[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1065 Introduced in House (IH)]
110th CONGRESS
1st Session
H. R. 1065
To streamline the regulation of nonadmitted insurance and reinsurance,
and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 15, 2007
Mr. Moore of Kansas (for himself, Ms. Ginny Brown-Waite of Florida, Mr.
Kanjorski, Mrs. Maloney of New York, Mr. Scott of Georgia, Mr. Klein of
Florida, Ms. Bean, Mrs. McCarthy of New York, Ms. Moore of Wisconsin,
Mr. Cleaver, Ms. Wasserman Schultz, Mr. Crowley, Mr. Israel, Mr. Clay,
Mr. Murphy of Connecticut, Mr. Delahunt, Mr. Wexler, Mr. Miller of
North Carolina, Mr. Donnelly, Mr. Sherman, Mr. Bachus, Mr. Baker, Mr.
King of New York, Mr. Mario Diaz-Balart of Florida, Mrs. Biggert, Mr.
Garrett of New Jersey, Mr. Feeney, Mr. Bilirakis, Mr. Putnam, Mr.
Buchanan, Mr. Campbell of California, Mr. Manzullo, Mr. Shays, Mr.
Gillmor, Mr. McHenry, Mrs. Capito, Mr. Gary G. Miller of California,
Mr. Pearce, Mr. Fossella, Mr. Lucas, Mr. Neugebauer, Ms. Castor, Mr.
Castle, Mr. Renzi, and Mr. Holden) 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 2007''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title and table of contents.
Sec. 2. Effective date.
TITLE I--NONADMITTED INSURANCE
Sec. 101. Reporting, payment, and allocation of premium taxes.
Sec. 102. Regulation of nonadmitted insurance by insured's home State.
Sec. 103. Participation in national producer database.
Sec. 104. Uniform standards for surplus lines eligibility.
Sec. 105. Streamlined application for commercial purchasers.
Sec. 106. GAO study of nonadmitted insurance market.
Sec. 107. Definitions.
TITLE II--REINSURANCE
Sec. 201. Regulation of credit for reinsurance and reinsurance
agreements.
Sec. 202. Regulation of reinsurer solvency.
Sec. 203. Definitions.
TITLE III--RULE OF CONSTRUCTION
Sec. 301. Rule of Construction.
SEC. 2. EFFECTIVE DATE.
Except as otherwise specifically provided in this Act, this Act
shall take effect upon the expiration of the 12-month period beginning
on the date of the enactment of this Act.
TITLE I--NONADMITTED INSURANCE
SEC. 101. REPORTING, PAYMENT, AND ALLOCATION OF PREMIUM TAXES.
(a) Home State's Exclusive Authority.--No State other than the home
State of an insured may require any premium tax payment for nonadmitted
insurance.
(b) Allocation of Nonadmitted Premium Taxes.--
(1) In general.--The States may enter into a compact or
otherwise establish procedures to allocate among the States the
premium taxes paid to an insured's home State described in
subsection (a).
(2) Effective date.--Except as expressly otherwise provided
in such compact or other procedures, any such compact or other
procedures--
(A) if adopted on or before the expiration of the
330-day period that begins on the date of the enactment
of this Act, shall apply to any premium taxes that, on
or after such date of enactment, are required to be
paid to any State that is subject to such compact or
procedures; and
(B) if adopted after the expiration of such 330-day
period, shall apply to any premium taxes that, on or
after January 1 of the first calendar year that begins
after the expiration of such 330-day period, are
required to be paid to any State that is subject to
such compact or procedures.
(3) Report.--Upon the expiration of the 330-day period
referred to in paragraph (2), the NAIC may submit a report to
the Committee on Financial Services and Committee on the
Judiciary of the House of Representatives and the Committee on
Banking, Housing, and Urban Affairs of the Senate identifying
and describing any compact or other procedures for allocation
among the States of premium taxes that have been adopted during
such period by any States.
(4) Nationwide system.--The Congress intends that each
State adopt a nationwide or uniform procedure, such as an
interstate compact, that provides for the reporting, payment,
collection, and allocation of premium taxes for nonadmitted
insurance consistent with this section.
(c) Allocation Based on Tax Allocation Report.--To facilitate the
payment of premium taxes among the States, an insured's home State may
require surplus lines brokers and insureds who have independently
procured insurance to annually file tax allocation reports with the
insured's home State detailing the portion of the nonadmitted insurance
policy premium or premiums attributable to properties, risks or
exposures located in each State. The filing of a nonadmitted insurance
tax allocation report and the payment of tax may be made by a person
authorized by the insured to act as its agent.
