the SLIMPACT mdel apprach t multi-state premium tax allcatin. Under SLIMPACT, each cmpacting state must adhere t specified tax allcatin frmulas and data reprting requirements. The Premium Tax Data Allcatin Frmula determines each cntracting state s premium allcatin. Each state may then charge its wn rate f taxatin n that allcatin. If a cmpacting state changes its rate f taxatin, the state must give 90 days ntice t the Cmpact Cmmissin. Until SLIMPACT is peratinal, n March 1 f each year, the SL prducer shall pay the cmmissiner a sum based n the ttal grss premiums charged, less any return premiums c(a). Where the insurance cvers risks, prperties r expsures inside and utside f the state, the premium tax due frm the prducer is: 6% n the prtin f the grss premiums allcated t Kansas, PLUS an amunt equal t the prtin f the premiums allcated t ther states r territries n the basis f the tax rates and fees applicable t ther prperties, risks, r expsures lcated r t be perfrmed utside f this state, LESS returned premiums c(a)(1) (3). Exempt Cmmercial Purchasers 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 53

54 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List The statute is silent n the definitin f exempt cmmercial purchasers, but the Cmpact Cmmissin established under SLIMPACT has general authrity t prmulgate rules fr cmpacting states t implement the express prvisins f the NRRA (including exempt cmmercial purchaser prvisin). On July 21, 2011, the NRRA exempt cmmercial purchaser prvisin will be in effect. Under the NRRA, an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin Under the NRRA, a surplus lines brker seeking t prcure r place nnadmitted insurance in Kansas fr an exempt cmmercial purchaser shall nt be required t satisfy any state requirement t make a due diligence search t determine whether the full amunt r type f insurance sught by such exempt cmmercial purchaser can be btained frm admitted insurers if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Kansas currently impses eligibility requirements n surplus lines insurers. Therefre, under the NRRA, as f July 21, 2011, the NRRA eligibility requirements will becme the requirements in Kansas unless/until the Cmpact Cmmissin prmulgates rules fr cmpacting states regarding freign insurer eligibility requirements. Under the NRRA, Kansas may nt impse eligibility requirements n, r therwise establish eligibility criteria fr, nnadmitted insurers dmiciled in a U.S. jurisdictin, except: Kansas may require that the insurer be authrized t write the type f insurance in its dmiciliary jurisdictin; and Kansas may require that the insurer have capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin which equals the greater f: The minimum capital and surplus requirements under the law f Kansas; r $15,000,000 Under the NRRA, the insurance cmmissiner may waive the minimum capital and surplus requirements abve if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 54

55 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List reputatin within the industry. The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin. Under the NRRA, a state may nt prhibit a surplus lines brker frm placing nnadmitted insurance with, r prcuring nnadmitted insurance frm, a nnadmitted insurer dmiciled utside the U.S. that is listed n the Quarterly Listing f Alien Insurers maintained by the Internatinal Insurers Department f the NAIC. Natinal Prducer Database The statute is silent n participatin in a natinal prducer database. Under the NRRA, Kansas may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in Kansas unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 55

56 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Kentucky Hme State f the Insured Premium Tax Exempt Cmmercial Purchaser Eligible Insurer Prducer Licensing Effective Date 2011 KY H 167 NRRA definitin + principal place f business definitin SLIMPACT; 100% t KY at a rate f 3% until agreement is implemented KY Industrial Insured + NRRA apprach unless/until SLIMPACT rule issued NRRA apprach unless/until SLIMPACT rule issued License required nly fr placements fr KY insureds; recgnizes federal requirement fr electrnic licensure by July 21, 2012, but silent n participatin Date SLIMPACT effective Defining Hme State f the Insured The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence Ky. Acts ch. 48, Art. II(12)(A)(i). Principal place f business is the state where the insured maintains its headquarters and where the insured s high-level fficers direct, cntrl and crdinate the business activities f the insured Ky. Acts ch. 48, Art. II(23). Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. Id. Art. II(12)(A)(ii). If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract. Id. Art. II(12)(B). Multi-State Risk Surplus Lines Premium Taxes Kentucky adpted the SLIMPACT mdel apprach t multi-state premium tax allcatin. Under SLIMPACT, each cmpacting state must adhere t specified tax allcatin frmulas and data reprting requirements. Id. Art. IV(1). The Premium Tax Data Allcatin Frmula determines each cntracting state s premium allcatin. Id. Art. IV(1). Each state may then charge its wn rate f taxatin n that allcatin. Id. Art. IV(5). If a cmpacting state changes its rate f taxatin, the state must give 90 days ntice t the Cmpact Cmmissin (the multi-state gverning bdy fr the SLIMPACT system). Id. Art. IV(6). Accrding t guidance issued by the Kentucky Department f Insurance n June 3, 2011, until SLIMPACT is peratinal, Kentucky will tax 100% f multi-state premiums at a rate f 3% when Kentucky is the hme state f the insured. When SLIMPACT is peratinal, Kentucky will tax accrding t the agreement s allcatin schedule. Exempt Cmmercial Purchasers Kentucky currently has an industrial insured exemptin. That exemptin will remain in effect. As f July 21, 2011, the NRRA cmmercial purchaser exemptin will als be effective The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 56

57 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List The statute is silent n the definitin f exempt cmmercial purchasers, but the Cmpact Cmmissin established under SLIMPACT has general authrity t prmulgate rules fr cmpacting states t implement the express prvisins f the NRRA Ky. Acts ch. 48, Art. III(2). On July 21, 2011, the NRRA exempt cmmercial purchaser prvisin will be in effect. Accrding t the NRRA, an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin Under the NRRA, a surplus lines brker seeking t prcure r place nnadmitted insurance in Kentucky fr an exempt cmmercial purchaser shall nt be required t satisfy any state requirement t make a due diligence search t determine whether the full amunt r type f insurance sught by such exempt cmmercial purchaser can be btained frm admitted insurers if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Kentucky des nt currently have eligibility requirements fr surplus lines insurers. After July 21, 2011, if Kentucky chses t enact eligibility requirements, the requirements must match thse set ut in the NRRA r match natinwide unifrm standards adpted by all f the states. The Cmpact Cmmissin is charged with prmulgating unifrm rules fr cmpacting states regarding freign insurer eligibility requirements as authrized by the NRRA. Id. Art. III(3). Under the NRRA, Kentucky may nt impse eligibility requirements n, r therwise establish eligibility criteria fr, nnadmitted insurers dmiciled in a U.S. jurisdictin, except: Kentucky may require that the insurer be authrized t write the type f insurance in its dmiciliary jurisdictin; and Kentucky may require that the insurer have capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin which equals the greater f: The minimum capital and surplus requirements under the law f Kentucky; r $15,000,000 The insurance cmmissiner may waive the minimum capital and surplus requirements abve if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 57

58 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin. Under the NRRA, a state may nt prhibit a surplus lines brker frm placing nnadmitted insurance with, r prcuring nnadmitted insurance frm, a nnadmitted insurer dmiciled utside the U.S. that is listed n the Quarterly Listing f Alien Insurers maintained by the Internatinal Insurers Department f the NAIC. Natinal Prducer Database The statute is silent n participatin in a natinal prducer licensing database. Hwever, the statute s preamble recgnizes that within tw years f enactment f the NRRA, all states must participate in the NAIC prducer database, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines licensees and the renewal f such licenses if a state wants t cntinue cllecting fees related t surplus lines licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 58

59 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Luisiana Hme State f the Insured NRRA definitin & Principal Place f Business & Principal Residence Premium Tax Signed NIMA; until NIMA is peratinal, will tax prtin allcable t LA at 5% + prtin allcable t ther NIMA states at rate f state where risk is lcated Exempt Cmmercial Purchaser NRRA apprach after July 21 Eligible Insurer NRRA apprach after July 21 Prducer Licensing License required nly fr placements fr LA insureds; LA law silent regarding participatin in electrnic licensing database Effective Date July 1, 2011 (Date LA jins NIMA, per statute) / July 21, 2011 (DOI Guidance) LA H 469 Defining Hme State f the Insured The hme state is where an insured maintains its principal place f business r if the insured is an individual, the individual s principal residence. La. Rev. Stat. Ann. 22:439(F). Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. If mre than ne insured frm an affiliate grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract. Accrding t Insurance Department guidance issued n July 21, 2011, principal place f business means (a) the state where the insured maintains its headquarters and where the insured s high-level fficers direct, cntrl and crdinate the business f activities; r (b) if the insured s high-level fficers direct, cntrl and crdinate the business activities in mre than ne state, the state in which the greatest percentage f the insured s taxable premium fr that insurance cntract is allcated; r (c) if the insured maintains its headquarters r the insured s high-level ffices direct, cntrl and crdinate the business activities utside any state, the state t which the greatest percentage f the insured s taxable premium fr that insurance cntract is allcated. Principal residence means (a) the state where the insured resides fr the greatest number f days during a calendar year; r (b) if the insured s principal residence is lcated utside any state, the state t which the greatest percentage f the insured s taxable premium fr that insurance cntract is allcated. Multi-State Risk Surplus Lines Premium Taxes Under La. Rev. Stat. Ann. 22:439, the Cmmissin shall n behalf f the state f Luisiana enter int NIMA r ther cperative agreements with ther states fr tax allcatin purpses (this prvisin became effective upn the Gvernr signing the bill). Pursuant t the statute, Luisiana has signed NIMA. Accrding t guidance issued by the Insurance Department, fr plicies effective between July 1 and July 20, 2011, where Luisiana is the hme state f the insured, Luisiana will nly cllect surplus lines premium taxes n the prtin f the risk allcated t that state (i.e., n a pr rata basis). Fr plicies effective n r after July 21, 2011, Luisiana will tax 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 59

60 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List accrding t the fllwing frmula: the prtin allcated t Luisiana at a rate f 5%, PLUS the prtin allcated t ther NIMA states at the rate f the NIMA state where the risk is lcated, LESS returned premiums, and LESS the taxes n risks lcated in nn-nima states. Until NIMA is peratinal, hwever, existing law will apply. Currently, where a plicy cvers risks r expsures nly partially in the state, the tax is payable upn the prtin f the premium that is prperly allcable t the risks r expsures in the state. The tax rate is 5%. La. Rev. Stat. Ann. 22:439(A)(2) & (C). Exempt Cmmercial Purchasers Luisiana s statute is silent n exempt cmmercial purchasers. Therefre, as f July 21, 2011, the NRRA apprach will apply by default. Under the NRRA, an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin Under the NRRA, a surplus lines brker seeking t prcure r place nnadmitted insurance in Luisiana fr an exempt cmmercial purchaser shall nt be required t satisfy any state requirement t make a due diligence search t determine whether the full amunt r type f insurance sught by such exempt cmmercial purchaser can be btained frm admitted insurers if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Luisiana des impse eligibility requirements n freign insurers. Therefre, beginning July 21, Luisiana will have t cmply with the NRRA apprach t eligibility requirements. Under the NRRA, a state may nly impse the fllwing eligibility requirements fr nnadmitted insurers dmiciled in a U.S. jurisdictin: the insurer must be authrized t write the type f insurance in its dmiciliary jurisdictin; and the insurer must have capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin which equals the greater f: The minimum capital and surplus requirements under the law f Luisiana; r $15,000, The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 60

61 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List The insurance cmmissiner may waive the minimum capital and surplus requirements abve if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin. In additin, under the NRRA, Luisiana may nt prhibit a surplus lines brker frm placing nnadmitted insurance with, r prcuring nnadmitted insurance frm, a nnadmitted insurer dmiciled utside the U.S. that is listed n the Quarterly Listing f Alien Insurers maintained by the Internatinal Insurers Department f the NAIC. Natinal Prducer Database Luisiana s law is silent n jining the NAIC prducer database r any ther unifrm natinal database fr prducer licensing and renewal f licenses. Under the NRRA, Luisiana may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in Luisiana unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 61

62 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Maine Hme State f the Insured Premium Tax Exempt Cmmercial Purchaser Eligible Insurer Prducer Licensing Effective Date July 21, 2011 ME H 993 Defining Hme State f the Insured NRRA definitin Authrizes multistate allcatin agreement fllwing a study; ME keeps 100% (at a rate f 3%) unless/until agreement becmes effective NRRA apprach NRRA apprach License required nly fr placements fr ME insureds; ME law silent regarding participatin in electrnic licensing database The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence. Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract. 24-A MRSA 2003(7). Multi-State Risk Surplus Lines Premium Taxes The State Tax Assessr may, in cnsultatin with the Department f Prfessinal and Financial Regulatin, Bureau f Insurance, enter int a multi-state agreement in accrdance with the NRRA fr the reprting f nnadmitted insurance premiums and the cllectin and allcatin f nnadmitted insurance taxes. The State Tax Assessr may nt enter int an agreement unless the Assessr has: cmpleted a fiscal analysis f the impact f the agreement that examines the effects n grss premium tax receipts and cncluded that entering int the agreement is in the state s best financial interests, des nt significantly increase administrative burden and cst t the state, and is cnsistent with the requirements f the NRRA. 36 MRSA Unless and until Maine enters int a tax allcatin agreement, Maine will keep 100% f premium taxes. 36 MRSA All grss direct insurance premiums paid t insurers that d nt have certificates f authrity t d business in Maine are subject t taxatin if this state is the insured s hme state. The rate f taxatin is 3%. 36 MRSA 2531(2). Exempt Cmmercial Purchasers Under 24-A MRSA 2003(6), an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 62

63 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin. Brkers prcuring r placing insurance fr an exempt cmmercial purchaser are nt required t make a due diligence search t determine whether the full amunt r type f insurance sught by the exempt cmmercial purchaser can be btained frm an admitted insurer if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. 24-A MRSA 2002-A(3)(E). Surplus Line Insurer Eligibility Criteria Accrding t 24-A MRSA 2007(3), a surplus lines brker may place insurance with a nnadmitted insurer if: The insurer is authrized t place that type f insurance in its dmiciliary jurisdictin; and The insurer has capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin that is the greater f the minimum capital and surplus requirements under the laws f this state r $15 millin. The insurance cmmissiner may waive the minimum capital and surplus requirements fr unauthrized freign insurers if he makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin. 24-A MRSA 2007(4). A surplus lines brker may place insurance with an alien insurer if that insurer is listed n the quarterly list f alien insurers maintained by the NAIC. 24-A MRSA 2007(5). Natinal Prducer Database Maine law is silent as t whether Maine will participate in the NAIC prducer database r sme ther equivalent unifrm natinal database fr prducer licensing and renewals. Under the NRRA, Maine may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in Maine unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 63

64 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Maryland Hme State f the Insured NRRA definitin Premium Tax 100% t MD at rate f 3% unless/until state jins a multistate agreement; calls fr a study f ther states experience with agreements by Jan. 1, 2012 Exempt Cmmercial Purchaser MD industrial insured exemptin + NRRA apprach t ECPs Eligible Insurer NRRA apprach: licensure in dmiciliary jurisdictin + greater f $15MM capital / surplus r minimum required by MD Prducer Licensing License required nly fr placements fr MD insureds; requires participatin in the NAIC prducer database Effective Date July 1, 2011 (tax prvisins July 21, 2011) MD H 959 / MD S 694 Defining Hme State f the Insured The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence. Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract (e). Multi-State Risk Surplus Lines Premium Taxes The statute stipulates that premiums charged fr surplus lines insurance are subject t a premium receipts tax f 3% n all grss premiums, less any returned premiums charged fr surplus lines insurance (b). Fr plicies effective befre July 21, 2011, if the plicy cvers risks lcated r t be perfrmed in and utside f the state, the premium receipts tax shall be cmputed at 3% f the premium that is prperly allcable t the risks lcated in the state (c). Fr plicies effective n r after July 21, 2011, if the state is the insured s hme state, the premium receipts tax shall be cmputed n the entire premium at a rate f 3% (d). The statute instructs the cmmissiner t, n r befre January 1, 2012, cnduct a study f varius appraches taken by ther states t implement the NRRA and reprt the findings t the Senate Finance Cmmittee and Huse Ecnmic Matters Cmmittee. Specifically, the study must include a review f the executin f agreements r cmpacts by ther states, the impact n premium receipt tax revenue based n the apprach taken, the impact f Maryland s apprach n premium receipt tax revenue, and guidance prvided frm grups such as NCOIL and NAIC (Sec. 2)(a)-(b). Exempt Cmmercial Purchasers Maryland currently has an industrial insured exemptin. That exemptin will remain effective. The NRRA cmmercial purchaser exemptin (incrprated int Maryland law) will als be in effect as f July 1, The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 64

