[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2571 Introduced in House (IH)]

111th CONGRESS
  1st Session
                                H. R. 2571

To streamline the regulation of nonadmitted insurance and reinsurance, 
                        and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 21, 2009

   Mr. Moore of Kansas (for himself, Mr. Garrett of New Jersey, Mr. 
       Kanjorski, Ms. Ginny Brown-Waite of Florida, Mr. Frank of 
 Massachusetts, Mr. Bachus, Mr. McMahon, Mr. Neugebauer, Ms. Bean, Mr. 
 Gary G. Miller of California, Mr. Crowley, Mr. King of New York, Mr. 
  Hinojosa, Mrs. Capito, Mrs. Maloney, Mrs. Bachmann, Mr. Israel, Mr. 
    Young of Florida, Mr. Sherman, Mr. McHenry, Mr. Putnam, and Mr. 
  Campbell) 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 2009''.
    (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. 302. Severability.

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 nationwide uniform requirements, forms, and 
        procedures, 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.--With respect to section 101 and 
subsections (a) and (b) of this section, 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 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 
        101(b) of this Act that include alternative nationwide uniform 
        eligibility requirements; 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) Affiliate.--The term ``affiliate'' means, with respect 
        to an insured, any entity that controls, is controlled by, or 
        is under common control with the insured.
            (3) Affiliated group.--The term ``affiliated group'' means 
        any group of entities that are all affiliated.
            (4) Control.--An entity has ``control'' over another entity 
        if--
                    (A) the entity directly or indirectly or acting 
                through one or more other persons owns, controls or has 
                the power to vote 25 percent or more of any class of 
                voting securities of the other entity; or
                    (B) the entity controls in any manner the election 
                of a majority of the directors or trustees of the other 
                entity.
            (5) 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 an 
                        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.
            (6) Home state.--
                    (A) In general.--Except as provided in subparagraph 
                (B), the term ``home State'' means, with respect to an 
                insured--
                            (i) 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
                            (ii) if 100 percent of the insured risk is 
                        located out of the State referred to in 
                        subparagraph (A), the State to which the 
                        greatest percentage of the insured's taxable 
                        premium for that insurance contract is 
                        allocated.
                    (B) Affiliated groups.--If more than one 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.
            (7) Independently procured insurance.--The term 
        ``independently procured insurance'' means insurance procured 
        directly by an insured from a nonadmitted insurer.
            (8) NAIC.--The term ``NAIC'' means the National Association 
        of Insurance Commissioners or any successor entity.
            (9) 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.
            (10) 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.
            (11) 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.
            (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:
                    (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.
            (13) 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.
            (14) 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.
            (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.

                         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.

SEC. 302. SEVERABILITY.

    If any section or subsection of this Act, or any application of 
such provision to any person or circumstance, is held to be 
unconstitutional, the remainder of this Act, and the application of the 
provision to any other person or circumstance, shall not be affected.
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