SEC. 102. REGULATION OF NONADMITTED INSURANCE BY INSURED'S HOME STATE.
(a) Home State Authority.--Except as otherwise provided in this
section, the placement of nonadmitted insurance shall be subject to the
statutory and regulatory requirements solely of the insured's home
State.
(b) Broker Licensing.--No State other than an insured's home State
may require a surplus lines broker to be licensed in order to sell,
solicit, or negotiate nonadmitted insurance with respect to such
insured.
(c) Enforcement Provision.--Any law, regulation, provision, or
action of any State that applies or purports to apply to nonadmitted
insurance sold to, solicited by, or negotiated with an insured whose
home State is another State shall be preempted with respect to such
application.
(d) Workers' Compensation Exception.--This section may not be
construed to preempt any State law, rule, or regulation that restricts
the placement of workers' compensation insurance or excess insurance
for self-funded workers' compensation plans with a nonadmitted insurer.
SEC. 103. PARTICIPATION IN NATIONAL PRODUCER DATABASE.
After the expiration of the 2-year period beginning on the date of
the enactment of this Act, a State may not collect any fees relating to
licensing of an individual or entity as a surplus lines broker in the
State unless the State has in effect at such time laws or regulations
that provide for participation by the State in the national insurance
producer database of the NAIC, or any other equivalent uniform national
database, for the licensure of surplus lines brokers and the renewal of
such licenses.
SEC. 104. UNIFORM STANDARDS FOR SURPLUS LINES ELIGIBILITY.
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 5A(2) and 5C(2)(a) of the Non-Admitted
Insurance Model Act; and
(2) prohibit a surplus lines broker from placing
nonadmitted insurance with, or procuring nonadmitted insurance
from, a nonadmitted insurer domiciled outside the United States
that is listed on the Quarterly Listing of Alien Insurers
maintained by the International Insurers Department of the
NAIC.
SEC. 105. STREAMLINED APPLICATION FOR COMMERCIAL PURCHASERS.
A surplus lines broker seeking to procure or place nonadmitted
insurance in a State for an exempt commercial purchaser shall not be
required to satisfy any State requirement to make a due diligence
search to determine whether the full amount or type of insurance sought
by such exempt commercial purchaser can be obtained from admitted
insurers if--
(1) the broker procuring or placing the surplus lines
insurance has disclosed to the exempt commercial purchaser that
such insurance may or may not be available from the admitted
market that may provide greater protection with more regulatory
oversight; and
(2) the exempt commercial purchaser has subsequently
requested in writing the broker to procure or place such
insurance from a nonadmitted insurer.
SEC. 106. GAO STUDY OF NONADMITTED INSURANCE MARKET.
(a) In General.--The Comptroller General of the United States shall
conduct a study of the nonadmitted insurance market to determine the
effect of the enactment of this title on the size and market share of
the nonadmitted insurance market for providing coverage typically
provided by the admitted insurance market.
(b) Contents.--The study shall determine and analyze--
(1) the change in the size and market share of the
nonadmitted insurance market and in the number of insurance
companies and insurance holding companies providing such
business in the 18-month period that begins upon the effective
date of this Act;
(2) the extent to which insurance coverage typically
provided by the admitted insurance market has shifted to the
nonadmitted insurance market;
(3) the consequences of any change in the size and market
share of the nonadmitted insurance market, including
differences in the price and availability of coverage available
in both the admitted and nonadmitted insurance markets;
(4) the extent to which insurance companies and insurance
holding companies that provide both admitted and nonadmitted
insurance have experienced shifts in the volume of business
between admitted and nonadmitted insurance; and
(5) the extent to which there has been a change in the
number of individuals who have nonadmitted insurance policies,
the type of coverage provided under such policies, and whether
such coverage is available in the admitted insurance market.
(c) Consultation With NAIC.--In conducting the study under this
section, the Comptroller General shall consult with the NAIC.
(d) Report.--The Comptroller General shall complete the study under
this section and submit a report to the Committee on Financial Services
of the House of Representatives and the Committee on Banking, Housing,
and Urban Affairs of the Senate regarding the findings of the study not
later than 30 months after the effective date of this Act.
SEC. 107. DEFINITIONS.
For purposes of this title, the following definitions shall apply:
(1) Admitted insurer.--The term ``admitted insurer'' means,
with respect to a State, an insurer licensed to engage in the
business of insurance in such State.