65 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List The statute incrprates by reference the NRRA definitin f exempt cmmercial purchaser (d). Accrding t the NRRA, an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin Brkers prcuring r placing insurance fr an exempt cmmercial purchaser are nt required t make a due diligence search t determine whether the full amunt r type f insurance sught by the exempt cmmercial purchaser can be btained frm an admitted insurer if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer (d)(1) (2). Surplus Line Insurer Eligibility Criteria Surplus lines brkers shall nt place cverage with a nnadmitted insurer unless, at the time f placement, the nnadmitted insurer: Is authrized t write such insurance in its dmiciliary jurisdictin; and Pssesses capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin that equals the greater f the minimum capital and surplus requirements under the laws f the dmiciliary jurisdictin r $15 millin (a) (b) The cmmissiner may waive the minimum capital and surplus requirement fr a nnadmitted insurer if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The directr may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin (b)(1)-(3). Natinal Prducer Database The statute instructs the cmmissiner t participate in the NAIC prducer database (d) The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 65

66 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Massachusetts Hme State f the Insured NRRA definitin (withut affiliated grups prvisin) Premium Tax Multistate allcatin agreement authrized fllwing public ntice and cmment; 100% t MA at rate f state where risk is lcated unless/until MA enters agreement Exempt Cmmercial Purchaser NRRA apprach (by default) Eligible Insurer NRRA apprach (by preemptin) Prducer Licensing License required nly fr placements fr MA insureds; silent n participatin in a prducer database Effective Date July 11, 2011 MA H 3535 Defining Hme State f the Insured The hme state is where an insured maintains its principal place f business r if the insured is an individual, the individual s principal residence. Principal place f business is the state where the insured maintains its headquarters and where the insured s high-level fficers direct, cntrl and crdinate the business activities f the insured. Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium (a). The statute des nt include the affiliated grups prvisin f the NRRA definitin. Multi-State Risk Surplus Lines Premium Taxes The statute authrizes the cmmissiner t enter int a multi-state agreement fr tax allcatin purpses fllwing a perid fr public ntice and cmment. In determining whether t enter int such an agreement, the cmmissiner may cnsider: efficiencies t be achieved, revenue t be generated, r any ther material factr. Prir t entering int any agreement r cmpact, the cmmissiner shall prvide public ntice and an pprtunity fr cmment theren (e). Unless and until Massachusetts enters int a multi-state agreement fr tax allcatin purpses, fr plicies that cver risk r expsures lcated r t be perfrmed bth in and ut f the state, Massachusetts will tax 100% f the premium at the rate f the state where the risk r expsure is lcated. Fr the prtin f the risks allcated t Massachusetts, the rate is 4% (d). Exempt Cmmercial Purchasers The Massachusetts statute recgnizes a diligent search exemptin fr cmmercial plicyhlders (b)(iii) (iv). Hwever, the exemptin des nt match the NRRA apprach t exempt cmmercial purchasers. Therefre, bth the Massachusetts exemptin and the NRRA exemptin will be in effect beginning July 21, The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 66

67 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Under the NRRA, an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin Brkers prcuring r placing insurance fr an exempt cmmercial purchaser are nt required t make a due diligence search t determine whether the full amunt r type f insurance sught by the exempt cmmercial purchaser can be btained frm an admitted insurer if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria The Massachusetts statute impses freign insurer eligibility requirements (c)(i). Hwever, the requirements under the statute d nt match the requirements under the NRRA. Therefre, as f July 21, 2011, the Massachusetts requirements will be preempted by the NRRA. Under the NRRA, if a state chses t impse eligibility restrictins n freign insurers, the nly requirements the state may impse are: Requiring the insurer be licensed in its dmiciliary jurisdictin; and Requiring the insurer t pssess capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin equal t the greater f the minimum capital and surplus requirements under the laws f the hme state r $15 millin. Under the NRRA, an insurance cmmissiner may waive the minimum capital and surplus requirement fr a nnadmitted insurer if he makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. But the cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin. Under the NRRA, a state cannt prhibit surplus lines prducers frm placing insurance with alien insurers that appear n the quarterly listing f alien insurers maintained by the NAIC Therefre, Massachusetts may maintain separate requirements fr alien insurers ( (c)(iii)), but the state cannt prevent placement f insurance with thse that appear n the NAIC list The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 67

68 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Natinal Prducer Database The statute is silent as t whether Massachusetts will participate in the NAIC prducer database r sme ther equivalent unifrm natinal database fr prducer licensing and renewals. Under the NRRA, Massachusetts may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in Massachusetts unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 68

69 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Michigan Michigan failed t enact surplus lines legislatin t implement NRRA prvisins befre July 21, Therefre, n July 21, 2011, the default NRRA prvisins tk effect preempting cnflicting state law. Hme State f the Insured NRRA definitin Premium Tax Beginning July 21, 2011, MI may nly cllect taxes n SL premiums where MI is the hme state f the insured; under current law, MI taxes 2% f net premium n a pr rata basis Exempt Cmmercial Purchaser NRRA apprach as f July 21, 2011 Eligible Insurer NRRA apprach as f July 21, 2011 Prducer Licensing License required nly fr placements fr MI insureds; MI law silent regarding participatin in electrnic licensing database Effective Date July 21, 2011 Defining Hme State f the Insured Under the NRRA, the hme state is where an insured maintains its principal place f business r if the insured is an individual, the individual s principal residence. Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract. Multi-State Risk Surplus Lines Premium Taxes As f July 21, 2011, Michigan may nly cllect surplus lines premium taxes where it is the hme state f the insured. Michigan has nt entered int a multistate agreement r cmpact fr tax allcatin purpses. Based n current law and guidance frm the Michigan Department f Insurance, Michigan taxes 2% n the prtin f net premium prperly allcable t the risks r expsures lcated in Michigan. Exempt Cmmercial Purchasers As f July 21, 2011, the NRRA exemptin fr cmmercial purchasers will be effective in Michigan. Accrding t the NRRA, an exempt cmmercial purchaser is ne that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 69

70 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin Under the NRRA, a surplus lines brker seeking t prcure r place nnadmitted insurance in Michigan fr an exempt cmmercial purchaser shall nt be required t satisfy any state requirement t make a due diligence search t determine whether the full amunt r type f insurance sught by such exempt cmmercial purchaser can be btained frm admitted insurers if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Michigan currently impses eligibility requirements n surplus lines insurers. Therefre, under the NRRA, as f July 21, 2011, Michigan may nt impse eligibility requirements n, r therwise establish eligibility criteria fr, nnadmitted insurers dmiciled in a U.S. jurisdictin, except: Michigan may require that the insurer be authrized t write the type f insurance in its dmiciliary jurisdictin; and Michigan may require that the insurer have capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin which equals the greater f: The minimum capital and surplus requirements under the law f Michigan; r $15,000,000 The insurance cmmissiner may waive the minimum capital and surplus requirements abve if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin. Under the NRRA, a state may nt prhibit a surplus lines brker frm placing nnadmitted insurance with, r prcuring nnadmitted insurance frm, a nnadmitted insurer dmiciled utside the U.S. that is listed n the Quarterly Listing f Alien Insurers maintained by the Internatinal Insurers Department f the NAIC. Natinal Prducer Database Under the NRRA, Michigan may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in Michigan unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 70

71 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 71

72 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Minnesta Hme State f the Insured NRRA definitin Premium Tax MN will tax 100% at a rate f 3% Exempt Cmmercial Purchaser NRRA apprach Eligible Insurer NRRA apprach Prducer Licensing License required nly fr placements fr MN insureds; allws participatin in NAIC r similar prducer database Effective Date July 21, 2011 MN S 1045 / MN 1 st Special Sessin Huse File 0020 Defining Hme State f the Insured The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence. Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract. 60A.196(f). Multi-State Risk Surplus Lines Premium Taxes The statute des nt authrize the insurance cmmissiner t enter int a multi-state agreement fr tax allcatin purpses. When Minnesta is the hme state f the insured, 100 % f the grss premiums are taxable in Minnesta with n allcatin f the tax t ther states. 297I.05(subd. 7)(c). Minnesta s tax rate is 3%. 297I.05(subd. 7)(a). Exempt Cmmercial Purchasers An exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin 60A.196(e) Brkers prcuring r placing insurance fr an exempt cmmercial purchaser are nt required t make a due diligence search t determine whether the full amunt r type f insurance sught by the exempt cmmercial purchaser can be btained frm an admitted insurer if: 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 72

73 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. 60A.201 (Subd. 5) (1) (2). Surplus Line Insurer Eligibility Criteria A surplus lines brker may place insurance with a freign insurer if: The insurer is authrized t place that type f insurance in its dmiciliary jurisdictin; and The insurer has capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin that is the greater f the minimum capital and surplus requirements under the laws f this state r $15 millin. 60A.206 (Subd. 3)(b). The insurance cmmissiner may waive the minimum capital and surplus requirement fr unauthrized freign insurers if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin. 60A.206 (Subd. 3)(b). Eligible SL insurers dmiciled utside f the U.S. shall file an annual statement n the standard financial reprting frmat as prescribed by the NAIC and an annual financial audit perfrmed by an independent accunting firm. The cmmissiner shall nt prhibit a SL brker frm placing nnadmitted insurance with, r prcuring nnadmitted insurance frm, an alien insurer that is included n the Quarterly Listing f Alien Insurers maintained by the NAIC. 60A.206 (Subd. 3)(d). Natinal Prducer Database Fr carrying ut the prvisins f the NRRA, the cmmissiner is authrized t utilize the NAIC prducer database r any ther equivalent unifrm natinal database fr licensure f SL brkers and renewal f licenses. 60A.198 (Subd. 7) The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 73

74 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Mississippi Hme State f the Insured NRRA definitin + principal place f business definitin + principal residence definitin Premium Tax Signed NIMA; MS keeps 100% (at a rate f 4%) unless/until agreement becmes peratinal Exempt Cmmercial Purchaser NRRA definitin Eligible Insurer NRRA apprach: greater f $15MM capital / surplus r minimum required by MS (n licensure requirement) Prducer Licensing License required nly fr placements fr MS insureds; MS law silent regarding participatin in electrnic licensing database Effective Date July 21, 2011 (per DOI guidance) MS H 785 Defining Hme State f the Insured The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence (2)(a)(i)(1). Principal place f business means the state where the insured maintains its headquarters and where the insured s high-level fficers direct, cntrl and crdinate the business activities (2)(e). Principal residence is the state where the individual resides fr the greatest number f days during a calendar year (2)(f). Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium (2)(a)(i)(2). If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract (2)(a)(ii). Multi-State Risk Surplus Lines Premium Taxes The statute authrizes the cmmissiner t enter int an agreement, cmpact r therwise establish prcedures t allcate amng states the premium taxes paid t an insured s hme state accrding t the NRRA (1). Pursuant t the statute, Mississippi signed NIMA. Until NIMA is peratinal, Mississippi will keep 100% f premium taxes. Surplus lines prducers shall reprt t the Insurance Cmmissiner within 30 days frm January 1 st and July 1 st each year the amunt received by him fr insurance frm nnadmitted insurers and shall pay t the Cmmissiner a 4% tax n that amunt Grss Premiums means the ttal grss amunt f premiums receive n each and every SL insurance cntract, less returned premiums Exempt Cmmercial Purchasers Under (2)(b), an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 74

75 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin. Brkers prcuring r placing insurance fr an exempt cmmercial purchaser are nt required t make a due diligence search t determine whether the full amunt r type f insurance sught by the exempt cmmercial purchaser can be btained frm an admitted insurer if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer (2)(a)(i) (ii). Surplus Line Insurer Eligibility Criteria The cmmissiner is required t annually prduce a list f nnadmitted insurers fund eligible t write business in Mississippi (1). An insurer is eligible if the insurer has capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin the greater f: the capital and surplus required f a cmpany licensed t d business in Mississippi r $15 millin (1)(a)(i) (ii). The insurance cmmissiner may waive these minimum capital and surplus requirements and a nnadmitted insurer may becme eligible if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry (1)(b). The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin (1)(b). Alien insurers shall have capital and surplus meeting the same requirements as freign insurers and have a trust fund f the greater f: $5.4 millin r 30% f U.S. surplus lines grss liabilities, excluding aviatin, wet marine and transprtatin liabilities, nt t exceed $60 millin (1)(e)(i) (ii). An alien insurer must als be listed n the NAIC quarterly listing f alien insurers (1)(h). Starting July 21, 2011, under the NRRA, listing n the NAIC list will be sufficient; n additinal requirements will need t be met. Natinal Prducer Database The statute is silent as t whether Mississippi will participate in the NAIC prducer database r sme ther equivalent unifrm natinal database fr prducer licensing and renewals. Under the NRRA, Mississippi may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in Mississippi unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 75

76 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Missuri Hme State f the Insured Premium Tax Exempt Cmmercial Purchaser Eligible Insurer Prducer Licensing Effective Date July 7, 2011 MO S 132 Defining Hme State f the Insured NRRA definitin + principal place f business 100% t MO at 5% rate MO Industrial Insured + NRRA apprach NRRA apprach (Greater f $15MM minimum capital / surplus r amunt required by MO; n licensure requirement) License required nly fr placements fr MO insureds; requires participatin in the NAIC database befre July 1, 2012 The hme state is where an insured maintains its principal place f business r if the insured is an individual, the individual s principal residence. Principal place f business is the state where the insured maintains its headquarters and where the insured s high-level fficers direct, cntrl and crdinate the business activities f the insured. Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. If mre than ne insured frm an affiliate grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract (7). Multi-State Risk Surplus Lines Premium Taxes The statute des nt authrize a multi-state agreement fr tax allcatin purpses. Beginning July 7, 2011, where Missuri is the hme state f the insured, Missuri will tax 100% f net premiums (grss amunt f charges fr surplus lines insurance, exclusive f sums cllected fr taxes, less returned premiums) at a rate f 5% (1). Exempt Cmmercial Purchasers Missuri currently has an industrial insured exemptin. That exemptin will remain effective. The NRRA cmmercial purchaser exemptin (incrprated int Missuri law) will als be in effect as f July 7, The statute adpts the NRRA definitin f exempt cmmercial purchaser (5). An exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 76

