State NRRA Compliance Review
Legislation: HB 316 NOTE: Effective May 10, 2011
Bulletins/Regulations/Rules: August 18, 2011 - Nonadmitted Reinsurance Reform Bulletin
June 20, 2012 - Bulletin 2012-04 - Filing Changes on Multi-State Risk Policies for Surplus Lines Clearinghouse
Compact, NIMA, other: NOTE: This state has joined NIMA. Agreement. Section 3. Section 31A-3-305 is enacted to read:
31A-3-305. Agreement related to nonadmitted insurance taxes.
(2) The commissioner may enter into an agreement to:
(a) facilitate the collection, allocation, and disbursement of premium taxes attributable to the placement of nonadmitted insurance;
(b) provide for uniform methods of allocation and reporting among nonadmitted insurance risk classifications; and
(c) share information among states relating to nonadmitted insurance premium taxes…
(4) The commissioner may participate in a clearinghouse established through an agreement described in Subsection (2) for the purpose of collecting or disbursing to reciprocal states any money collected pursuant to Subsection (3) applicable to properties, risks, or exposures located or to be performed outside of this state. To the extent that other states where portions of the properties, risks, or exposures reside have failed to enter into an agreement with this state, the state shall retain the net premium tax collected.
(5) The commissioner may adopt an allocation schedule included in an agreement described in Subsection (2) for the purpose of allocating risk and computing the tax due on the portion of premium attributable to each risk classification and to each state where properties, risks, or exposures reside.
(6) The commissioner may apply the definition of "home state" in Subsection (1) when implementing an agreement described in Subsection (2).
(7) The commissioner shall report to the Business and Labor Interim Committee regarding the nature and status of any agreement into which the commissioner enters under Subsection (2).
Home State Definition: Utah is the Home State if the insured maintains its principal place of business or, in the case of an individual, the individual’s principal residence here. Utah’s requirements regarding the placement of such business will apply if Utah is considered the Home State. However, if 100% of the insured risk is located outside of Utah, then the Home State is the State to which the greatest percentage of the insured’s taxable premium for that insurance contract is allocated. With respect to an affiliated group, if more than one (1) insured from the affiliated group is a named insured on a single nonadmitted insurance contract, the home state is that of the member of the affiliated group that has the largest percentage of premium attributed to the member under the insurance contract.
Utah further defines terms relating to the home state. These definitions are not contained in the NRRA. When a group policyholder pays 100% of the premium from its own money, "home state" means the home state of the group policyholder. When a group policyholder does not pay 100% of the premium from its own money, "home state" means the home state of the group member.
"Principal place of business," for purposes of determining the home state of an insured, means the state where the insured maintains its headquarters and where the insured's high-level officers direct, control, and coordinate the business activities, or if the insured's high-level officers direct, control, and coordinate the business activities in more than one state, the state in which the greatest percentage of the insured's taxable premium for that insurance contract is allocated; or if the insured maintains its headquarters or the insured's high-level officers direct, control, and coordinate the business activities outside any state, the state to which the greatest percentage of the insured's taxable premium for that insurance contract is allocated.
"Principal residence," with respect to determining the home state of an insured, means the state where the insured resides for the greatest number of days during a calendar year; or if the insured's principal residence is located outside any state, the state to which the greatest percentage of the insured's taxable premium for that insurance contract is allocated.
Exempt Commercial Purchaser: HB 316 does not address the exempt commercial purchaser. NRRA applies. Under the NRRA, surplus lines brokers seeking to procure or place nonadmitted insurance on behalf of an “exempt commercial purchaser” are not required to perform a diligent search if: 1) the broker has disclosed to the exempt commercial purchaser that 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 for the broker to procure or place such insurance from a nonadmitted insurer. The NRRA definitions of “Exempt commercial purchaser” apply.
FROM Bulletin 2011-4: (Which also has definitions for ECP and QRM)
What are the requirements for a diligent search and when is a diligent search not required?
The Utah Insurance Department's Administrative Rule R590-171-6 (for entire SL rule:
Eligibility: Brokers are permitted to place nonadmitted insurance with U.S. domestic insurers that are eligible in Utah provided they are authorized to write such business in their State of Domicile and maintain minimum capital and surplus of $15 million or the minimum capital and surplus amount required in Utah, whichever is greater. Utah allows brokers to place business with non-U.S. carriers that are included on the NAIC’s Quarterly Listing of Alien Insurers.
FROM Bulletin 2011-4
The Department maintains a list of nonadmitted insurers authorized to place nonadmitted insurance in Utah. A copy of this authorized insurers list is available from the Surplus Lines Association of Utah by phoning 801-944-0114, or on the Web at www.slaut.org
Tax Reporting Status: Section 3. Section 31A-3-305 is enacted to read:
31A-3-305. Agreement related to nonadmitted insurance taxes. …
(3) If the commissioner enters into an agreement under Subsection (2), the following apply:
(a) In addition to the full amount of gross premiums charged by the insurer for the insurance, a surplus lines producer shall collect and pay to the commissioner a sum based on the total gross premiums charged, less any return premiums, for surplus lines insurance provided by the surplus lines producer.
(b) When surplus lines insurance covers property, risks, or exposures located or to be performed in and out of this state, the sum payable is calculated as follows:
(i) calculate an amount equal to the applicable tax rates under this part on that portion of the gross premiums allocated to this state pursuant to the agreement;
(ii) add to the amount under Subsection (3)(b)(i) an amount equal to the portion of the premiums allocated to other states or territories on the basis of the tax rates and fees applicable to properties, risks, or exposures located or to be performed outside of this state pursuant to the agreement; and
(iii) subtract from the amount under Subsection (3)(b)(ii) the amount of gross premiums allocated to this state and returned to the insured.
(c) The tax on any portion of the premium unearned at termination of insurance having been credited by the state to the licensee shall be returned to the policyholder directly by the surplus lines producer. A surplus lines producer may not absorb or rebate, for any reason, any part of the tax
FROM Bulletin 2011-4:
What are the requirements for premium tax allocation and payment in Utah?
As of July 21,2011, the NRRA permits only the insured's Home State to require the payment of premium tax for nonadmitted insurance. Until July 21, 2011, the laws and regulations of Utah will continue to apply to premium tax due on multi-state placements.
Tax Processing Fee: Silent
Policyholder Notice: No change
Department Contact: Utah Insurance Department - 3110 State Office Building - Salt Lake City, UT 84114 - (801) 538-3800