Nonadmitted & Reinsurance Reform Act

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About the NRRA


The Nonadmitted and Reinsurance Reform Act (NRRA) of 2010 was enacted as part of the Dodd Frank Wall Street Reform and Consumer Protection Act. The bill included language to standardize the reporting, allocation and payment of nonadmitted insurance premium tax on multistate risks. 

 

Overview

The NRRA granted the insured’s home state exclusive authority to regulate and tax surplus lines insurance that includes multi-jurisdictional boundaries. The bill provided states the ability to enter into an agreement to collect and share premium taxes for these multistate risks. Additionally, the NRRA recognized the Exempt Commercial Purchaser and provided a nationwide standard for the automatic export of risks for these qualified insureds. Lastly, the NRRA established uniform standards for surplus lines eligibility regarding insurers both domiciled inside and outside of the United States.

 

NRRA Glossary

Uniform Standards for Surplus Lines Eligibility
SEC. 524. UNIFORM STANDARDS FOR SURPLUS LINES ELIGIBILITY.
A State may not—
(1) impose eligibility requirements on, or otherwise establish eligibility criteria for, nonadmitted insurers domiciled in a United States jurisdiction, except in conformance with such requirements and criteria in sections 5A(2) and 5C(2)(a) of the Non-Admitted Insurance Model Act, unless the State has adopted nationwide uniform requirements, forms, and procedures developed in accordance with section 521(b) of this subtitle that include alternative nationwide uniform eligibility requirements; or
(2) prohibit a surplus lines broker from placing nonadmitted insurance with, or procuring nonadmitted insurance from, a nonadmitted insurer domiciled outside the United States that is listed on the Quarterly Listing of Alien Insurers maintained by the International Insurers Department of the NAIC.
Exempt Commercial Purchaser
The term "exempt commercial purchaser" means any person purchasing commercial insurance that, at the time of placement, meets the following requirements:
  • The person employs or retains a qualified risk manager to negotiate insurance coverage.
  • The person has paid aggregate nationwide commercial property and casualty insurance premiums in excess of $100,000 in the immediately preceding 12 months.
  • The person meets at least 1 of the following criteria
    • The person possesses a net worth in excess of $20,000,000, as such amount is adjusted pursuant to clause (ii).
    • The person generates annual revenues in excess of $50,000,000, as such amount is adjusted pursuant to clause (ii).
    • The person employs more than 500 full-time or full-time equivalent employees per individual insured or is a member of an affiliated group employing more than 1,000 employees in the aggregate.
    • The person is a not-for-profit organization or public entity generating annual budgeted expenditures of at least $30,000,000, as such amount is adjusted pursuant to clause (ii).
    • The person is a municipality with a population in excess of 50,000 persons.
    Effective on the fifth January 1 occurring after the date of the enactment of this subtitle and each fifth January 1 occurring thereafter, the amounts in subclauses (I), (II), and (IV) of clause (i) shall be adjusted to reflect the percentage change for such 5-year period in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the Department of Labor. 15 U.S.C. § 8206(5).
Home State
In General.—Except as provided in subparagraph (B), the term ‘‘home State’’ means, with respect to an insured—
  • the State in which an insured maintains its principal place of business or, in the case of an individual, the individual’s principal residence; or
  • if 100 percent of the insured risk is located out of the State referred to in clause (i), the State to which the greatest percentage of the insured’s taxable premium for that insurance contract is allocated.
Affiliated Groups.—If more than 1 insured from an affiliated group are named insureds on a single nonadmitted insurance contract, the term ‘‘home State’’ means the home State, as determined pursuant to subparagraph (A), of the member of the affiliated group that has the largest percentage of premium attributed to it under such insurance contract. 15 U.S.C. § 8206(6).
Independently Procured Insurance
The term‘‘independently procured insurance’’ means insurance procured directly by an insured from a nonadmitted insurer. 15 U.S.C. § 8206(7).
Nonadmitted Insurance
The term ‘‘nonadmitted insurance’’ means any property and casualty insurance permitted to be placed directly or through a surplus lines broker with a nonadmitted insurer eligible to accept such insurance. 15 U.S.C. § 8206(9).
Nonadmitted Insurer
The term "nonadmitted insurer"-
  • means, with respect to a State, an insurer not licensed to engage in the business of insurance in such State; but
  • does not include a risk retention group, as that term is defined in section 2(a)(4) of the Liability Risk Retention Act of 1986 (15 U.S.C. 3901(a)(4). 15 U.S.C. §8206(11).)
Premium Tax
The term ‘‘premium tax’’ means, with respect to surplus lines or independently procured insurance coverage, any tax, fee, assessment, or other charge imposed by a government entity directly or indirectly based on any payment made as consideration for an insurance contract for such insurance, including premium deposits, assessments, registration fees, and any other compensation given in consideration for a contract of insurance. 15 U.S.C. § 8206(12).
 
Qualified Risk Manager
The term ‘‘qualified risk manager’’ means, with respect to a policyholder of commercial insurance, a person who meets all of the following requirements:
  • The person is an employee of, or third-party consultant retained by, the commercial policyholder.
  • The person provides skilled services in loss prevention, loss reduction, or risk and insurance coverage analysis, and purchase of insurance.
  • The person-
    • (i):
      • (I) has a bachelor’s degree or higher from an accredited college or university in risk management, business administration, finance, economics, or any other field determined by a State insurance commissioner or other State regulatory official or entity to demonstrate minimum competence in risk management; and
        • (aa) has 3 years of experience in risk financing, claims administration, loss prevention, risk and insurance analysis, or purchasing commercial lines of insurance; or
        • (bb) has-
          • (AA) a designation as a Chartered Property and Casualty Underwriter (in this subparagraph referred to as ‘‘CPCU’’) issued by the American Institute for CPCU/Insurance Institute of America;
          • (BB) a designation as an Associate in Risk Management (ARM) issued by the American Institute for CPCU/Insurance Institute of America;
          • (CC) a designation as Certified Risk Manager (CRM) issued by the National Alliance for Insurance Education & Research;
          • (DD) a designation as a RIMS Fellow (RF) issued by the Global Risk Management Institute; or
          • (EE) any other designation, certification, or license determined by a State insurance commissioner or other State insurance regulatory official or entity to demonstrate minimum competency in risk management;
    • (ii):
      • (I) has at least 7 years of experience in risk financing, claims administration, loss prevention, risk and insurance coverage analysis, or purchasing commercial lines of insurance; and
      • (II) has any 1 of the designations specified in subitems (AA) through (EE) of clause (i)(II)(bb);
    • (iii) has at least 10 years of experience in risk financing, claims administration, loss prevention, risk and insurance coverage analysis, or purchasing commercial lines of insurance; or
    • (iv) has a graduate degree from an accredited college or university in risk management, business administration, finance, economics, or any other field determined by a State insurance commissioner or other State regulatory official or entity to demonstrate minimum competence in risk management. 15 U.S.C. § 8206(13).
Surplus Lines Brokers
The term ‘‘surplus lines broker’’ means an individual, firm, or corporation which is licensed in a State to sell, solicit, or negotiate insurance on properties, risks, or exposures located or to be performed in a State with nonadmitted insurers. 15 U.S.C. § 8206(15).
State
The term ‘‘State’’ includes any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, Guam, the Northern Mariana Islands, the Virgin Islands, and American Samoa. 15 U.S.C. § 8206(16).