77 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin Brkers prcuring r placing insurance fr an exempt cmmercial purchaser are nt required t make a due diligence search t determine whether the full amunt r type f insurance sught by the exempt cmmercial purchaser can be btained frm an admitted insurer if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Under , a surplus lines licensee shall nt place cverage with a nnadmitted insurer, unless, at the time f placement, the licensee determines that the nnadmitted insurer pssesses capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin that equals the greater f the minimum capital and surplus requirements under the laws f Missuri r $15 millin (nte: this requirement is cnsistent with the NRRA minimum capital and surplus requirement, but Missuri des nt adpt the ther allwable NRRA requirement, which is licensure in the dmiciliary jurisdictin). The directr may waive the minimum capital and surplus requirement fr a nnadmitted insurer if he makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The directr may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin Surplus lines licensees may place insurance with alien insurers that appear n the mst recent quarterly listing f alien insurers maintained by the NAIC Natinal Prducer Database The statute instructs the directr t participate in the NAIC prducer database, r an equivalent natinwide database, by July 1, (4) The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 77

78 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Mntana Hme State f the Insured NRRA definitin + principal place f business definitin + principal residence definitin Premium Tax Multistate allcatin agreement authrized; taxatin n a pr rata basis fr plicies effective befre July 1; 100% taxatin fr plicies effective after July 1 at a rate f 2.75%until agreement is implemented Exempt Cmmercial Purchaser NRRA apprach Eligible Insurer NRRA apprach: licensure in dmiciliary jurisdictin + greater f $15MM capital / surplus r minimum required by MT Prducer Licensing License required nly fr placements fr MT insureds; allws participatin in NAIC r similar database by July 21, 2012 Effective Date May 6, 2011 / July 1, 2011 (tax prvisins) 2011 MT S 331 Defining Hme State f the Insured The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence (3)(j)(i). Principal place f business is the state where the insured s highlevel fficers direct, cntrl and crdinate the business activities f the insured (3)(m). Principal residence is the state where an individual insured resides fr the greatest number f days during a calendar year r, if the insured s principal residence is lcated utside f any state, the state t which the greatest percentage f the insured s taxable premium fr that insurance cntract is lcated (3)(n). Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium (3)(j)(ii). If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract (3)(j)(iii). Multi-State Risk Surplus Lines Premium Taxes The statute authrizes the cmmissiner, after a negtiated rule-making prcess, t enter int a cperative r reciprcal agreement with ther states, individually r cllectively, fr the purpses f cllecting, allcating, and disbursing premium taxes and fees attributable t multistate risks. MT S 331, 16. Mntana s statute is nt clear n hw Mntana will handle premium taxatin prir t an agreement s implementatin. Hwever, accrding t guidance issued by the state s Insurance Department, fr plicies with effective dates befre July 1, 2011, Mntana will tax nly the prtin f the premium cvering risks prperly allcable t Mntana. Fr plicies effective n r after July 1, 2011, Mntana will tax 100% f the premium amunt, regardless f where the risks r expsures are lcated, at Mntana s tax rate f 2.75% Exempt Cmmercial Purchasers 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 78

79 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Under MT S 331, 13(1), an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin. Brkers prcuring r placing insurance fr an exempt cmmercial purchaser are nt required t make a due diligence search t determine whether the full amunt r type f insurance sught by the exempt cmmercial purchaser can be btained frm an admitted insurer if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer (2)(c)(i) (ii). Surplus Line Insurer Eligibility Criteria Under (1)(a) (b), surplus lines brkers shall nt place cverage with a nnadmitted insurer unless, at the time f placement, the nnadmitted insurer: Is authrized t write such insurance in its dmiciliary jurisdictin; and Pssesses capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin that equals the greater f the minimum capital and surplus requirements under the laws f Mntana r $15 millin. The cmmissiner may waive the minimum capital and surplus requirement fr a nnadmitted insurer if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry (1)(b)(ii). The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin (1)(b)(ii). Brkers may nt place insurance with any alien insurer unless the alien insurer appears n the NAIC s quarterly list f alien insurers (2). Natinal Prducer Database The cmmissiner may participate in the NAIC s prducer licensing database (9) The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 79

80 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Nebraska Hme State f the Insured NRRA definitin + principal place f business definitin Premium Tax Signed NIMA; allws NE t keep 100% pending NIMA peratin t be taxed at the rate f the state where the risk is lcated; NE rate is 3% Exempt Cmmercial Purchaser NRRA apprach Eligible Insurer NRRA apprach: licensure in dmiciliary jurisdictin + greater f $15MM capital / surplus r minimum required by NE Prducer Licensing License required nly fr placements fr NE insureds; allws participatin in NAIC r similar database by July 21, Effective Date July 21, NE L 70 Defining Hme State f the Insured The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence (7)(a)(i). Principal place f business is the state where the insured maintains its headquarters and where the insured s high-level fficers direct, cntrl and crdinate the business activities f the insured (7)(c). Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium (7)(a)(ii). If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract (7)(b). Multi-State Risk Surplus Lines Premium Taxes The statute authrizes the directr, in rder t carry ut the NRRA, t enter int the Nnadmitted Insurance Multi- State Agreement (NIMA) in rder t facilitate the cllectin, allcatin, and disbursement f premium taxes attributable t the placement f nnadmitted insurance, prvide fr unifrm methds f allcatin and reprting amng nnadmitted insurance risk classificatins, and share infrmatin amng states relating t nnadmitted insurance premium taxes (1). The directr may participate in the clearinghuse established thrugh NIMA fr the purpse f cllecting and disbursing t reciprcal states any funds cllected applicable t prperties, risks, r expsures lcated r t be perfrmed utside f Nebraska (2). The state has jined the NIMA agreement. Unless and until NIMA is implemented, when the insurance cvers prperties, risks r expsures lcated r t be perfrmed bth in and ut f this state, the sum payable shall be cmputed as fllws: Fr the prtin that is attributable t instate risks, 3% f premiums; PLUS Fr the prtin attributable t ut-f-state risks, an amunt equal t the prtin f the premiums allcated t each f the ther states and at a rate as established by each state as being applicable t the prperties, risks r expsures lcated r perfrmed utside f this state (4)(c)(i) (ii) The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 80

81 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Exempt Cmmercial Purchasers Under (5)(a), an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin. Brkers prcuring r placing insurance fr an exempt cmmercial purchaser are nt required t make a due diligence search t determine whether the full amunt r type f insurance sught by the exempt cmmercial purchaser can be btained frm an admitted insurer if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer (2)(a) (b). Surplus Line Insurer Eligibility Criteria Accrding t (1), surplus lines brkers shall nt place cverage with a nnadmitted insurer unless, at the time f placement, the nnadmitted insurer: Is authrized t write such insurance in its dmiciliary jurisdictin; Has established satisfactry evidence f gd repute and financial integrity; and Pssesses capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin that equals the greater f the minimum capital and surplus requirements under the laws f Nebraska r $15 millin. The directr may waive the minimum capital and surplus requirement fr a nnadmitted insurer if the directr makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry (1)(c)(ii). The directr may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin (1)(c)(ii). Brkers may nt place insurance with any alien insurer unless the alien insurer appears n the NAIC s quarterly list f alien insurers (2). Natinal Prducer Database 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 81

82 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List The directr may utilize the natinal prducer database f the NAIC r any ther equivalent unifrm natinal database fr the licensure f an individual r entity as a surplus lines prducer and fr renewal f such license The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 82

83 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Nevada Hme State f the Insured NRRA definitin + principal place f business definitin + principal residence definitin Premium Tax Signed NIMA; NV taxes and keeps 100% at rate f 3.5% unless/until NIMA is peratinal Exempt Cmmercial Purchaser NV industrial insured exemptin + NRRA apprach Eligible Insurer NRRA apprach Prducer Licensing License required nly fr placements fr NV insureds; NV law silent regarding participatin in electrnic licensing database Effective Date June 13, 2011 NV S 289 Defining Hme State f the Insured The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence. NRS 685A 8(1)-(2). Principal place f business means the state where the insured maintains its headquarters and where the insured s high-level fficers direct, cntrl and crdinate the business activities; r if the insured s high-level fficers direct, cntrl, and crdinate the business activities in mre than ne state, the state in which the greatest percentage f the insured s taxable premium fr that insurance cntract is allcated; r if the insured maintains its headquarters r the fficers direct, cntrl and crdinate the business activities utside any state, the state in which the greatest percentage f the insured s taxable premium fr that insurance cntract is allcated. NRS 685A 13. Principal residence is the state where the individual resides fr the greatest number f days during a calendar year; r if the insured s principal residence is lcated utside any state, the state in which the greatest percentage f the insured s taxable premium fr that insurance cntract is allcated. NRS 685A 14. Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract. NRS 685A 8(1)-(2). Multi-State Risk Surplus Lines Premium Taxes The Cmmissiner may, with the apprval f the State Bard f Examiners, n behalf f the state enter int a multistate agreement t preserve the ability f this state t cllect premium tax n multi-state risks. NRS 685A 17. The state has jined NIMA. Until NIMA is peratinal, each brker shall pay a tax n surplus lines cverages fr which this state is the insured s hme state at the same rate f tax as impse by law n the premiums f similar cverages written by authrized insurers, which is 3.5%. NRS 685A.180(1). Once NIMA is peratinal, taxes will be cllected and allcated accrding t the agreement. NRS 685A.180(6). Exempt Cmmercial Purchasers 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 83

84 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Nevada currently has an industrial insured exemptin. That exemptin will remain in effect. As f June 13, 2011, the NRRA cmmercial purchaser exemptin is als in place. Under NRS 685A 6, an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin. Brkers prcuring r placing insurance fr an exempt cmmercial purchaser are nt required t make a due diligence search t determine whether the full amunt r type f insurance sught by the exempt cmmercial purchaser can be btained frm an admitted insurer if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. NRS 685A.040(5). Surplus Line Insurer Eligibility Criteria Accrding t NRS 685A.070(2), a surplus lines brker may place insurance with a nnadmitted insurer if: The insurer is authrized t place that type f insurance in its dmiciliary jurisdictin; and The insurer has capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin that is the greater f the minimum capital and surplus requirements under the laws f this state r $15 millin. The insurance cmmissiner may waive the minimum capital and surplus requirements fr unauthrized freign insurers if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin. NRS 685A.070(3). A brker shall nt place surplus lines insurance with an alien insurer, unless the alien insurer is listed n the quarterly listing f alien insurers maintained by the NAIC. Alien insurers must als maintain a trust fund reasnably adequate t prtect all f its U.S. plicyhlders. NRS 685A.070(4) Natinal Prducer Database 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 84

85 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List The statute is silent n whether Nevada will participate in the NAIC prducer database r sme ther equivalent unifrm natinal database fr prducer licensing and renewals. Under the NRRA, Nevada may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in Nevada unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 85

86 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List New Hampshire Hme State f the Insured NRRA definitin Premium Tax Multistate allcatin agreement authrized; NH keeps 100% taxed at the rate f the state where the risk is lcated unless/until agreement becmes effective Exempt Cmmercial Purchaser NH industrial insured exemptin + NRRA apprach Eligible Insurer NRRA apprach: licensure in dmiciliary jurisdictin + greater f $15MM capital / surplus r minimum required by NH Prducer Licensing License required nly fr placements fr NH insureds; NH law silent regarding participatin in electrnic licensing database Effective Date August 14, 2011 NH H 424 Defining Hme State f the Insured The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence. Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract. 405-B:2(II). Multi-State Risk Surplus Lines Premium Taxes Fr purpses f carrying ut the NRRA, the cmmissiner is authrized t enter int a cperative r reciprcal agreement, r cmpact with anther state in rder t facilitate the cllectin, allcatin, and disbursement f premium taxes attributable t the placement f nnadmitted insurance, prvide fr unifrm methds f allcatin and reprting amng nnadmitted insurance risk classificatins, and share infrmatin amng states relating t nnadmitted insurance premium taxes. 405-B:3. Unless and until New Hampshire enters int a tax allcatin agreement, New Hampshire will keep 100% f premium taxes, taxed at the rate f the state where the risk is lcated. 405-B:4(II). Where the insurance cvers prperties, risks r expsures lcated r t be perfrmed bth in and ut f New Hampshire, the tax payable shall be cmputed based n an amunt f 3% n that prtin f grss premiums allcated t New Hampshire, PLUS an amunt equal t the prtin f the premiums allcated t ther states r territries based n the tax rates and fees applicable t ther prperties, risks, r expsures lcated r t be perfrmed utside f New Hampshire, LESS grss premiums allcated t New Hampshire and returned t the insured. 405-B:4(II). Exempt Cmmercial Purchasers New Hampshire has an industrial insured exemptin. That exemptin will remain in effect. As f July 21, 2011, the NRRA cmmercial purchaser exemptin will als be effective The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 86

87 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List The New Hampshire statute is silent n exempt cmmercial purchasers. Nnetheless, the NRRA exempt cmmercial purchaser exemptin will apply starting July 21, Under the NRRA, an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin. Accrding t the NRRA, brkers prcuring r placing insurance fr an exempt cmmercial purchaser are nt required t make a due diligence search t determine whether the full amunt r type f insurance sught by the exempt cmmercial purchaser can be btained frm an admitted insurer if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Under 405:24(II), a surplus lines brker may place insurance with a nnadmitted insurer if: The insurer is authrized t place that type f insurance in its dmiciliary jurisdictin; and The insurer has capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin that is the greater f the minimum capital and surplus requirements under the laws f this state r $15 millin. A surplus lines brker may place insurance with an alien insurer if that insurer is listed n the quarterly list f alien insurers maintained by the NAIC. 405:24(II). Natinal Prducer Database The statute is silent as t whether New Hampshire will participate in the NAIC prducer database r sme ther equivalent unifrm natinal database fr prducer licensing and renewals. Under the NRRA, New Hampshire may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in New Hampshire unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 87

88 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List New Jersey Hme State f the Insured Premium Tax Exempt Cmmercial Purchaser Eligible Insurer Prducer Licensing Effective Date July 21, 2011 NJ S 2930 Defining Hme State f the Insured NRRA definitin Multistate allcatin agreement authrized; NJ taxes and keeps 100% at rate f 5% unless/until agreement becmes effective NRRA apprach NRRA apprach License required nly fr placements fr NJ insureds; NJ law silent regarding participatin in electrnic licensing database The hme state is where an insured maintains its principal place f business r if the insured is an individual, the individual s principal residence. P.L 1960, c.32 (C.17: )(g). Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract. P.L 1960, c.32 (C.17: )(g). Multi-State Risk Surplus Lines Premium Taxes The Cmmissiner is authrized t enter int, mdify and terminate the state s participatin in ne r mre cmpacts r agreements that establish prcedures fr the reprting, payment, cllectin and allcatin, amng the ther states participating in thse cmpacts r agreements, the premium taxes fr multi-state risks. P.L. 1960, c.32. The Cmmissiner shall submit any decisin t enter int r terminate the state s participatin in any cmpacts r agreements t the Jint Budget Oversight Cmmittee. The Cmmittee has the authrity t nullify any decisin t enter an agreement r terminate participatin in an agreement. P.L. 1960, c.32. Unless and until the Cmmissiner enters int an agreement, New Jersey will tax 100% f the ttal United States premium at a rate f 5%, even where the plicy cvers risks r expsures nly partially in the state. P.L. 1960, c.32 (C.17: ). Exempt Cmmercial Purchasers The New Jersey statute is silent n exempt cmmercial purchasers. Therefre, the NRRA apprach will be in effect as f July 21, Under the NRRA, an exempt cmmercial purchaser is ne that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 88