(2) Exempt commercial purchaser.--The term ``exempt
commercial purchaser'' means any person purchasing commercial
insurance that, at the time of placement, meets the following
requirements:
(A) The person employs or retains a qualified risk
manager to negotiate insurance coverage.
(B) The person has paid aggregate nationwide
commercial property and casualty insurance premiums in
excess of $100,000 in the immediately preceding 12
months.
(C)(i) The person meets at least one of the
following criteria:
(I) The person possesses a net worth in
excess of $20,000,000, as such amount is
adjusted pursuant to clause (ii).
(II) The person generates annual revenues
in excess of $50,000,000, as such amount is
adjusted pursuant to clause (ii).
(III) The person employs more than 500 full
time or full time equivalent employees per
individual insured or is a member of affiliated
group employing more than 1,000 employees in
the aggregate.
(IV) The person is a not-for-profit
organization or public entity generating annual
budgeted expenditures of at least $30,000,000,
as such amount is adjusted pursuant to clause
(ii).
(V) The person is a municipality with a
population in excess of 50,000 persons.
(ii) Effective on the fifth January 1 occurring
after the date of the enactment of this Act and each
fifth January 1 occurring thereafter, the amounts in
subclauses (I), (II), and (IV) of clause (i) shall be
adjusted to reflect the percentage change for such
five-year period in the Consumer Price Index for All
Urban Consumers published by the Bureau of Labor
Statistics of the Department of Labor.
(3) Home state.--The term ``home State'' means the State in
which an insured maintains its principal place of business or,
in the case of an individual, the individual's principal
residence.
(4) Independently procured insurance.--The term
``independently procured insurance'' means insurance procured
directly by an insured from a nonadmitted insurer.
(5) NAIC.--The term ``NAIC'' means the National Association
of Insurance Commissioners or any successor entity.
(6) Nonadmitted insurance.--The term ``nonadmitted
insurance'' means any property and casualty insurance permitted
to be placed directly or through a surplus lines broker with a
nonadmitted insurer eligible to accept such insurance.
(7) Non-admitted insurance model act.--The term ``Non-
Admitted Insurance Model Act'' means the provisions of the Non-
Admitted Insurance Model Act, as adopted by the NAIC on August
3, 1994, and amended on September 30, 1996, December 6, 1997,
October 2, 1999, and June 8, 2002.
(8) Nonadmitted insurer.--The term ``nonadmitted insurer''
means, with respect to a State, an insurer not licensed to
engage in the business of insurance in such State.
(9) Qualified risk manager.--The term ``qualified risk
manager'' means, with respect to a policyholder of commercial
insurance, a person who meets all of the following
requirements:
(A) The person is an employee of, or third party
consultant retained by, the commercial policyholder.
(B) The person provides skilled services in loss
prevention, loss reduction, or risk and insurance
coverage analysis, and purchase of insurance.
(C) 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
(II)(aa) has three years of experience in
risk financing, claims administration, loss
prevention, risk and insurance analysis, or
purchasing commercial lines of insurance; or
(bb) has one of the following designations:
(AA) a designation as a Chartered
Property and Casualty Underwriter (in
this subparagraph referred to as
``CPCU'') issued by the American
Institute for CPCU/Insurance Institute
of America;
(BB) a designation as an Associate
in Risk Management (ARM) issued by the
American Institute for CPCU/Insurance
Institute of America;
(CC) a designation as Certified
Risk Manager (CRM) issued by the
National Alliance for Insurance
Education & Research;
(DD) a designation as a RIMS Fellow
(RF) issued by the Global Risk
Management Institute; or
(EE) any other designation,
certification, or license determined by
a State insurance commissioner or other
State insurance regulatory official or
entity to demonstrate minimum
competency in risk management;
(ii)(I) has at least seven years of
experience in risk financing, claims
administration, loss prevention, risk and
insurance coverage analysis, or purchasing
commercial lines of insurance; and
(II) has any one of the designations
specified in subitems (AA) through (EE) of
clause (i)(II)(bb);
(iii) has at least 10 years of experience
in risk financing, claims administration, loss
prevention, risk and insurance coverage
analysis, or purchasing commercial lines of
insurance; or
(iv) has a graduate degree from an
accredited college or university in risk
management, business administration, finance,
economics, or any other field determined by a
State insurance commissioner or other State
regulatory official or entity to demonstrate
minimum competence in risk management.
