[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5637 Introduced in House (IH)]
109th CONGRESS
2d Session
H. R. 5637
To streamline the regulation of nonadmitted insurance and reinsurance,
and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
June 19, 2006
Ms. Ginny Brown-Waite of Florida (for herself, Mr. Moore of Kansas, Mr.
Baker, Ms. Hooley, Mr. Feeney, Ms. Wasserman Schultz, Mr. Sessions, Mr.
Holden, Mr. Fossella, Mr. Scott of Georgia, Mr. Bachus, Ms. Bean, Mr.
Renzi, Mr. Israel, Mr. Fitzpatrick of Pennsylvania, Mr. Crowley, and
Mrs. Biggert) introduced the following bill; which was referred to the
Committee on Financial Services, and in addition to the Committee on
the Judiciary, for a period to be subsequently determined by the
Speaker, in each case for consideration of such provisions as fall
within the jurisdiction of the committee concerned
_______________________________________________________________________
A BILL
To streamline the regulation of nonadmitted insurance and reinsurance,
and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Nonadmitted and
Reinsurance Reform Act of 2006''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title and table of contents.
Sec. 2. Definitions.
TITLE I--NONADMITTED INSURANCE
Sec. 101. Reporting, payment, and allocation of premium taxes.
Sec. 102. Regulation of nonadmitted insurance by insured's home State.
Sec. 103. Participation in national producer database.
Sec. 104. Uniform standards for surplus lines eligibility.
Sec. 105. Streamlined application for commercial purchasers.
Sec. 106. Definitions.
TITLE II--CREDIT FOR REINSURANCE
Sec. 201. Prohibiting extraterritorial application of State laws.
Sec. 202. Solvency regulation.
Sec. 203. Definitions.
SEC. 2. DEFINITIONS.
For purposes of this Act, the following definitions shall apply:
(1) Insurer.--The term ``insurer''--
(A) means an entity chartered and licensed as an
insurance company and authorized to engage in the
business of insurance under the laws of at least 1
State; and
(B) includes any entity that, under the laws of a
State, is considered to be an insurer specifically for
purposes of this title.
(2) State.--The term ``State'' includes any State, the
District of Columbia, the Commonwealth of Puerto Rico, Guam,
the Northern Mariana Islands, the Virgin Islands, and American
Samoa.
TITLE I--NONADMITTED INSURANCE
SEC. 101. REPORTING, PAYMENT, AND ALLOCATION OF PREMIUM TAXES.
(a) Home State's Exclusive Authority.--
(1) In general.--No State other than the home State of an
insured may require any premium tax payment for nonadmitted
insurance.
(2) Amount of payment.--The amount of any premium tax
payment for nonadmitted insurance permitted under paragraph (1)
shall be determined on the basis of any compact or procedures
entered into under subsection (b).
(b) Allocation of Nonadmitted Premium Taxes.--The States may enter
into a compact or otherwise establish procedures to allocate among the
States the premium taxes paid to an insured's home State described in
subsection (a).
(c) Allocation Based on Tax Allocation Report.--To facilitate the
payment of premium taxes among the States, an insured's home State may
require surplus lines brokers and insureds who have independently
procured insurance to annually file tax allocation reports with the
insured's home State detailing the portion of the nonadmitted insurance
policy premium or premiums attributable to properties, risks or
exposures located in each State. The filing of a nonadmitted insurance
tax allocation report and the payment of tax may be made by a person
authorized by the insured to act as its agent.
SEC. 102. REGULATION OF NONADMITTED INSURANCE BY INSURED'S HOME STATE.
(a) Home State Authority.--Except as otherwise provided in this
title, nonadmitted insurance is subject to the applicable statutory and
regulatory requirements solely of the insured's home State.
(b) Broker Licensing.--No State other than an insured's home State
may require a surplus lines broker to be licensed in order to sell,
solicit, or negotiate nonadmitted insurance with respect to such
insured.