89 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin. Brkers prcuring r placing insurance fr an exempt cmmercial purchaser are nt required t make a due diligence search t determine whether the full amunt r type f insurance sught by the exempt cmmercial purchaser can be btained frm an admitted insurer if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria New Jersey des impse eligibility requirements n freign surplus lines insurers. Therefre, as f July 21, 2011, the NRRA eligibility requirements will be in effect in New Jersey. Under the NRRA, a surplus lines brker may place insurance with a nnadmitted insurer if: The insurer is authrized t place that type f insurance in its dmiciliary jurisdictin; and The insurer has capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin that is the greater f the minimum capital and surplus requirements under the laws f this state r $15 millin. Under the NRRA, the insurance cmmissiner may waive the minimum capital and surplus requirements fr unauthrized freign insurers if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin. Under the NRRA, a surplus lines brker may place insurance with an alien insurer if that insurer is listed n the quarterly list f alien insurers maintained by the NAIC. Natinal Prducer Database The statute is silent as t whether New Jersey will participate in the NAIC prducer database r sme ther equivalent unifrm natinal database fr prducer licensing and renewals. Under the NRRA, New Jersey may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in New Jersey unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 89

90 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List New Mexic Hme State f the Insured Premium Tax Exempt Cmmercial Purchaser Eligible Insurer Prducer Licensing Effective Date July 21, NM S 250 Defining Hme State f the Insured NRRA definitin + principal place f business definitin SLIMPACT NRRA apprach NRRA apprach License required nly fr placements fr NM insureds; state law requires participatin in NAIC r similar database by July 21, 2012 The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence. Surplus Lines Insurance Multistate Cmpliance Cmpact, Art. 2(L)(1)(a). Principal place f business is the state where the insured maintains its headquarters and where the insured s high-level fficers direct, cntrl and crdinate the business activities f the insured. Id. Art. 2(V). Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. Id. Art. 2(L)(1)(b). If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract. Id. Art. 2(L)(2). Multi-State Risk Surplus Lines Premium Taxes New Mexic adpted the SLIMPACT mdel apprach t multi-state premium tax allcatin. Under SLIMPACT, each cmpacting state must adhere t specified tax allcatin frmulas and data reprting requirements. Id. Art. 4(A). The Premium Tax Data Allcatin Frmula determines each cntracting state s premium allcatin. Id. Art. 4(A). Each state may then charge its wn rate f taxatin n that allcatin. Id. Art. 4(E). If a cmpacting state changes its rate f taxatin, the state must give 90 days ntice t the Cmpact Cmmissin (the multi-state gverning bdy fr the SLIMPACT system). Id. Art. 4(F). Exempt Cmmercial Purchasers New Mexic s statute adds an exempt cmmercial purchaser prvisin t the SLIMPACT mdel. Under 59A-14-2(F),an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 90

91 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin. Brkers prcuring r placing insurance fr an exempt cmmercial purchaser are nt required t make a due diligence search t determine whether the full amunt r type f insurance sught by the exempt cmmercial purchaser can be btained frm an admitted insurer if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. 59A-14-3(C)(2) (D). Surplus Line Insurer Eligibility Criteria The Cmpact Cmmissin is charged with prmulgating unifrm rules fr cmpacting states regarding freign insurer eligibility requirements as authrized by the NRRA. Surplus Lines Insurance Multistate Cmpliance Cmpact, Art. 4(M). New Mexic added a specific prvisin n insurer eligibility t the SLIMPACT Mdel ( 59A-14-4(C)): Surplus lines brkers shall nt place cverage with a nnadmitted insurer unless, at the time f placement, the nnadmitted insurer: Is authrized t write such insurance in its dmiciliary jurisdictin; Has established satisfactry evidence f gd repute and financial integrity; and Pssesses capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin that equals the greater f the minimum capital and surplus requirements under the laws f New Mexic r $15 millin. The superintendent may waive the minimum capital and surplus requirement fr a nnadmitted insurer if the superintendent makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. 59A-14-4(C)(1)(b). The superintendent may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin. 59A-14-4(C)(1)(b). Alien insurers must be n the NAIC quarterly listing f alien insurers. 59A-14-4(C)(3). If New Mexic jins a cmpact fr the regulatin f surplus lines insurance and the state adpts natinwide unifrm eligibility requirements, brkers may place insurance with nnadmitted insurers that are in cmpliance with thse requirements. 59A-14-4(C)(4). Natinal Prducer Database Nt later than July 21, 2012, the superintendent shall participate in the NAIC prducer database r an equivalent unifrm natinal database fr the licensure f surplus lines brkers and renewal f thse licenses. NM S 250, The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 91

92 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List New Yrk Hme State f the Insured NRRA definitin + principal place f business definitin + principal residence definitin Premium Tax 100% t NY at 3.6% taxatin rate Exempt Cmmercial Purchaser NRRA apprach Eligible Insurer Des nt incrprate NRRA prvisins; NY scheduled t raise minimum capital/ surplus requirement t $45MM Prducer Licensing License required nly fr placements fr NY insureds; NY law silent regarding participatin in electrnic licensing database, but Insurance Department guidance indicates NY intends t participate n r befre July 21, 2012 Effective Date July 21, 2011 NY S 2811 Defining Hme State f the Insured The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence. NY Insurance Law 2101(x)(3)(A). Principal place f business means the state where the insured maintains its headquarters and where the insured s high level fficers direct, cntrl, and crdinate the business activities; r if the fficers cntrl business activities in mre than ne state, r if the place f business is utside f any state, then the state t which the greatest percentage f the insured s taxable premium fr that insurance cntract is allcated. Principal residence is the state where the individual resides fr the greatest number f days during a calendar year r, if the insured s principal residence is lcated utside any state, the state t which the greatest percentage f the insured s taxable premium fr that insurance cntract is allcated. Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. 2101(x)(3)(B). New Yrk has nt histrically allwed unaffiliated grups t purchase prperty/casualty insurance and did nt allw fr p/c grup plicies. Hwever, sme exceptins nw exist under the law (e.g., fr purchasing grups under the Natinal Risk Retentin Act r emplyer spnsred grup insurance). If ne f these unaffiliated grups is purchasing insurance, when the grup plicyhlder pays 100% f the premium frm its wn funds (with emplyer spnsred plans, fr example), the hme state is the grup plicyhlder s principal place f business. 2101(x)(3)(D)(i). When the grup plicyhlder des nt pay 100% f the premium frm its wn funds, then the hme state is that f each grup member. 2101(x)(3)(D)(ii). Multi-State Risk Surplus Lines Premium Taxes New Yrk will tax 100% f each excess [surplus] line plicy s written premium when New Yrk is the hme state f the insured at a rate f 3.6%. Fr all plicies effective n r after July 21, 2011, New Yrk will tax 100% f the written premium attributable t risks r prperty lcated in the United States, even when the plicy insures risk expsures in ther states (New Yrk revised its initial psitin n taxing multi-natinal risks and has determined that it will nly tax premiums allcable t risks lcated in the U.S.). Tax law Exempt Cmmercial Purchasers 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 92

93 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Under insurance law 2101(x)(2), an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin. Accrding t Insurance law 2118(b)(3)(F), any exempt cmmercial purchaser may sign a waiver permitting its excess lines brker t access the nnadmitted insurer market withut first making a diligent search f the admitted market if: The brker has disclsed t the exempt cmmercial purchaser that the insurance may r may nt be available frm the authrized market that may prvide greater prtectins with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing that the brker prcure the insurance frm an unauthrized insurer. Surplus Line Insurer Eligibility Criteria The New Yrk law des nt incrprate any NRRA insurer eligibility prvisins. Hwever, New Yrk is scheduled t increase its minimum capital and surplus requirements fr insurer eligibility n a sliding scale, frm $15 millin t $45 millin. Natinal Prducer Database New Yrk s law is silent n jining the NAIC prducer database r any ther unifrm natinal database fr prducer licensing. Under the NRRA, New Yrk may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in New Yrk unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses. Circular Letter N. 9 (2011) issued n July 22, 2011 by the New Yrk Insurance Department indicates that the state des intend t participate in a natinal database by the July 21, 2012 deadline The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 93

94 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Nrth Carlina Hme State f the Insured Premium Tax Exempt Cmmercial Purchaser Eligible Insurer Prducer Licensing Effective Date July 21, 2011 NC S 321 Defining Hme State f the Insured NRRA definitin Requires a study befre entering int a multistate allcatin agreement; NC will tax and keep 100% (at a rate f 5%) unless/until agreement is entered int and effective NRRA apprach NRRA apprach License required nly fr placements fr NC insureds; authrizes participatin in a prducer licensing database The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence. Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract (b). Multi-State Risk Surplus Lines Premium Taxes The Revenue Laws Study Cmmittee shall, in cperatin with the Cmmissiner f Insurance, study the ptential impact that wuld result frm the state s entry int a multi-state agreement fr purpses f carrying ut the NRRA in rder t prevent the state frm lsing revenue after July 21, The Cmmittee shall determine if entering int an agreement will result in retentin f surplus lines tax revenue fr the state and if s, which agreement wuld result in the highest retentin f revenue and the mst efficient methd fr cllecting and distributing taxes. The Cmmittee shall reprt its findings t the General Assembly during the 2012 Regular Sessin. NC S Unless and until Nrth Carlina enters int an agreement, grss premiums charged, less any return premiums, fr surplus lines insurance where Nrth Carlina is the hme state f the insured are subject t a premium receipts tax f 5% (a). Exempt Cmmercial Purchasers Under (b), an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 94

95 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin. Brkers prcuring r placing insurance fr an exempt cmmercial purchaser are nt required t make a due diligence search t determine whether the full amunt r type f insurance sught by the exempt cmmercial purchaser can be btained frm an admitted insurer if: (a). The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Accrding t , a surplus lines brker may place insurance with a nnadmitted insurer if: The insurer is authrized t place that type f insurance in its dmiciliary jurisdictin; and The insurer has capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin that is the greater f the minimum capital and surplus requirements under the laws f this state r $15 millin. The insurance cmmissiner may waive the minimum capital and surplus requirements fr unauthrized freign insurers if he makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin A surplus lines brker may place insurance with an alien insurer if that insurer is listed n the quarterly list f alien insurers maintained by the NAIC Natinal Prducer Database The statute authrizes the cmmissiner t utilize the natinal insurance prducer database f the NAIC r any ther equivalent unifrm natinal database (a) The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 95

96 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Nrth Dakta Hme State f the Insured Premium Tax Exempt Cmmercial Purchaser Eligible Insurer Prducer Licensing Effective Date April 19, ND H 1123 NRRA definitin + principal place f business definitin SLIMPACT; 100% t ND (taxed at rate f state where risk is lcated) until SLIMPACT is in effect NRRA apprach NRRA apprach unless/until SLIMPACT issues rule License required nly fr placements fr ND insureds; silent n participatin in NAIC r similar database by July 21, Defining Hme State f the Insured The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence (4)(a)(1). Principal place f business is the state where the insured maintains its headquarters and where the insured s high-level fficers direct, cntrl, and crdinate the business activities f the insured. Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium (4)(a)(2). If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract (4)(b). Multi-State Risk Surplus Lines Premium Taxes Nrth Dakta adpted the SLIMPACT mdel apprach t multi-state premium tax allcatin. Under SLIMPACT, each cmpacting state must adhere t specified tax allcatin frmulas and data reprting requirements , Art. IV(1). The Premium Tax Data Allcatin Frmula determines each cntracting state s premium allcatin , Art. IV(1). Each state may then charge its wn rate f taxatin n that allcatin , Art. IV(5). If a cmpacting state changes its rate f taxatin, the state must give 90 days ntice t the Cmpact Cmmissin (the multistate gverning bdy fr the SLIMPACT system) , Art. IV(6). Prir t SLIMPACT implementatin, if Nrth Dakta is an insured s hme state, in additin t the full amunt f grss premiums charged by the insurer, the surplus lines prducer shall cllect and pay t the cmmissiner a sum equal t 1.75% f the grss premiums and fees, LESS any return premiums (1). If the insurance cvers risks lcated bth in and ut f Nrth Dakta, the sum payable must be cmputed based n: An amunt equal t 1.75% n that prtin f the grss premiums allcated t Nrth Dakta PLUS An amunt equal t the prtin f the premiums allcated t ther states n the basis f the tax rates and fees applicable t ther risks lcated utside Nrth Dakta LESS The amunt f grss premiums allcated t this state and returned t the insured (1)(a) (c) The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 96

97 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List If ther states d nt enter int SLIMPACT and prtins f the risks are lcated in these ther nn-slimpact states, Nrth Dakta retains 100% f the net premium tax cllected (3). Exempt Cmmercial Purchasers Nrth Dakta currently has an industrial insured exemptin. That exemptin will remain in effect. Additinally, Nrth Dakta s statute adds the NRRA definitin f exempt cmmercial purchaser t the SLIMPACT mdel. Under (3), an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin. Surplus Line Insurer Eligibility Criteria The Cmpact Cmmissin is charged with prmulgating unifrm rules fr cmpacting states regarding freign insurer eligibility requirements as authrized by the NRRA , Art. IV(13). Nrth Dakta added a specific prvisin n insurer eligibility t the SLIMPACT Mdel. Under (4)(a), surplus lines brkers shall nt place cverage with a nnadmitted insurer unless, at the time f placement, the nnadmitted insurer: Is authrized t write such insurance in its dmiciliary jurisdictin; Pssesses capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin that equals the greater f the minimum capital and surplus requirements under the laws f Nrth Dakta r $15 millin. The cmmissiner may waive the minimum capital and surplus requirement fr a nnadmitted insurer if he makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry (4)(a)(2). The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin (4)(a)(2). Alien insurers must be n the NAIC quarterly listing f alien insurers (4)(b). Natinal Prducer Database The Nrth Dakta statute is silent n jining a natinal prducer database, but the statute s preamble recgnizes that within tw years f enactment f the NRRA, all states must participate in the NAIC prducer database, r any ther 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 97

98 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List equivalent unifrm natinal database, fr the licensure f surplus lines licensees and the renewal f such licenses if a state wants t cntinue cllecting fees related t surplus lines licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 98

99 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Ohi Hme State f the Insured Premium Tax Exempt Cmmercial Purchaser Eligible Insurer Prducer Licensing Effective Date June 17, OH H 122 Defining Hme State f the Insured NRRA definitin + principal place f business definitin Multistate allcatin agreement authrized fllwing study; 100% t OH at rate f 5% unless/until state jins agreement NRRA apprach NRRA apprach License required nly fr placements fr OH insureds; OH law silent regarding participatin in electrnic licensing database The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence (A)(1). Principal place f business is the state where the insured maintains the insured s headquarters and where the insured s high-level fficers direct, cntrl and crdinate the business activities f the insured (A)(2). Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium (A)(1)(a). If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract (A)(1)(b). Multi-State Risk Surplus Lines Premium Taxes The statute directs the superintendent t cnduct a fiscal analysis f the impact f entering int a multi-state agreement r cmpact fr determining eligibility fr placement f unauthrized insurance and fr payment, reprting, cllectin and allcatin f taxes n unauthrized insurance (D). If the fiscal analysis indicates that entering int an agreement r cmpact is advantageus t Ohi, the superintendent may enter int SLIMPACT, NIMA r anther multi-state agreement (D). Meantime, 100% f premium tax is t be paid t Ohi, at a rate f 5% f the balance f the grss premiums charged fr insurance placed r prduced under the license after a deductin fr returned premiums (B). Exempt Cmmercial Purchasers Ohi currently has an industrial insured exemptin. That exemptin will remain in effect. The NRRA cmmercial purchaser exemptin is als in effect. Under (A), an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 99

