The fate of the Nonadmitted Insurance Multistate Agreement remains murky at best in the wake of Florida's announcement that it will leave the surplus lines premium tax collection and allocation clearinghouse on June 1.

NIMA came into being in response to the Nonadmitted and Reinsurance Reform Act, which became part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

One of NRRA's aims was to clarify that the only rules governing the placement of surplus lines cover, including collecting premium taxes, are those of the home state of the insured. While the law imposed a uniform standard of home-state taxation of surplus lines premiums, it made it optional for states to allocate premiums to other states where risks covered under the policy are located.

Although NIMA was developed through the National Association of Insurance Commissioners, the NAIC had no involvement in its operation.

However, brokers and others criticized the state compact approach as unnecessary and costly.

One such clearinghouse — the Surplus Lines Insurance Multi-State Compliance Compact — never began operating because it did not get 10 states to join the group initially backed by the National Association of Professional Surplus Lines Offices Inc.

NIMA did begin operations, with an initial membership of 11 states plus Puerto Rico, and did not require a minimum number of states to be activated.

But Florida's withdrawal announced earlier this month leaves only Puerto Rico, South Dakota, Utah and Wyoming as full members, raising questions about NIMA's future.

“As a member since 2011, Florida was fully committed along with the other member states to the benefits envisioned by this multistate agreement, to include the reporting, payment, collection and allocation of premium taxes for nonadmitted insurance,” a spokeswoman for the Florida Office of Insurance Regulation said in an email.

“Despite the achievement of these benefits, nationwide participation in NIMA, especially among large states, did not occur as expected and led to the decision to withdraw,” the spokeswoman said. “Florida will continue to use the Florida Surplus Lines Service Office's clearinghouse services on a single-state-only basis via an independent contract separate from the NIMA arrangement.”

The Tallahassee, Florida-based surplus lines office will continue to run the clearinghouse for NIMA.

The remaining states are considering NIMA's future without Florida. For its part, “Utah is still evaluating the situation with NIMA and the role Utah will play with it in the future,” a spokesman for the Utah Department of Insurance said in an email.

“The South Dakota Division of Insurance is currently reviewing all options and will make a determination regarding our future direction when the analysis has been completed,” South Dakota Insurance Director Larry Deiter said in an email.

A spokeswoman for the Wyoming Department of Insurance said it also is considering its options.

NRRA supporters who questioned the wisdom of multistate clearinghouses rather than allowing the home state of the policyholder to collect the taxes say Florida's move could doom NIMA.

“It certainly looks as though NIMA is continuing to devolve, and it is something that the AAMGA has continued advocating because we continue to believe that the 100% home state tax provision under the NRRA is the most consistent and uniform provision that can provide the greatest amount of ease for brokers and consumers alike,” said Bernie Heinze, executive director of the King of Prussia, Pennsylvania-based American Association of Managing General Agents.

“This really does bring us closer to finally realizing the goal of the NRRA for the consistent and single approach to the taxation of premiums on multistate surplus lines policies,” he said.

“Florida was the largest state,” said Keri Kish, director of government relations at Kansas City, Missouri-based NAPSLO. “With Florida's withdrawal, it's taking most of the tax-sharing revenue for the other states with it.”

NIMA “was an unnecessary burden for the broker and for the consumer,” Ms. Kish said. “NAPSLO strongly believed that the cost of supporting any tax-sharing system would far exceed the benefits derived from the insignificant tax reallocation among participating states. And we found that to be true since NIMA became operational in 2012.”

Florida's withdrawal from NIMA is “very likely the death blow to the multistate surplus lines premium tax allocation mechanism,” the Washington-based Council of Insurance Agents & Brokers said in a message to members.

“With the withdrawal of Florida, NIMA loses its largest market and brings us one step closer to finally realizing the long-delayed goal of the Nonadmitted and Reinsurance Reform Act for a single, uniform approach to the taxation of multistate surplus lines placements,” the council said.