(c) Enforcement Provision.--Any law, regulation, provision, or
action of any State that applies or purports to apply to nonadmitted
insurance sold to, solicited by, or negotiated with an insured whose
home State is another State shall be preempted with respect to such
application.
SEC. 103. PARTICIPATION IN NATIONAL PRODUCER DATABASE.
After the expiration of the 2-year period beginning on the date of
the enactment of this Act, a State may not collect any fees relating to
licensing of an individual or entity as nonresident insurance broker in
the State unless the State has in effect at such time laws or
regulations that provide for participation by the State in the national
insurance producer database of the NAIC, or any other equivalent
uniform national database, for the licensure of surplus lines brokers
and the renewal of such licenses.
SEC. 104. UNIFORM STANDARDS FOR SURPLUS LINES ELIGIBILITY.
After the expiration of the 2-year period beginning on the date of
the enactment of this Act, a State may not--
(1) impose eligibility requirements on, or otherwise
establish eligibility criteria for, nonadmitted insurers
domiciled in a United States jurisdiction, except in
conformance with section 5C(2)(a) of the Non-Admitted Insurance
Model Act; and
(2) prohibit a surplus lines broker from placing
nonadmitted insurance with, or procuring nonadmitted insurance
from, a nonadmitted insurer domiciled outside the United States
that is listed on the Quarterly Listing of Alien Insurers
maintained by the International Insurance Division of the NAIC.
SEC. 105. STREAMLINED APPLICATION FOR COMMERCIAL PURCHASERS.
A surplus lines broker seeking to procure or place nonadmitted
insurance in a State for an exempt commercial purchaser shall not be
required to satisfy any State requirement to make a due diligence
search to determine whether the full amount or type of insurance sought
by such exempt commercial purchaser can be obtained from admitted
insurers if--
(1) the broker procuring or placing the surplus lines
insurance has disclosed to the exempt commercial purchaser that
such insurance may or may not be available from the admitted
market that may provide greater protection with more regulatory
oversight; and
(2) the exempt commercial purchaser has subsequently
requested in writing the broker to procure or place such
insurance from a nonadmitted insurer.
SEC. 106. DEFINITIONS.
For purposes of this title, the following definitions shall apply:
(1) Exempt commercial purchaser.--The term ``exempt
commercial purchaser'' means any person purchasing commercial
insurance that meets the following requirements:
(A) The person employs or retains a qualified risk
manager to negotiate insurance coverage.
(B) The person meets at least 2 of the following
criteria:
(i) The person possesses a net worth in
excess of $20,000,000.
(ii) The person generates annual revenues
in excess of $50,000,000.
(iii) The person employs more than 500 full
time or full time equivalent employees per
individual insured or is a member of affiliated
group employing more than 1,000 employees in
the aggregate.
(iv) The person pays annual aggregate
nationwide insurance premiums in excess of
$100,000 for covered lines of insurance.
(v) The person is a not-for-profit
organization or public entity generating annual
budgeted expenditures of at least $30,000,000.
(vi) The person is a municipality with a
population in excess of 50,000 persons.
(2) Home state.--The term ``home State'' means the State in
which an insured maintains its principal place of business or
principal residence.
(3) Independently procured insurance.--The term
``independently procured insurance'' means--
(A) insurance procured directly by an insured from
a nonadmitted insurer on properties, risks, or
exposures located or to be performed in whole or in
part in the home State of the insured; or
(B) a multi-State insurance policy with a
nonadmitted insurer, that covers properties, risks, or
exposures only partially located or to be performed in
a State, placed by a surplus lines broker in another
State.
(4) NAIC.--The term ``NAIC'' means the National Association
of Insurance Commissioners or any other association that
regularly establishes insurance model acts or insurance
standards.
(5) Nonadmitted insurance.--The term ``nonadmitted
insurance'' means any property and casualty insurance permitted
to be placed directly or through a surplus lines broker with a
nonadmitted insurer eligible to accept such insurance.