100 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin (B)(4) mandates that brkers prcuring r placing insurance fr an exempt cmmercial purchaser are nt required t make a due diligence search t determine whether the full amunt r type f insurance sught by the exempt cmmercial purchaser can be btained frm an admitted insurer if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Under (A)(1), surplus lines brkers shall nt place cverage with a nnadmitted insurer unless, at the time f placement, the nnadmitted insurer: Is authrized t write such insurance in its dmiciliary jurisdictin; and Pssesses capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin that equals the greater f the minimum capital and surplus requirements under the laws f Ohi r $15 millin. Alien insurers must be n the quarterly listing f alien insurers maintained by NAIC (A)(2). Natinal Prducer Database The statute is silent n jining a natinal prducer database fr brker licensing and renewal f licenses. Under the NRRA, Ohi may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in Ohi unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 100

101 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Oklahma Hme State f the Insured Premium Tax Exempt Cmmercial Purchaser Eligible Insurer Prducer Licensing Effective Date August 25, OK S 778 Defining Hme State f the Insured NRRA definitin Multistate allcatin agreement authrized; 100% t OK taxed at the rate f the state where the risk is lcated until state enters agreement NRRA apprach NRRA apprach License required nly fr placements fr OK insureds; allws participatin in NAIC r similar database by July 21, 2012 The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence (2)(a)(1). Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium (2)(a)(2). If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract (2)(d). Multi-State Risk Surplus Lines Premium Taxes The cmmissiner may enter int written multi-state agreements with ther state jurisdictins n behalf f Oklahma t prvide fr cperatin and assistance amng member jurisdictins in the administratin and cllectin f taxes impsed n multi-state surplus lines insurance Until the insurance cmmissiner enters int a multistate agreement, if the insurance cvers risks lcated bth in and ut f Oklahma, the sum payable is cmputed based n the same 6% prtin f grss premiums allcated t Oklahma, PLUS an amunt equal t the prtin f the premiums allcated t ther states n the basis f the tax rates and fees applicable t risks lcated utside f Oklahma LESS the amunt f grss premium unearned at terminatin f the SL insurance (A). Exempt Cmmercial Purchasers Under (B), an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 101

102 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin. As required under (A), brkers prcuring r placing insurance fr an exempt cmmercial purchaser are nt required t make a due diligence search t determine whether the full amunt r type f insurance sught by the exempt cmmercial purchaser can be btained frm an admitted insurer if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Per (1)(a), a surplus lines brker may place insurance with a freign insurer if: The insurer is licensed in its dmiciliary jurisdictin; and The insurer has capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin that is the greater f the minimum capital and surplus requirements under the laws f this state r $15 millin. The insurance cmmissiner may waive the minimum capital and surplus requirements fr unauthrized freign insurers if he makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry (1)(b). The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin (1)(b). A surplus lines brker may place insurance with an alien insurer if that insurer is listed n the quarterly list f alien insurers maintained by the NAIC (1)(c). Natinal Prducer Database Under the statute, the cmmissiner may utilize the natinal insurance prducer database f the NAIC r any ther equivalent unifrm natinal database fr the licensure and renewal f an individual r entity as a surplus lines brker in rder t carry ut NRRA requirements (2) The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 102

103 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Oregn Hme State f the Insured Premium Tax Exempt Cmmercial Purchaser Eligible Insurer Prducer Licensing Effective Date January 1, 2012 OR H 2679 Defining Hme State f the Insured NRRA definitin Multistate allcatin agreement authrized; OR will tax n a pr rata basis at 3% frm July 21, 2011 until Jan. 1, 2012; after Jan. 1, 2012, unless/until OR enters an agreement, will tax 100% at a rate f 2.3% NRRA apprach; brader standards NRRA apprach License required nly fr placements fr OR insureds; OR law silent regarding participatin in electrnic licensing database The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence. Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract. ORS (8). Multi-State Risk Surplus Lines Premium Taxes The Directr f the Department f Cnsumer and Business Services is authrized t enter int a cmpact r t therwise establish prcedures with ther states t allcate amng the states the premium taxes paid t an insured s hme state. Under the new law, which is nt effective until January 1, 2012, Oregn will tax 100% f premiums at a rate f 2% unless and until the state enters int an agreement. ORS (1)-(4). Accrding t guidance frm the Oregn Insurance Divisin and the Oregn Surplus Lines Assciatin, Oregn will tax plicies with inceptin dates between July 21, 2011 and December 31, 2011 n a pr rata basis (n the prtin f the risk allcable t Oregn) at a rate f 3%. Fr plicies with inceptin dates n r after January 1, 2012, unless and until Oregn enters int a multi-state agreement, Oregn will tax 100% f premiums, regardless f where the risk is lcated, at a rate f 2.3%. Exempt Cmmercial Purchasers Oregn has adpted the NRRA apprach t exempt cmmercial purchasers, but has eased sme f the requirements t qualify as such a purchaser. Under ORS (6), an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $10 millin at the end f the preceding fiscal year; 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 103

104 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Had net revenues r sales ver $20 millin at the end f the preceding fiscal year; Has mre than 50 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 100 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin. Brkers prcuring r placing insurance fr an exempt cmmercial purchaser are nt required t make a due diligence search t determine whether the full amunt r type f insurance sught by the exempt cmmercial purchaser can be btained frm an admitted insurer if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. ORS (2). Surplus Line Insurer Eligibility Criteria Accrding t ORS (1), a surplus lines brker may place insurance with a nnadmitted insurer if: The insurer is authrized t place that type f insurance in its dmiciliary jurisdictin; and The insurer has capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin that is the greater f the minimum capital and surplus requirements under the laws f this state r $15 millin. The insurance cmmissiner may waive the minimum capital and surplus requirements fr unauthrized freign insurers if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin. ORS (1)(A). A brker may place insurance with an alien insurer that is listed n the quarterly listing f alien insurers maintained by the NAIC. ORS (1)(E). Natinal Prducer Database The statute is silent n whether Oregn will participate in the NAIC prducer database r sme ther equivalent unifrm natinal database fr prducer licensing and renewals. Under the NRRA, Oregn may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in Oregn unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 104

105 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Pennsylvania Hme State f the Insured NRRA definitin Premium Tax 100% t PA at rate f 3% Exempt Cmmercial Purchaser PA Industrial Insured + NRRA apprach Eligible Insurer NRRA apprach Prducer Licensing License required nly fr placements fr PA insureds; silent n participatin in NAIC r similar database by July 21, 2012 Effective Date July 1, 2011 PA S 1096 Defining Hme State f the Insured The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence P.A. 682, N Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium (7)(a)(ii). If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract (7)(b). Multi-State Risk Surplus Lines Premium Taxes The statute des nt authrize the insurance cmmissiner t enter int a multi-state agreement fr tax allcatin purpses. Fr plicies placed befre July 1, 2011 that cver risks r expsures inside and utside f Pennsylvania, nly the prtin f the premium reasnably ascribable t that prtin f the risk lcated in Pennsylvania will be taxed at 3%. 1616(1) (2)(i) P.L. 147, N. 14. Fr plicies placed after June 30, 2011 that cver multi-state risks, Pennsylvania will cllect a 3% tax n grss premiums charged, less any returned premiums. 1616(1) (2)(ii) P.L. 147, N. 14. Exempt Cmmercial Purchasers Pennsylvania has an industrial insured exemptin. That exemptin will remain in effect. Pennsylvania has als adpted the NRRA apprach t exempt cmmercial purchasers. As defined in 1610(c) P.L. 682 N. 284, an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 105

106 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Under 1610(a.1) P.L. 682 N. 284, brkers prcuring r placing insurance fr an exempt cmmercial purchaser are nt required t make a due diligence search t determine whether the full amunt r type f insurance sught by the exempt cmmercial purchaser can be btained frm an admitted insurer if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Under 1605(1) P.L. 682 N. 284, a surplus lines brker may place insurance with a freign insurer if: The insurer is authrized t place that type f insurance in its dmiciliary jurisdictin; and The insurer has capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin f at least $15 millin. The insurance cmmissiner may waive the minimum capital and surplus requirement fr unauthrized freign insurers if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin. 1605(1) P.L. 682 N A surplus lines brker may place insurance with an alien insurer if the insurer is listed n the quarterly listing f alien insurers maintained by the NAIC. 1605(1) P.L. 682 N Natinal Prducer Database Under the NRRA, Pennsylvania may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in Pennsylvania unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 106

107 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Rhde Island Hme State f the Insured NRRA definitin + principal place f business definitin + principal residence definitin Premium Tax SLIMPACT; until SLIMPACT peratinal, RI will tax at the rate f the state where the risk is lcated (RI = 4%) Exempt Cmmercial Purchaser RI industrial insured exemptin + NRRA apprach t cmmercial purchasers Eligible Insurer NRRA apprach Prducer Licensing License required nly fr placements fr RI insureds; allws RI participatin in NAIC r similar database immediately Effective Date May 27, 2011 / July 21, 2011 (taxes) 2011 RI H 5110 / RI H 5953 Defining Hme State f the Insured The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence (5)(i). Principal place f business is the state where the insured maintains its headquarters and where the insured s high-level fficers direct, cntrl and crdinate the business activities; r if the insured s high-level fficers direct, cntrl and crdinate the business activities in mre than ne state, the state in which the greatest percentage f the insured s taxable premium fr that insurance cntract is allcated; r if the insured maintains its headquarters r the insured s high-level fficers direct, cntrl and crdinate the business activities utside any state, the state t which the state s greatest percentage f the insured s taxable premium fr that insurance cntract is allcated (5)(ii). Principal residence is the state where the insured resides fr the greatest number f days during a calendar year; r if the insured s principal residence is lcated utside any state, the state t which the greatest percentage f the insured s taxable premium that that insurance cntract is allcated (5)(iii). Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium , Art. II(12)(i)(B). If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract , Art. II(12)(ii). Multi-State Risk Surplus Lines Premium Taxes Rhde Island adpted the SLIMPACT mdel apprach t multi-state premium tax allcatin. Under SLIMPACT, each cmpacting state must adhere t specified tax allcatin frmulas and data reprting requirements , Art. IV(1). The Premium Tax Data Allcatin Frmula determines each cntracting state s premium allcatin , Art. IV(1). Each state may then charge its wn rate f taxatin n that allcatin , Art. IV(5). If a cmpacting state changes its rate f taxatin, the state must give 90 days ntice t the Cmpact Cmmissin , Art. IV(6). Under RI H 5953, until SLIMPACT is peratinal, where insurance cvers prperties, risks r expsures lcated r t be perfrmed bth in and ut f the state, Rhde Island will tax 4% n the prtin f the premium allcated t Rhde Island, plus an amunt equal t the prtin f the risks allcated t ther states at the rate f the state where the risk is lcated The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 107

108 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Exempt Cmmercial Purchasers The statute is silent n the definitin f exempt cmmercial purchasers, but the Cmpact Cmmissin established under SLIMPACT has general authrity t prmulgate rules fr cmpacting states t implement the express prvisins f the NRRA , Art. I(1). Rhde Island currently has an industrial insured exemptin. That exemptin will remain in effect. As f July 21, 2011, the NRRA cmmercial purchaser exemptin will als be effective. RI H 5953 incrprates the definitin f exempt cmmercial purchaser frm the NRRA. Under the NRRA, an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin Under the NRRA, a surplus lines brker seeking t prcure r place nnadmitted insurance in Rhde Island fr an exempt cmmercial purchaser shall nt be required t satisfy any state requirement t make a due diligence search t determine whether the full amunt r type f insurance sught by such exempt cmmercial purchaser can be btained frm admitted insurers if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria The Cmpact Cmmissin is charged with prmulgating unifrm rules fr cmpacting states regarding freign insurer eligibility requirements as authrized by the NRRA , Art. I (8)(i). Until SLIMPACT rules are established, Rhde Island will fllw the NRRA definitin: Under current Rhde Island law ( , Art. II(14)), which is cnsistent with the NRRA, a surplus lines brker may place insurance with a freign insurer if: The insurer has established satisfactry evidence f gd repute and financial integrity; and The insurer is authrized t place that type f insurance in its dmiciliary jurisdictin; and The insurer has capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin that is the greater f the minimum capital and surplus requirements under the laws f this state r $15 millin. Accrding t Insurance Divisin Guidance issued n September 28, 2011, a brker may place business with an alien insurer if the insurer is listed n the Quarterly Listing f Alien Insurers maintained by the NAIC The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 108

109 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Natinal Prducer Database Rhde Island participates in the NIPR and will cntinue t cllect licensing fees fr surplus lines brkers The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 109

110 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Suth Carlina Suth Carlina failed t enact surplus lines legislatin t implement NRRA prvisins befre the legislature adjurned. Therefre, n July 21, 2011, the default NRRA prvisins tk effect preempting cnflicting state law. Hme State f the Insured NRRA definitin Premium Tax Beginning July 21, 2011, SC may nly cllect taxes n SL premiums where SC is the hme state f the insured; where SC is the hme state f the insured, SC will tax its pr rata prtin f the premium at rate f 4% Exempt Cmmercial Purchaser SC Industrial Insured + NRRA apprach Eligible Insurer N eligibility requirements Prducer Licensing License required nly fr placements fr SC insureds; SC law silent regarding participatin in electrnic licensing database Effective Date July 21, 2011 Defining Hme State f the Insured Under the NRRA, the hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence. Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract. Multi-State Risk Surplus Lines Premium Taxes Suth Carlina has nt entered int a multistate agreement r cmpact fr tax allcatin purpses. As f July 21, 2011, accrding t the NRRA, Suth Carlina may nly cllect surplus lines premium taxes where it is the hme state f the insured. In accrdance with guidance frm the Suth Carlina Insurance Department, under its current law, Suth Carlina taxes pr rata the prtin f the premium cvering risks lcated in the state, at 4% (6). Exempt Cmmercial Purchasers Suth Carlina has an industrial insured exemptin. That exemptin will remain in effect. As f July 21, 2011, the NRRA cmmercial purchaser exemptin will als be effective. Under the NRRA, an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 110

111 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin. Under the NRRA, a surplus lines brker seeking t prcure r place nnadmitted insurance in Suth Carlina fr an exempt cmmercial purchaser shall nt be required t satisfy any state requirement t make a due diligence search t determine whether the full amunt r type f insurance sught by such exempt cmmercial purchaser can be btained frm admitted insurers if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Suth Carlina currently des nt have insurer eligibility requirements. Therefre, under the NRRA, Suth Carlina may nt impse eligibility requirements n, r therwise establish eligibility criteria fr, nnadmitted insurers dmiciled in a U.S. jurisdictin, except: Suth Carlina may require that the insurer be authrized t write the type f insurance in its dmiciliary jurisdictin; and Suth Carlina may require that the insurer have capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin which equals the greater f: The minimum capital and surplus requirements under the law f Suth Carlina; r $15,000,000 The insurance cmmissiner may waive the minimum capital and surplus requirements abve if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin. Under the NRRA, a state may nt prhibit a surplus lines brker frm placing nnadmitted insurance with, r prcuring nnadmitted insurance frm, a nnadmitted insurer dmiciled utside the U.S. that is listed n the Quarterly Listing f Alien Insurers maintained by the Internatinal Insurers Department f the NAIC. Natinal Prducer Database Under the NRRA, Suth Carlina may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in Suth Carlina unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 111

