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Nonadmitted and reinsurance reform law has simplified compliance: GAO


Changes in state laws regarding the regulation of surplus lines insurers under the Nonadmitted and Reinsurance Reform Act have simplified compliance for multistate risks, the Government Accountability Office said Thursday in a report.

In “Property and Casualty Insurance: Effects of the Nonadmitted and Reinsurance Reform Act of 2010,” the GAO noted that under the law, only the “home state” of the policyholder — the state where the policyholder maintains its principal business or, if the risk is 100% outside that state, the state to which the greatest percentage of the insured's taxable premium is allocated — may tax or regulate surplus lines insurance transactions.

Supporters of the law, which included the Risk & Insurance Management Society Inc., said it would enhance the ability of surplus lines insurers and brokers to conduct business across state lines.

The GAO found that nearly all states have modified their laws to implement at least portions of NRRA, and that most home states are collecting and retaining 100% of premium taxes.

“According to surplus lines insurers, brokers and representatives of industry associations, the act has simplified the collection of premium taxes for multistate risks,” the GAO said.

The agency noted, however, that some states are requesting information from surplus lines insurers beyond that required under NRRA.

Market participants said NRRA has had little, if any, effect on the prices or availability of coverage, as this was not an intent of the law. Instead, insurance cycles are the primary drivers of prices and availability, market participants told the agency.

The GAO also pointed out that surplus lines insurers contacted by the agency said NRRA has caused “little noticeable shifting in coverage between the admitted and surplus lines markets.”