(6) Non-admitted insurance model act.--The term ``Non-
Admitted Insurance Model Act'' means the provisions of the Non-
Admitted Insurance Model Act, as adopted by the NAIC on August
3, 1994, and amended on September 30, 1996, December 6, 1997,
October 2, 1999, and June 8, 2002, except that such term shall
not include any--
(A) changes to the Non-Admitted Insurance Model Act
subsequent to the adoption of this Act;
(B) State-specific deviations or alternative
standards; or
(C) best practices.
(7) Nonadmitted insurer.--The term ``nonadmitted insurer''
means, with respect to a State, an insurer not licensed to
engage in the business of insurance in such State.
(8) Premium tax.--The term ``premium tax'' means, with
respect to surplus lines or independently procured insurance
coverage, any tax, fee, assessment, or other charge imposed by
a State on an insured based on any payment made as
consideration for an insurance contract for such insurance,
including premium deposits, assessments, registration fees, and
any other compensation given in consideration for a contract of
insurance.
(9) Surplus lines broker.--The term ``surplus lines
broker'' means an individual, firm, or corporation which sells,
solicits, or negotiates insurance on properties, risks, or
exposures located or to be performed in a State with
nonadmitted insurers.
TITLE II--CREDIT FOR REINSURANCE
SEC. 201. PROHIBITING EXTRATERRITORIAL APPLICATION OF STATE LAWS.
(a) No Limit on Domiciliary State Regulation.--This section may not
be construed to limit the State of domicile of a ceding insurer from
applying such State's laws and regulation to the ceding insurer.
(b) Preemption of State Law.--Except as provided in subsection (a)
with respect to the State of domicile of a ceding insurer, all laws,
regulations, provisions, or other actions of a State are preempted to
the extent that they--
(1) restrict or eliminate the rights of a ceding insurer or
reinsurer to resolve disputes pursuant to contractual
arbitration to the extent such contractual provision is not
inconsistent with the provisions of title 9, United States
Code;
(2) require that a certain State's law shall govern the
reinsurance contract, disputes arising from the reinsurance
contract, or requirements of the reinsurance contract;
(3) attempt to enforce a reinsurance contract on terms
different than those set forth in the reinsurance contract, to
the extent that the terms are not inconsistent with this title;
or
(4) apply the laws of the State to ceding insurers not
domiciled in that State.
SEC. 202. SOLVENCY REGULATION.
(a) Domiciliary State Regulation.--The State of domicile of a
reinsurer shall be solely responsible for regulating the financial
solvency of the reinsurer if such State is an NAIC accredited State.
(b) Nondomiciliary States.--
(1) Limitation on financial information requirements.--If
the State of domicile of a reinsurer is an NAIC accredited
State, a State that is not the State of domicile of such
reinsurer may not require the reinsurer to provide any
additional financial information other than the information
required to be filed with or by the domiciliary State.
(2) Receipt of information.--No provision of this section
shall be construed as preventing or prohibiting a State that is
not the State of domicile of a reinsurer from receiving a copy
of any financial statement or information provided to the
domiciliary State of the reinsurer.
(3) Credit for reinsurance.--If a reinsurer qualifies for
credit for reinsurance in the State of domicile of the
reinsurer, each State other than the State of domicile shall
accept such credit for reinsurance.
SEC. 203. DEFINITIONS.
For purposes of this title, the following definitions shall apply:
(1) Domiciliary state.--The terms ``State of domicile'' and
``domiciliary State'' means, with respect to an insurer or
reinsurer, the State in which the insurer or reinsurer is
incorporated or entered through, and licensed.
(2) Reinsurance.--The term ``reinsurance'' means the
sharing of underwriting risk by insurers and reinsurers, under
which part of all of an insurer's risk is assumed by the
reinsurer in return for consideration.
(3) Reinsurer.--The term ``reinsurer'' means an insurer
engaged in the business of assuming insurers' risk.
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