112 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 112

113 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Suth Dakta Hme State f the Insured Premium Tax Exempt Cmmercial Purchaser Eligible Insurer Prducer Licensing Effective Date February 17, SD H 1030 Defining Hme State f the Insured NRRA definitin Signed NIMA; 100% t SD at rate f 2.25% until NIMA becmes peratinal NRRA exemptin NRRA apprach License required nly fr placements fr SD insureds; SD law silent regarding participatin in electrnic licensing database The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence. SD H 1030, 6. Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. SD H 1030, 6. If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract. SD H 1030, 6. Multi-State Risk Surplus Lines Premium Taxes The statute allws the directr t determine whether it is efficient and beneficial fr Suth Dakta t enter int a multi-state agreement fr tax allcatin purpses If the directr finds that it wuld increase efficiency f the surplus lines marketplace and regulatin f surplus lines insurance, the directr may enter int a multi-state agreement fr the eligibility fr placement f surplus lines insurance and the payment, reprting, cllectin, and apprtinment f surplus lines premium taxes Pursuant t the statute s grant f authrity, the Directr has signed NIMA. Until NIMA is peratinal, Suth Dakta will keep the entire premium tax (at a rate f 2.5%), even when a prtin f the risk is lcated utside f the state Exempt Cmmercial Purchasers Althugh Suth Dakta recgnizes a cmmercial purchaser exemptin, the state has nt updated its exempt cmmercial purchaser definitin t match that f the NRRA. Nnetheless, the NRRA exempt cmmercial purchaser definitin will apply after July 21, Under the NRRA, an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 113

114 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin Under , brkers prcuring r placing insurance fr an exempt cmmercial purchaser are nt required t make a due diligence search t determine whether the full amunt r type f insurance sught by the exempt cmmercial purchaser can be btained frm an admitted insurer if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Surplus lines brkers shall nt place cverage with a nnadmitted insurer unless, at the time f placement, the nnadmitted insurer: Is authrized t write such insurance in its dmiciliary jurisdictin; and Pssesses capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin that equals the greater f the minimum capital and surplus requirements under the laws f Suth Dakta r $15 millin (1). The directr may waive the minimum capital and surplus requirement fr a nnadmitted insurer if he makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry The directr may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin Alien insurers must be n the quarterly listing f alien insurers maintained by NAIC (2). Natinal Prducer Database The statute is silent n jining a natinal prducer database fr brker licensing and renewal f licenses. Under the NRRA, Suth Dakta may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in Suth Dakta unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 114

115 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Tennessee Hme State f the Insured NRRA definitin + principal place f business definitin Premium Tax SLIMPACT; TN will tax and keep 100% at a rate f 5% until SLIMACT peratinal Exempt Cmmercial Purchaser NRRA apprach unless/until SLIMPACT rule issued Eligible Insurer NRRA apprach unless/until SLIMPACT rule issued Prducer Licensing License required nly fr placements fr TN insureds; authrizes participatin in a prducer licensing database Effective Date June 10, 2011 TN H 966 Defining Hme State f the Insured The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence (10)(A). Principal place f business is the state where the insured maintains its headquarters and where the insured s high-level fficers direct, cntrl and crdinate the business activities f the insured (10)(C). Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium (10)(A). If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract (10)(B). Multi-State Risk Surplus Lines Premium Taxes Tennessee adpted the SLIMPACT mdel apprach t multi-state premium tax allcatin. Under SLIMPACT, each cmpacting state must adhere t specified tax allcatin frmulas and data reprting requirements. The Premium Tax Data Allcatin Frmula determines each cntracting state s premium allcatin. Each state may then charge its wn rate f taxatin n that allcatin. If a cmpacting state changes its rate f taxatin, the state must give 90 days ntice t the Cmpact Cmmissin (the multi-state gverning bdy fr the SLIMPACT system). Until SLIMPACT is peratinal, Tennessee will tax and keep 100% n grss premiums. The tax rate is 5% (a)-(b). Exempt Cmmercial Purchasers Tennessee has implemented the NRRA exempt cmmercial purchaser prvisin (8). Under the NRRA, an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 115

116 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin Under (b), a surplus lines brker seeking t prcure r place nnadmitted insurance in Alabama fr an exempt cmmercial purchaser shall nt be required t satisfy any state requirement t make a due diligence search t determine whether the full amunt r type f insurance sught by such exempt cmmercial purchaser can be btained frm admitted insurers if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Under (b)(1), a brker may place insurance with a nnadmitted insurer dmiciled in a U.S. jurisdictin if: The insurer is authrized t write the type f insurance in its dmiciliary jurisdictin; and The insurer has capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin which equals the greater f: The minimum capital and surplus requirements under the law f Tennessee; r $15,000,000 The insurance cmmissiner may waive the minimum capital and surplus requirements abve if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin (b)(1). A brker may place insurance with a nnadmitted insurer dmiciled utside the U.S. if the insurer is listed n the Quarterly Listing f Alien Insurers maintained by the Internatinal Insurers Department f the NAIC (b)(2). Natinal Prducer Database The statute authrizes the cmmissiner t participate in the NAIC prducer licensing database (d) The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 116

117 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Texas Hme State f the Insured Premium Tax Exempt Cmmercial Purchaser Eligible Insurer Prducer Licensing Effective Date TX SB 1 NRRA definitin Multistate allcatin agreement authrized; TX keeps 100% at rate f 4.85% unless/until state enters an agreement NRRA apprach NRRA apprach License required nly fr placements fr TX insureds; TX law silent regarding participatin in electrnic licensing database September 28, 2011 (per Gvernr s guidance; Texas Insurance Dept and Cmptrller are reviewing ptential retractive applicatin) Defining Hme State f the Insured The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence. Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract (4). This definitin will take effect n July 21, Multi-State Risk Surplus Lines Premium Taxes The Texas Insurance Cde authrizes the Cmptrller t enter int multi-state agreements fr purpses f cllecting and allcating insurance taxes (j) (2009). Accrding t the state s new surplus lines law, fr plicies delivered, issued fr delivery, r renewed n r after July 21, 2011, if Texas has nt entered int a multi-state agreement, the tax is cmputed n the entire plicy premium at a rate f 4.85% (c). If the state des enter a multi-state agreement, taxes due n multistate plicies will be allcated and reprted in accrdance with that agreement (f) Fr plicies delivered, issued fr delivery, r renewed prir t July 21, taxes are paid n the prtin f the premium applicable t the risk lcated in Texas. All premiums negtiated, written, prcured r received in Texas are deemed t be written n prperty r risks lcated in Texas, unless such premiums are prperly allcated r apprtined and reprted as premiums subject t taxatin in ther states. 28 Tex. Admin Cde and There remains a questin as t whether the new tax law will be effective September 28 r (retractively) July 21. The Texas Insurance Department and Cmptrller are reviewing the law and expect t issue guidance sn. Exempt Cmmercial Purchasers The Texas statute is silent n exempt cmmercial purchasers. Therefre, as f July 21, 2011, the NRRA apprach will be in effect. Under the NRRA, an exempt cmmercial purchaser is a purchaser that prcures insurance cverage 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 117

118 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin. Brkers prcuring r placing insurance fr an exempt cmmercial purchaser are nt required t make a due diligence search t determine whether the full amunt r type f insurance sught by the exempt cmmercial purchaser can be btained frm an admitted insurer if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Texas des impse eligibility requirements n freign insurers. Therefre, as f July 21, 2011, the NRRA requirements will preempt any cnflicting state requirements. Under the NRRA, a surplus lines brker may place insurance with a nnadmitted insurer if: The insurer is authrized t place that type f insurance in its dmiciliary jurisdictin; and The insurer has capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin that is the greater f the minimum capital and surplus requirements under the laws f this state r $15 millin. The insurance cmmissiner may waive the minimum capital and surplus requirements fr unauthrized freign insurers if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin. Brkers may place insurance with an alien insurer that appears n the Quarterly Listing f Alien Insurers maintained by the NAIC. Natinal Prducer Database The statute is silent n whether Texas will participate in the NAIC prducer database r sme ther equivalent unifrm natinal database fr prducer licensing and renewals. Under the NRRA, Texas may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in Texas unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 118

119 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Utah Hme State f the Insured NRRA definitin + principal place f business definitin + principal residence definitin Premium Tax Signed NIMA; 100% t UT at rate f 4.25% until NIMA is peratinal Exempt Cmmercial Purchaser NRRA apprach Eligible Insurer Utah nly requires minimum capital/surplus f $15MM Prducer Licensing License required nly fr placements fr UT insureds; UT law silent regarding participatin in electrnic licensing database Effective Date May 10, 2011 UT H 316 Defining Hme State f the Insured The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence. 31A-3-305(1)(b)(i)(A). Principal place f business is the state where the insured maintains its headquarters and where the insured s high-level fficers direct, cntrl and crdinate the business activities; r if the insured s high-level fficers direct, cntrl and crdinate the business activities in mre than ne state, the state in which the greatest percentage f the insured s taxable premium fr that insurance cntract is allcated; r if the insured maintains its headquarters r the insured s high-level fficers direct, cntrl and crdinate the business activities utside any state, the state t which the state s greatest percentage f the insured s taxable premium fr that insurance cntract is allcated. 31A-3-305(1)(c). Principal residence is the state where the insured resides fr the greatest number f days during a calendar year; r if the insured s principal residence is lcated utside any state, the state t which the greatest percentage f the insured s taxable premium that that insurance cntract is allcated. 31A-3-305(1)(d). Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. 31A-3-305(1)(b)(i)(B). If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract. 31A-3-305(1)(b)(ii). Multi-State Risk Surplus Lines Premium Taxes The statute allws the cmmissiner t enter int an agreement t facilitate the cllectin, allcatin, and disbursement f premium taxes attributable t the placement f nnadmitted insurance. 31A-3-305(2)(a). T the extent that ther states where a prtin f the prperties, risks r expsures reside have nt entered int the agreement with Utah, Utah will retain the net premium tax cllected. 31A-3-303(4)(a). The state has jined NIMA. Until NIMA is peratinal, surplus lines insurance is subject t a tax f 4.25% n grss premiums, less 4.25% n returned premiums. 31A-3-301(1)(a). Exempt Cmmercial Purchasers 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 119

120 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List The statute des nt include any exempt cmmercial purchaser prvisins. On July 21, 2011, the NRRA exempt cmmercial purchaser prvisin will becme effective. Under the NRRA, an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin. Under the NRRA, a surplus lines brker seeking t prcure r place nnadmitted insurance in Utah fr an exempt cmmercial purchaser shall nt be required t satisfy any state requirement t make a due diligence search t determine whether the full amunt r type f insurance sught by such exempt cmmercial purchaser can be btained frm admitted insurers if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria The Utah law des nt incrprate any NRRA insurer eligibility prvisins, but current law requires unauthrized insurer t be in substantial cmpliance with the slvency standards in Chapter 17, Part 6, Risk-Based Capital, r maintain[] capital and surplus f at least $15,000,000, whichever is greater. 31A (6)(e). Therefre, under the NRRA, the NRRA eligibility standards will apply in Utah beginning July 21, Under the NRRA, a brker may place insurance with a nnadmitted insurer dmiciled in a U.S. jurisdictin if: The insurer is authrized t write the type f insurance in its dmiciliary jurisdictin; and The insurer has capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin which equals the greater f: The minimum capital and surplus requirements under the law f Tennessee; r $15,000,000 The insurance cmmissiner may waive the minimum capital and surplus requirements abve if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 120

121 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Mrever, beginning July 21, 2011, Utah cannt prhibit placement f surplus lines insurance with a nnadmitted insurer dmiciled utside the U.S. if the insurer is listed n the Quarterly Listing f Alien Insurers maintained by the Internatinal Insurers Department f the NAIC. Natinal Prducer Database Utah s law is silent n jining the NAIC prducer database r any ther unifrm natinal database fr prducer licensing and renewal f licenses. Under the NRRA, Utah may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in Utah unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 121

122 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Vermnt Hme State f the Insured Premium Tax Exempt Cmmercial Purchaser Eligible Insurer Prducer Licensing Effective Date May 26, VT S 36 NRRA definitin + principal place f business definitin SLIMPACT; VT will tax and keep 100% at the rate where the risk is lcated until SLIMPACT is peratinal VT industrial insured exemptin + NRRA apprach until SLIMPACT rule issued NRRA apprach until SLIMPACT rule issued License required nly fr placements fr VT insureds; requires VT t participate in NAIC r similar database by July 1, 2012 Defining Hme State f the Insured The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence. 8 V.S.A 5033(13)(A)(i). Principal place f business is the state where the insured maintains its headquarters and where the insured s high-level fficers direct, cntrl and crdinate the business activities f the insured. Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. 8 V.S.A 5033(13)(A)(ii). If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract. 8 V.S.A 5033(13)(B). Multi-State Risk Surplus Lines Premium Taxes The Vermnt statute expresses the intent f the state t enter int SLIMPACT. 8 V.S.A 5051(a). Hwever, during the interim f the legislative biennium, if SLIMPACT des nt take effect, the cmmissiner has the discretin t enter int a different multi-state agreement (the legislature s intent is fr the state t enter int sme tax-allcatin agreement). 8 V.S.A 5051(b). During that interim perid, if SLIMPACT has nt taken effect, the cmmissiner is instructed t determine whether entering int a different multi-state agreement is in the best financial interest f the state, whether it creates an undue administrative burden n the state, and whether it is cnsistent with the NRRA requirements. 8 V.S.A 5051(b). Based n thse findings, the cmmissiner must get prir apprval f the Jint Fiscal Cmmittee t enter int any ther agreement. 8 V.S.A 5051(c)(2). Under SLIMPACT, each cmpacting state must adhere t specified tax allcatin frmulas and data reprting requirements. 8 V.S.A 5055(1). The Premium Tax Data Allcatin Frmula determines each cntracting state s premium allcatin. 8 V.S.A 5055(1). Each state may then charge its wn rate f taxatin n that allcatin. 8 V.S.A 5055(5). If a cmpacting state changes its rate f taxatin, the state must give 90 days ntice t the Cmpact Cmmissin. 8 V.S.A 5055(6). By July 21, 2011, if a clearinghuse fr tax allcatin has nt been established r is nt peratinal, all payments and taxes that therwise wuld be payable t such a clearinghuse shall be submitted t the cmmissiner r with a vluntary 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 122

123 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List dmestic rganizatin f surplus lines brkers with which the cmmissiner has cntracted fr the purpse f cllecting and allcating all payments and taxes. 8 V.S.A. 5051(d). Under the amended 8 V.S.A. 5035(a), if the insurance cvers risks lcated bth in and ut f Vermnt, the sum payable must be cmputed based n grss premiums charged, minus any return premiums, as fllws: An amunt equal t 3% n that prtin f the premiums applicable t risks lcated in Vermnt; PLUS An amunt equal t a percentage n that prtin f the premiums applicable t risks lcated utside Vermnt. This percentage is based n the laws f the jurisdictin within which the risk is lcated. Exempt Cmmercial Purchasers Vermnt law already includes an industrial insured exemptin. That exemptin will remain in effect. While the new statute is silent n the definitin f exempt cmmercial purchasers, Vermnt recgnizes the NRRA exemptin fr cmmercial purchasers unless and until SLIMPACT adpts rules: Under 8 V.S.A 5024(c), brkers prcuring r placing insurance fr an exempt cmmercial purchaser are nt required t make a due diligence search t determine whether the full amunt r type f insurance sught by the exempt cmmercial purchaser can be btained frm an admitted insurer if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Thus, ging frward, Vermnt s industrial insured exemptin will remain in effect. As f July 21, 2011, the NRRA cmmercial purchaser exemptin will als be effective. Under the NRRA, an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin. Surplus Line Insurer Eligibility Criteria The Cmpact Cmmissin is charged with prmulgating unifrm rules fr cmpacting states regarding freign insurer eligibility requirements as authrized by the NRRA. Until SLIMPACT rules are established, Vermnt prvides: 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 123