(10) Premium tax.--The term ``premium tax'' means, with
respect to surplus lines or independently procured insurance
coverage, any tax, fee, assessment, or other charge imposed by
a State on an insured based on any payment made as
consideration for an insurance contract for such insurance,
including premium deposits, assessments, registration fees, and
any other compensation given in consideration for a contract of
insurance.
(11) Surplus lines broker.--The term ``surplus lines
broker'' means an individual, firm, or corporation which is
licensed in a State to sell, solicit, or negotiate insurance on
properties, risks, or exposures located or to be performed in a
State with nonadmitted insurers.
(12) State.--The term ``State'' includes any State of the
United States, the District of Columbia, the Commonwealth of
Puerto Rico, Guam, the Northern Mariana Islands, the Virgin
Islands, and American Samoa.
TITLE II--REINSURANCE
SEC. 201. REGULATION OF CREDIT FOR REINSURANCE AND REINSURANCE
AGREEMENTS.
(a) Credit for Reinsurance.--If the State of domicile of a ceding
insurer is an NAIC-accredited State, or has financial solvency
requirements substantially similar to the requirements necessary for
NAIC accreditation, and recognizes credit for reinsurance for the
insurer's ceded risk, then no other State may deny such credit for
reinsurance.
(b) Additional Preemption of Extraterritorial Application of State
Law.--In addition to the application of subsection (a), all laws,
regulations, provisions, or other actions of a State that is not the
domiciliary State of the ceding insurer, except those with respect to
taxes and assessments on insurance companies or insurance income, are
preempted to the extent that they--
(1) restrict or eliminate the rights of the ceding insurer
or the assuming insurer to resolve disputes pursuant to
contractual arbitration to the extent such contractual
provision is not inconsistent with the provisions of title 9,
United States Code;
(2) require that a certain State's law shall govern the
reinsurance contract, disputes arising from the reinsurance
contract, or requirements of the reinsurance contract;
(3) attempt to enforce a reinsurance contract on terms
different than those set forth in the reinsurance contract, to
the extent that the terms are not inconsistent with this title;
or
(4) otherwise apply the laws of the State to reinsurance
agreements of ceding insurers not domiciled in that State.
SEC. 202. REGULATION OF REINSURER SOLVENCY.
(a) Domiciliary State Regulation.--If the State of domicile of a
reinsurer is an NAIC-accredited State or has financial solvency
requirements substantially similar to the requirements necessary for
NAIC accreditation, such State shall be solely responsible for
regulating the financial solvency of the reinsurer.
(b) Nondomiciliary States.--
(1) Limitation on financial information requirements.--If
the State of domicile of a reinsurer is an NAIC-accredited
State or has financial solvency requirements substantially
similar to the requirements necessary for NAIC accreditation,
no other State may require the reinsurer to provide any
additional financial information other than the information the
reinsurer is required to file with its domiciliary State.
(2) Receipt of information.--No provision of this section
shall be construed as preventing or prohibiting a State that is
not the State of domicile of a reinsurer from receiving a copy
of any financial statement filed with its domiciliary State.
SEC. 203. DEFINITIONS.
For purposes of this title, the following definitions shall apply:
(1) Ceding insurer.--The term ``ceding insurer'' means an
insurer that purchases reinsurance.
(2) Domiciliary state.--The terms ``State of domicile'' and
``domiciliary State'' means, with respect to an insurer or
reinsurer, the State in which the insurer or reinsurer is
incorporated or entered through, and licensed.
(3) Reinsurance.--The term ``reinsurance'' means the
assumption by an insurer of all or part of a risk undertaken
originally by another insurer.
(4) Reinsurer.--
(A) In general.--The term ``reinsurer'' means an
insurer to the extent that the insurer--
(i) is principally engaged in the business
of reinsurance;
(ii) does not conduct significant amounts
of direct insurance as a percentage of its net
premiums; and
(iii) is not engaged in an ongoing basis in
the business of soliciting direct insurance.
(B) Determination.--A determination of whether an
insurer is a reinsurer shall be made under the laws of
the State of domicile in accordance with this
paragraph.
(5) State.--The term ``State'' includes any State of the
United States, the District of Columbia, the Commonwealth of
Puerto Rico, Guam, the Northern Mariana Islands, the Virgin
Islands, and American Samoa.
TITLE III--RULE OF CONSTRUCTION
SEC. 301. RULE OF CONSTRUCTION.
Nothing in this Act or amendments to this Act shall be construed to
modify, impair, or supersede the application of the antitrust laws. Any
implied or actual conflict between this Act and any amendments to this
Act and the antitrust laws shall be resolved in favor of the operation
of the antitrust laws.
<all>