124 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List A surplus lines brker may place insurance with a freign insurer if the insurer has capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin that is the greater f the minimum capital and surplus requirements under the laws f Vermnt r $15 millin. 8 V.S.A 5026(a)(1). The insurance cmmissiner may waive the minimum capital and surplus requirement fr unauthrized freign insurers if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. 8 V.S.A 5026(b). The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin. 8 V.S.A 5026(b). A surplus lines brker may place insurance with an alien insurer if the insurer is listed n the quarterly listing f alien insurers maintained by the NAIC. 8 V.S.A 5026(a)(2). Natinal Prducer Database The cmmissiner shall participate in the NAIC prducer database r an equivalent unifrm natinal database befre July 1, V.S.A. 4807(d) The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 124

125 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Virginia Hme State f the Insured Premium Tax Exempt Cmmercial Purchaser Eligible Insurer Prducer Licensing Effective Date July 1, 2011 VA H 2286 Defining Hme State f the Insured NRRA definitin + Principal Place f Business Where VA is the hme state f the insured, VA will cntinue t tax 100% at rate f 2.25% VA industrial insured exemptin + NRRA apprach as f July 21, 2011 NRRA apprach License required nly fr placements fr VA insureds; VA law silent regarding participatin in electrnic licensing database The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence. The principal place f business is the state where the insured maintains its headquarters and where the insured s high-level fficers direct, cntrl, and crdinate the business activities f the insured. Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract Multi-State Risk Surplus Lines Premium Taxes Virginia has nt entered int a multistate agreement r cmpact fr tax allcatin purpses. Fr plicies effective after July 1, 2011, Virginia will nly cllect surplus lines premium taxes where it is the hme state f the insured. Under Virginia law, each surplus lines brker whse annual premium tax liability can reasnably be expected t exceed $1500 shall pay a premium tax n direct grss premiums adjusted fr additinal and returned premiums (B). There is n allcatin t ther states where cvered risks are lcated. Virginia taxes surplus lines premiums at a rate f 2.25% Exempt Cmmercial Purchasers Virginia has an industrial insured exemptin. That exemptin will remain in effect. As f July 21, 2011, the NRRA cmmercial purchaser exemptin will als be effective. Under the NRRA, an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 125

126 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin Under the NRRA, a surplus lines brker seeking t prcure r place nnadmitted insurance in Virginia fr an exempt cmmercial purchaser shall nt be required t satisfy any state requirement t make a due diligence search t determine whether the full amunt r type f insurance sught by such exempt cmmercial purchaser can be btained frm admitted insurers if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Under Virginia law (and the NRRA), Virginia allws brkers t place insurance with nnadmitted insurers that are authrized t write the type f insurance in their dmiciliary jurisdictin and have capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin which equals the greater f: The minimum capital and surplus requirements under the law f Virginia; r $15,000,000. The insurance cmmissiner may waive the minimum capital and surplus requirements abve if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin (2)(a). Under (D), an unlicensed alien insurer shall be deemed apprved by the Cmmissin if such insurer is listed n the Quarterly Listing f Alien Insurers maintained by the NAIC. Natinal Prducer Database Under the NRRA, Virginia may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in Virginia unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 126

127 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Washingtn Hme State f the Insured NRRA definitin Premium Tax 100% t WA at rate f 2% Exempt Cmmercial Purchaser NRRA apprach Eligible Insurer NRRA apprach Prducer Licensing License required nly fr placements fr WA insureds; allws participatin in NAIC r similar database by July 21, 2012 Effective Date July 21, WA H 1694 Defining Hme State f the Insured The hme state is where an insured maintains its principal place f business r, if the insured is an individual, the individual s principal residence. WA H 1694, 1(5)(a)(i). Principal place f business is the state where the insured maintains its headquarters and where the insured s high-level fficers direct, cntrl, and crdinate the business activities f the insured. Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. WA H 1694, 1(5)(a)(ii). If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract. WA H 1694, 1(5)(b). Multi-State Risk Surplus Lines Premium Taxes Washingtn s statute des nt prvide fr allcatin f multi-state premium taxes between states r any multi-state agreement fr these purpses. Fr prperty and casualty insurance ther than industrial insurance, if Washingtn is the hme state f the insured, the tax is cmputed n the entire premium, regardless f whether the plicy cvers risks r expsures utside f the state (2). Washingtn taxes at a rate f 2% Exempt Cmmercial Purchasers Under WA H 1694, 1(4)(a), an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 127

128 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Under WA H 1694, 5(1) (2), brkers prcuring r placing insurance fr an exempt cmmercial purchaser are nt required t make a due diligence search t determine whether the full amunt r type f insurance sught by the exempt cmmercial purchaser can be btained frm an admitted insurer if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer; and The brker submits recrds that these requirements have been satisfied. Surplus Line Insurer Eligibility Criteria Surplus lines brkers shall nt place cverage with a nnadmitted insurer unless, at the time f placement, the nnadmitted insurer: Is authrized t write such insurance in its dmiciliary jurisdictin; and Pssesses capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin that equals the greater f the minimum capital and surplus requirements under the laws f Washingtn r $15 millin (1)(a)(i). The directr may waive the minimum capital and surplus requirement fr a nnadmitted insurer if he makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry (1)(a)(ii). The directr may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin (1)(a)(ii). Alien insurers must be n the quarterly listing f alien insurers maintained by NAIC (1)(b). Natinal Prducer Database The directr may participate in the NAIC natinal prducer database r an equivalent natinal unifrm database fr licensure f surplus lines brkers. WA H 1694, The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 128

129 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List West Virginia Hme State f the Insured Premium Tax Exempt Cmmercial Purchaser Eligible Insurer Prducer Licensing Effective Date July 1, 2011 WV S 435 Defining Hme State f the Insured NRRA definitin Multistate allcatin agreement authrized; 100% t WV taxed at rate f 4.55% unless/until an agreement is peratinal (per DOI guidance) NRRA apprach NRRA apprach License required nly fr placements fr WV insureds; WV law silent regarding participatin in electrnic licensing database The hme state is where an insured maintains its principal place f business r if the insured is an individual, the individual s principal residence C-3(i)(1). Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium C-3(i)(2). Where mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance placement, West Virginia will be cnsidered the hme state if West Virginia is the hme state f the member f the affiliated grup that has the largest percentage f premium attributable t it under such insurance cntract. Multi-State Risk Surplus Lines Premium Taxes The cmmissiner is authrized t participate in NIMA r a similar allcatin agreement fr purpses f cllecting and disbursing t signatry states any funds cllected that are allcable t prperties, risks, r expsures lcated r t be perfrmed utside f West Virginia C-7(h). T the extent that ther states where prtins f the prperties, risks r expsures reside have failed t enter int NIMA r a similar agreement with West Virginia, West Virginia will retain 100% f the net premium tax cllected C-7(h). Accrding t a surplus lines bulletin issued by the insurance department n July 11, 2011, fr plicies with an effective date n r after July 1, 2011, where West Virginia is the hme state f the insured, West Virginia will tax and cllect 100% f multi-state premiums at a rate f 4.55% (nte: this is nt cnsistent with the statutry language, which indicates that premiums will be taxed at the rate f the state where the risk is lcated, but insurance department staff has cnfirmed that the state will tax accrding t the bulletin and nt the statutry language). Accrding t that same bulletin, if and when the state enters NIMA, taxes will be cllected and allcated accrding t the NIMA clearinghuse scheme. Exempt Cmmercial Purchasers 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 129

130 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Under 33-12C-3(f), an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin. Under 33-12C-5(b)(3), brkers prcuring r placing insurance fr an exempt cmmercial purchaser are nt required t make a due diligence search t determine whether the full amunt r type f insurance sught by the exempt cmmercial purchaser can be btained frm an admitted insurer if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Under 33-12C-5(d), surplus lines brkers shall nt place cverage with a nnadmitted insurer unless, at the time f placement, the nnadmitted insurer: Is authrized t write such insurance in its dmiciliary jurisdictin; and Pssesses capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin that equals the greater f the minimum capital and surplus requirements under the laws f West Virginia r $15 millin; and Has established satisfactry evidence f gd repute and financial integrity, The directr may waive the abve minimum capital and surplus requirement fr a nnadmitted insurer if the directr makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry C-5(d)(2)(A)(ii). The directr may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin C-5(d)(2)(A)(ii). Alien insurers shall have capital and surplus meeting the same requirements as freign insurers have a trust fund f the greater f: $5.4 millin r 30% f U.S. surplus lines grss liabilities, excluding aviatin, wet marine and transprtatin liabilities, nt t exceed $60 millin C-5(d)(2)(E)(i) (ii). The insurer may request permissin frm the cmmissiner t pay valid plicyhlder claims ut f the trust accunt, but the amunt in the accunt can never fall belw the greater f $15 millin r 30% f U.S. liabilities C-5(d)(2)(E)(ii)(II). An alien insurer must als be listed with the NAIC quarterly listing f alien insurers C-5(d)(3). The cmmissiner may waive these requirements fr alien insurers upn an affirmative finding f acceptability after cnsideratin f: the interests f the public and plicyhlders; the length f time the insurer has been authrized t d business in its dmiciliary jurisdictin and elsewhere; 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 130

131 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List unavailability f particular cverages; the size f the cmpany as measured by assets, capital and surplus, reserves, premium writings, etc.; diversificatin f the cmpany between lines f business and gegraphically; past prjected trend in the cmpany s capital and surplus C-5(d)(3). The alien insurer must prvide the cmmissiner with a current annual statement certified by the insurer and an actuarial pinin regarding the insurer s lss reserves C-5(d)(4). In additin, under the NRRA, West Virginia must permit the placement f cverage with an alien insurer listed n the NAIC s quarterly listing f alien insurers. Natinal Prducer Database The statute is silent n participatin in the NAIC prducer database r an equivalent natinal unifrm database fr prducer licensing. Under the NRRA, West Virginia may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in West Virginia unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 131

132 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Wiscnsin Wiscnsin failed t enact surplus lines legislatin t implement NRRA prvisins befre July 21, Therefre, n July 21, 2011, the default NRRA prvisins tk effect preempting cnflicting state law. Hme State f the Insured NRRA definitin Premium Tax Beginning July 21, 2011, WI may nly cllect taxes n SL premiums where WI is the hme state f the insured; under current law, WI taxes 3% f net premium n a pr rata basis Exempt Cmmercial Purchaser NRRA apprach as f July 21, 2011 Eligible Insurer N eligibility requirements Prducer Licensing License required nly fr placements fr WI insureds; WI law silent regarding participatin in electrnic licensing database Effective Date July 21, 2011 Defining Hme State f the Insured Under the NRRA, the hme state is where an insured maintains its principal place f business r if the insured is an individual, the individual s principal residence. Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium. If mre than ne insured frm an affiliated grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract. Multi-State Risk Surplus Lines Premium Taxes As f July 21, 2011, therefre, Wiscnsin may nly cllect surplus lines premium taxes where it is the hme state f the insured. Wiscnsin has nt entered int a multistate agreement r cmpact fr tax allcatin purpses. Based n current law, taxes are paid n the prtin f the premium applicable t the risk lcated in Wiscnsin, except that all premiums received in this state r charged n plicies written r negtiated in this state shall be taxable in full, with a credit fr any tax actually paid in anther state t the extent f a reasnable allcatin n the basis f risk allcatins. Wis. Stat (6); Wis Admin. Cde The rate f taxatin is 3%. Wis. Admin. Cde 6.17; Wis. Stat Exempt Cmmercial Purchasers As f July 21, 2011, the NRRA exemptin fr cmmercial purchasers will be effective in Wiscnsin The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 132

133 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Accrding t the NRRA, an exempt cmmercial purchaser is ne that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin Under the NRRA, a surplus lines brker seeking t prcure r place nnadmitted insurance in Wiscnsin fr an exempt cmmercial purchaser shall nt be required t satisfy any state requirement t make a due diligence search t determine whether the full amunt r type f insurance sught by such exempt cmmercial purchaser can be btained frm admitted insurers if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Wiscnsin des nt currently impse eligibility requirements n freign insurers. If Wiscnsin des impse such requirements after July 21, 2011, hwever, thse requirements must match the NRRA. Under the NRRA, as f July 21, 2011, Wiscnsin may nt impse eligibility requirements n, r therwise establish eligibility criteria fr, nnadmitted insurers dmiciled in a U.S. jurisdictin, except: Wiscnsin may require that the insurer be authrized t write the type f insurance in its dmiciliary jurisdictin; and Wiscnsin may require that the insurer have capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin which equals the greater f: The minimum capital and surplus requirements under the law f Wiscnsin; r $15,000,000 The insurance cmmissiner may waive the minimum capital and surplus requirements abve if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin. Under the NRRA, a state may nt prhibit a surplus lines brker frm placing nnadmitted insurance with, r prcuring nnadmitted insurance frm, a nnadmitted insurer dmiciled utside the U.S. that is listed n the Quarterly Listing f Alien Insurers maintained by the Internatinal Insurers Department f the NAIC The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 133

134 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Natinal Prducer Database Under the NRRA, Wiscnsin may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in Wiscnsin unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 134

135 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Wyming Hme State f the Insured NRRA definitin Premium Tax Signed NIMA; 100% t WY at a rate f 3% until Dec. 31, 2011; accrding t NIMA frmula n Jan. 1, 2012 Exempt Cmmercial Purchaser WY industrial insured + NRRA apprach after July 21 Eligible Insurer NRRA apprach after July 21 Prducer Licensing License required nly fr placements fr WY insureds; WY law silent regarding participatin in electrnic licensing database Effective Date July 1, 2011 WY H 242 Defining Hme State f the Insured The hme state is where an insured maintains its principal place f business r if the insured is an individual, the individual s principal residence (a)(iv)(A)(I). Hwever, if 100% f the insured risk is lcated utside f the state f the principal place f business r principal residence, the hme state is the state that cllects the greatest percentage f the insured s taxable premium (a)(iv)(A)(II). If mre than ne insured frm an affiliate grup are named insureds n a single nnadmitted insurance cntract, the hme state is the hme state f the member f the affiliated grup that has the largest percentage f premium attributed t it under the insurance cntract (a)(iv)(B). Multi-State Risk Surplus Lines Premium Taxes The cmmissiner may participate in a multi-state agreement r clearinghuse fr purpses f cllecting, allcating r disbursing taxes cllected n multi-state premiums (g). T the extent that ther states where prtins f the prperties, risks r expsures reside have failed t enter int an agreement with Wyming, Wyming will retain 100% f the net premium tax cllected (g). The state has jined NIMA. Accrding t Insurance Department Guidance issued n Nvember 2, 2011, until NIMA is peratinal n January 1, 2012, fr multi-state plicies, the entire grss premium will be taxed at Wyming s rate f 3%. Effective January 1, 2012, the NIMA tax allcatin frmula will apply. Exempt Cmmercial Purchasers Wyming has an industrial insured exemptin. That exemptin will remain in effect. As f July 21, 2011, the NRRA cmmercial purchaser exemptin will als be effective. Under the NRRA, an exempt cmmercial purchaser is a purchaser that prcures insurance cverage thrugh a qualified risk manager, paid at least $100,000 in prperty and casualty insurance premiums in the last year, and meets ne f the fllwing criteria: Had a net wrth f ver $20 millin at the end f the preceding fiscal year; 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 135

136 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Had net revenues r sales ver $50 millin at the end f the preceding fiscal year; Has mre than 500 full-time emplyees per individual cmpany, r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; Is a municipality with a ppulatin f mre than 50,000 peple; r Is a nnprfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin Under the NRRA, a surplus lines brker seeking t prcure r place nnadmitted insurance in Wyming fr an exempt cmmercial purchaser shall nt be required t satisfy any state requirement t make a due diligence search t determine whether the full amunt r type f insurance sught by such exempt cmmercial purchaser can be btained frm admitted insurers if: The brker disclses t the exempt cmmercial purchaser that such insurance may r may nt be available frm the admitted market that may prvide greater prtectin with mre regulatry versight; and The exempt cmmercial purchaser has subsequently requested in writing the brker t prcure r place such insurance fr a nnadmitted insurer. Surplus Line Insurer Eligibility Criteria Wyming s current eligibility requirements will be preempted and replaced by the NRRA requirements n July 21, Therefre, beginning July 21, Wyming may nly impse the fllwing eligibility requirements fr nnadmitted insurers dmiciled in a U.S. jurisdictin: the insurer must be authrized t write the type f insurance in its dmiciliary jurisdictin; and the insurer must have capital and surplus r its equivalent under the laws f its dmiciliary jurisdictin which equals the greater f: The minimum capital and surplus requirements under the law f Wyming; r $15,000,000. The insurance cmmissiner may waive the minimum capital and surplus requirements abve if the cmmissiner makes an affirmative finding f acceptability after cnsidering: quality f management, capital and surplus f a parent cmpany, cmpany underwriting prfit and investment trends, market availability, and cmpany recrd and reputatin within the industry. The cmmissiner may nt make a finding f acceptability if the insurer s capital and surplus is under $4.5 millin. In additin, under the NRRA, Wyming may nt prhibit a surplus lines brker frm placing nnadmitted insurance with, r prcuring nnadmitted insurance frm, a nnadmitted insurer dmiciled utside the U.S. that is listed n the Quarterly Listing f Alien Insurers maintained by the Internatinal Insurers Department f the NAIC. Natinal Prducer Database Wyming s law is silent n jining the NAIC prducer database r any ther unifrm natinal database fr prducer licensing and renewal f licenses. Under the NRRA, Wyming may nt cllect any fees relating t licensing f an individual r entity as a surplus lines brker in Wyming unless the state has in effect by July 21, 2012, laws r regulatins that prvide fr participatin by the state in the natinal prducer database f the NAIC, r any ther equivalent unifrm natinal database, fr the licensure f surplus lines brkers and renewal f such licenses The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 136

137 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 137

138 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Attachment A: State-by-State Requirements (Please see explanatin f terms n next page.) State Updated Law Tax Regime Hme State Def Exempt Cm l Purchaser Insurer Eligibility AL Yes SLIMPACT NRRA + NRRA + Ind. Ins. NRRA AK Yes NIMA NRRA + NRRA NRRA AZ Yes Study/Agreement Auth d NRRA + NRRA NRRA AR Yes Agreement Auth d NRRA + NRRA NRRA CA Yes 100% NRRA + NRRA NRRA CO N (adjurned) PR NRRA (default) NRRA (default) + Ind. Ins. NRRA (default) CT Yes NIMA NRRA NRRA + Ind. Ins. N DE Yes Study/100%/Agreement NRRA NRRA NRRA Auth d DC N PR NRRA (default) NRRA (default) N FL Yes NIMA NRRA NRRA NRRA (default) GA Yes Study/100%/Agreement NRRA + NRRA NRRA Auth d HI Yes NIMA NRRA + NRRA NRRA ID Yes 100% NRRA + NRRA NRRA IL N (bill 100%-DOI NRRA NRRA + Ind. Ins. NRRA pending); DOI Guidance IN Yes SLIMPACT NRRA + NRRA + Ind. Ins. N (until SLIMPACT) IA N (adjurned) PR NRRA (default) NRRA (default) N KS Yes SLIMPACT NRRA + NRRA (SLIMPACT) NRRA KY Yes SLIMPACT NRRA + NRRA (SLIMPACT) N (until SLIMPACT) LA Yes NIMA NRRA NRRA (default) NRRA (default) ME Yes Study/100%/Agreement NRRA NRRA NRRA Auth d MD Yes Study/100%/Agreement NRRA NRRA + Ind. Ins. NRRA Auth d MA Yes Public Cmment NRRA - NRRA NRRA /100%/Agreement Auth d MI N PR NRRA (default) NRRA (default) NRRA (default) MN Yes 100% NRRA NRRA NRRA MS Yes NIMA NRRA + NRRA NRRA MO Yes 100% NRRA + NRRA + Ind. Ins. NRRA MT Yes Agreement Auth d NRRA + NRRA NRRA NE Yes NIMA NRRA + NRRA NRRA NV Yes NIMA NRRA + NRRA + Ind. Ins. NRRA NH Yes Agreement Auth d NRRA NRRA + Ind. Ins. NRRA NJ Yes Agreement Auth d NRRA NRRA (default) NRRA (default) NM Yes SLIMPACT NRRA + NRRA NRRA NY Yes 100% NRRA + NRRA NRRA NC Yes Study/100%/Agreement NRRA NRRA NRRA Auth d ND Yes SLIMPACT NRRA + NRRA NRRA OH Yes Study/100%/Agreement NRRA + NRRA NRRA Auth d OK Yes Agreement Auth d NRRA NRRA NRRA OR Yes Agreement Auth d NRRA NRRA (lwer standards) NRRA PA Yes 100% NRRA NRRA + Ind. Ins. NRRA State Updated Law Tax Regime Hme State Def Exempt Cm l Purchaser Insurer Eligibility RI Yes SLIMPACT NRRA + NRRA + Ind. Ins. NRRA 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 138

139 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List SC N (adjurned) PR-DOI NRRA (default) NRRA (default) + Ind. Ins. N SD Yes NIMA NRRA NRRA NRRA TN Yes SLIMPACT NRRA + NRRA (SLIMPACT) NRRA TX Yes Agreement Auth d NRRA NRRA (default) NRRA (default) UT Yes NIMA NRRA + NRRA NRRA (default) VT Yes SLIMPACT NRRA + NRRA + Ind. Ins. NRRA VA Yes 100% NRRA + NRRA (default) + Ind. Ins. NRRA WA Yes 100% NRRA NRRA NRRA WV Yes NIMA NRRA NRRA NRRA WI N PR NRRA (default) NRRA (default) N WY Yes NIMA NRRA NRRA + Ind. Ins. NRRA 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 139

140 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Explanatin f Terms Updated Law Clumn: Bill Pending states in which surplus lines legislatin pending as f 7/21/11 but still in sessin Adjurned states in which legislature adjurned in 2011 withut enacting NRRA cnfrming legislatin Tax Regime Clumn: SLIMPACT SLIMPACT state NIMA NIMA signatry state Study/100%/Agreement Auth d state authrized t enter a multistate allcatin agreement pending study/determinatin; meantime, taxes and keeps 100%. PR states that have nt yet taken actin and currently impse tax n a pr rata prtin f the premium PR-DOI states that have nt yet taken actin and currently impse tax n a pr rata prtin f the premium; in these states, the pr rata allcatin nt prvided in statute r rule but accrding t DOI bulletin r guidance 100% states that tax and keep 100% f premium Exempt Cm l Purchaser Clumn: NRRA states that have enacted exempt cmmercial purchaser (ECP) prvisins f NRRA NRRA by default states that have nt enacted ECP prvisins f NRRA, where ECP prvisins will be impsed under the federal law n 7/21/11 NRRA + Ind. Ins. states that have bth industrial insured exemptin and NRRA ECP prvisins in law NRRA (default) + Ind. Ins. states that have industrial insured exemptin but have nt enacted ECP prvisins f NRRA; ECP prvisins will be impsed under the federal law n 7/21/11 NRRA SLIMPACT states that have enacted NRRA s ECP, but whse requirements culd change if SLIMPACT creates ECP rules 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 140

141 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Insurer Eligibility Clumn NRRA states that have enacted NRRA s eligibility standards NRRA by default states that have (r had) eligibility standards n their bks; thse requirements must cnfrm with NRRA N States that currently d nt have eligibility requirements N (until SLIMPACT) states that d nt have eligibility requirements but culd have such requirements in future if SLIMPACT creates eligibility rules 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 141

142 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Attachment B: Exempt Cmmercial Purchaser Certificatin Frm 1. The undersigned, n behalf f [NAME OF PURCHASER], hereby certifies that [PURCHASER] is an Exempt Cmmercial Purchaser as that term is defined in 15 U.S.C The undersigned certifies that [PURCHASER]: (1) emplys r retains a qualified risk manager, as that term is defined in 15 U.S.C and set frth in Annex A heret, t negtiate insurance cverage; (2) has paid aggregate natinwide cmmercial prperty and casualty insurance premiums in excess f $100,000 in the immediately preceding 12 mnths; and (3) meets at least ne f the fllwing criteria: (i) pssesses a net wrth in excess f $20 millin (as adjusted fr inflatin); (ii) generates annual revenues in excess f $50 millin (as adjusted fr inflatin); (iii) emplys mre than 500 full-time (r full-time equivalent) emplyees per individual insured r is a member f an affiliated grup emplying mre than 1,000 emplyees in the aggregate; (iv) is a nt-fr-prfit rganizatin r public entity generating annual budgeted expenditures f at least $30 millin (as adjusted fr inflatin); r (v) is a municipality with a ppulatin f mre than 50, The undersigned hereby certifies that [NAME OF BROKER/AGENCY] has infrmed me that the insurance cverage sught by [PURCHASER] may r may nt be available frm the admitted insurance market and, if it is available frm the admitted insurance market it may prvide greater prtectin with mre regulatry versight than the cverage [PURCHASER] seeks t purchaser frm the nnadmitted insurance market. 3. The undersigned, n behalf f [NAME OF PURCHASER], hereby requests [NAME OF BROKER/AGENCY] t purchase the insurance cverage sught by [PURCHASER] frm the nnadmitted insurance market. NAME TITLE NAME OF PURCHASER DATE 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 142

143 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List ANNEX A [Exempt Cmmercial Purchaser Certificatin Frm] As used in this certificatin, the term qualified risk manager means, with respect t a plicyhlder f cmmercial insurance, a persn wh meets all f the fllwing requirements: (A) The persn is an emplyee f, r third-party cnsultant retained by, the cmmercial plicyhlder. (B) The persn prvides skilled services in lss preventin, lss reductin, r risk and insurance cverage analysis, and purchase f insurance. (C) The persn (i) (I) has a bachelr s degree r higher frm an accredited cllege r university in risk management, business administratin, finance, ecnmics, r any ther field determined by a State insurance cmmissiner r ther State regulatry fficial r entity t demnstrate minimum cmpetence in risk management; and (II) (aa) has 3 years f experience in risk financing, claims administratin, lss preventin, risk and insurance analysis, r purchasing cmmercial lines f insurance; r (bb) has (AA) a designatin as a Chartered Prperty and Casualty Underwriter (in this subparagraph referred t as CPCU ) issued by the American Institute fr CPCU/Insurance Institute f America; (BB) a designatin as an Assciate in Risk Management (ARM) issued by the American Institute fr CPCU/Insurance Institute f America; (CC) a designatin as Certified Risk Manager (CRM) issued by the Natinal Alliance fr Insurance Educatin & Research; (DD) a designatin as a RIMS Fellw (RF) issued by the Glbal Risk Management Institute; r (EE) any ther designatin, certificatin, r license determined by a State insurance cmmissiner r ther State insurance regulatry fficial r entity t demnstrate minimum cmpetency in risk management; (ii) (I) has at least 7 years f experience in risk financing, claims administratin, lss preventin, risk and insurance cverage analysis, r purchasing cmmercial lines f insurance; and (II) has any 1 f the designatins specified in subitems (AA) thrugh (EE) f clause (i)(ii)(bb); (iii) has at least 10 years f experience in risk financing, claims administratin, lss preventin, risk and insurance cverage analysis, r purchasing cmmercial lines f insurance; r (iv) has a graduate degree frm an accredited cllege r university in risk management, business administratin, finance, ecnmics, r any ther field determined by a State insurance cmmissiner r ther State regulatry fficial r entity t demnstrate minimum cmpetence in risk management The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 143

144 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Attachment C: Hme State Checklist Des the plicy insure nly ne (1) insured? Yes N If Yes, skip t Hme State Determinatin sectin. If N, cntinue t Multiple Insureds (Affiliated Grups) sectin belw. Multiple Insureds (Affiliated Grups) An affiliated grup means a grup f entities that are all affiliated such as crprate affiliates (e.g., parent, direct and indirect subsidiaries, sister cmpanies in the same grup). Des the plicy insure tw (2) r mre named insureds f an affiliated grup as defined abve? Yes N If yes, which insured f the affiliated grup has the largest percentage f premium: This insured is used t determine the Hme State in the Hme State Determinatin sectin. If N, please cntact [LEGAL]. Hme State Determinatin Business: 1. What is the state f the insured s principal place f business? The state f the insured s principal place f business is the state where the insured is headquartered and cnducts its main business peratins. If the insured s high-level fficers direct, cntrl and crdinate the business activities f the insured in mre than ne state, the principal place f business may be the state in which the greatest percentage f the insured s taxable premium fr the applicable insurance cntract is allcated. Principal place f business may r may nt be the state where the insured is dmiciled r incrprated. 2. Is any prtin f the premium allcable t the insured s principal place f business state as defined abve? Yes N If yes, the Hme State is the state f the insured s principal place f business r principal residence The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 144

145 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List If n, The Hme State is the state t which the largest percentage f premium is allcable. State: Individual: 1. What is the state f the insured s principal residence? The state f the insured s principal residence is the state in which the insured resides fr the greatest number f days during a calendar year. If the insured resides utside the United States, the state f principal residence is the state t which the greatest percentage f the insured s taxable premium fr the applicable insurance cntract is allcated. 2. Is any prtin f the premium allcable t the insured s principal residence state as defined abve? Yes N If yes, the Hme State is the state f the insured s principal residence. If n, The Hme State is the state t which the largest percentage f premium is allcable. State: 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 145

146 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Attachment D: NIMA Allcatin Frmula Fr the purpses f this Annex and subject t Parts III, IV, and VII, the Nnadmitted Insurance premium tax revenue fr a calendar tax year r fr a sub-perid f a calendar tax year, as the case may be, is the amunt determined by the frmula: Tax Allcatin = (Net tax due t each State/net tax due t all States) x Amunt cllected Hme State Net Taxes = (Taxes cllected fr the Hme State + Taxes due frm ther Participating States) Taxes wed t ther Participating States Ttal Premium Tax t be Cllected n Each Multi-State Plicy = (Hme State s tax rate x Prtin f premium allcated t Hme State) + (Hme State s tax rate x Premium allcated t Nn-Participating State if insurer is nnadmitted in that State) + (Participating States tax rate x Premium allcated t each Participating State if insurer is nnadmitted in that state) 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 146

147 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List Exhibit 1: Infrmatin Required t be Submitted By the Brker r Insured via the Clearinghuse Web Prtal A. Submissin Cntact Name Address Phne Number address Independently prcured plicy? (Y/N) B. Agency/Brkerage Firm Data State License Number Name Address Phne Number C. Agent/Sublicensee r Individual Licensee Data State License Number Name Office Address Mailing Address Phne Number Address 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 147

148 The Cuncil s NRRA Cmpliance Guide Updated 11/11/11 Versin 010 Jump t: Table f Cntents State List D. Billing Cntact Name Address Address Phne Number E. Plicy Data Plicy Number/Binder Number if Plicy Number is nt available Effective Date Expiratin Date Insured Name Hme State f Insured F. Transactin Data NAIC Insurer Cde Number(s) Insurer Name(s) Ttal Plicy Premium by Insurer(s) Cverage Cde Tax Status Transactin Type (New, Renewal r Endrsement) Allcatin amng States: Allcatin Methd Premiums Allcated t Each State 2011 The Cuncil f Insurance Agents & Brkers and Stepte & Jhnsn LLC 148