Chapter 029
2011 -- S 0088 SUBSTITUTE A AS
AMENDED
Enacted 05/27/11
A N A C T
RELATING TO
INSURANCE
Introduced
By: Senators Bates, Walaska, Picard,
Date Introduced: January 27, 2011
It is enacted by the
General Assembly as follows:
SECTION 1. Title 27 of the General Laws entitled
"INSURANCE" is hereby amended
by adding thereto the following chapter:
CHAPTER
75
27-75-1.
Short title. – This chapter shall be known and
cited as the “Surplus Lines
27-75-2.
Preamble. – WHEREAS, with regard to
non-admitted insurance policies with
risk exposures located in multiple states, the 111th
V, Subtitle B the non-Admitted and Reinsurance Reform
Act of 2010, of the Dodd-Frank Wall
Street Reform and Consumer Protection Act, hereafter,
the NRRA, that:
(1) The placement of
non-admitted insurance shall be subject to the statutory and
regulatory requirements solely of the insured’s home state, and
(2) Any law,
regulation, provision, or action of any state that applies or purports to apply
to non-admitted insurance sold to, solicited by, or
negotiated with an insured whose home state is
another state shall be preempted with respect to such
application; except that 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
non-admitted insurer shall not be preempted;
and
WHEREAS, in
compliance with NRRA, no state other than the home state of an insured
may require any premium tax payment for non-admitted
insurance; and 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 non-admitted insurance with respect to such insured;
and
WHEREAS, the NRRA
intends that 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; and that each state adopt nationwide uniform
requirements, forms, and procedures, such as
an interstate compact, that provide for the reporting,
payment, collection, and allocation of
premium taxes for non-admitted insurance; and
WHEREAS, after the
expiration of the two-year period beginning on the date of the
enactment of the NRRA, a state may not collect any fees
relating to licensing of an individual or
entity as a surplus lines licensee 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
licensees and the renewal of such licenses; and
WHEREAS, a need
exists for a system of regulation that will provide for surplus lines
insurance to be placed with reputable and financially sound
non-admitted insurers, and that will
permit orderly access to surplus lines insurance in this
state and encourage insurers to make new
and innovative types of insurance available to consumers
in this state; and
WHEREAS, protecting
the revenue of this state and other compacting states may be
accomplished by facilitating the payment and collection of premium
tax on non-admitted
insurance and providing for allocation of premium tax for
non-admitted insurance of multi-state
risks among the states in accordance with uniform
allocation formulas; and
WHEREAS, the efficiency
of the surplus lines market may be improved by eliminating
duplicative and inconsistent tax and regulatory requirements
among the states, and by promoting
and protecting the interests of surplus lines licensees
who assist such insureds and non-admitted
insurers, thereby ensuring the continued availability of
non-admitted insurance to consumers; and
WHEREAS, regulatory
compliance with respect to non-admitted insurance placements
may be streamlined by providing for exclusive
single-state regulatory compliance for non-
admitted insurance of multi-state risks, thereby providing
certainty regarding such compliance to
all persons who have an interest in such transactions,
including, but not limited to, insureds,
regulators, surplus lines licensees, other insurance producers,
and surplus lines insurers; and
WHEREAS, coordination
of regulatory resources and expertise between state insurance
departments and other state agencies, as well as state surplus
lines stamping offices, with respect
to non-admitted insurance will be improved; and
NOW, THEREFORE, in
consideration of the foregoing, it is enacted by the general
assembly as follows:
27-75-3.
Enactment of compact. – The surplus lines
insurance multi-state compliance
compact is enacted into law and entered into by this state
with all other states legally joining this
compact in the form substantially as follows:
ARTICLE
I
PURPOSES
The purposes of this
compact are:
(1) To implement the
express provisions of the Non-Admitted and Reinsurance Reform
Act (NRRA).
(2) To protect the
premium tax revenues of the compacting states through facilitating the
payment and collection of premium tax on non-admitted insurance;
and to protect the interests of
the compacting states by supporting the continued
availability of such insurance to consumers;
and to provide for allocation of premium tax for
non-admitted insurance of multi-state risks
among the states in accordance with uniform allocation
formulas to be developed, adopted, and
implemented by the commission.
(3) To streamline and
improve the efficiency of the surplus lines market by eliminating
duplicative and inconsistent tax and regulatory requirements
among the states; and promote and
protect the interest of surplus lines licensees who assist
such insureds and surplus lines insurers,
thereby ensuring the continued availability of surplus lines
insurance to consumers.
(4) To streamline
regulatory compliance with respect to non-admitted insurance
placements by providing for exclusive single-state regulatory
compliance for non-admitted
insurance of multi-state risks, in accordance with rules to be
adopted by the commission, thereby
providing certainty regarding such compliance to all persons
who have an interest in such
transactions, including, but not limited to, insureds,
regulators, surplus lines licensees, other
insurance producers, and surplus lines insurers.
(5) To establish a
clearinghouse for receipt and dissemination of premium tax and
clearinghouse transaction data related to non-admitted insurance of
multi-state risks, in
accordance with rules to be adopted by the commission.
(6) To improve
coordination of regulatory resources and expertise between state
insurance departments and other state agencies, as well as
State surplus lines stamping offices,
with respect to non-admitted insurance.
(7) To adopt uniform
rules to provide for premium tax payment, reporting, allocation,
data collection and dissemination for non-admitted
insurance of multi-state risks and single-state
risks, in accordance with rules to be adopted by the
commission, thereby promoting the overall
efficiency of the non-admitted insurance market.
(8) To adopt uniform
mandatory rules with respect to regulatory compliance
requirements for:
(i)
Foreign insurer eligibility requirements;
(ii) Surplus lines
policyholder notices;
(9) To establish the
surplus lines insurance multi-state compliance compact
commission.
(10) To coordinate
reporting of clearinghouse transaction data on non-admitted insurance
of multi-state risks among compacting states and
contracting states.
(11) To perform these
and such other related functions as may be consistent with the
purposes of the surplus lines insurance multi-state compliance
compact.
ARTICLE
II
DEFINITIONS
For purposes of this Compact the following definitions shall apply:
(1) "Admitted
insurer" means an insurer that is licensed, or authorized, to transact the
business of insurance under the law of the home state; for
purposes of this compact “admitted
insurer” shall not include a domestic surplus lines insurer
as may be defined by applicable state
law.
(2) “Affiliate”
means, with respect to an insured, any entity that controls, is controlled by,
or is under common control with the insured.
(3) “Allocation
formula” means the uniform methods promulgated by the commission by
which insured risk exposures will be apportioned to each
state for the purpose of calculating
premium taxes due.
(4) “Bylaws” means
those bylaws established by the commission for its governance, or
for directing or controlling the commission’s actions or
conduct.
(5) “Clearinghouse”
means the commission’s operations involving the acceptance,
processing, and dissemination, among the compacting states,
contracting states, surplus lines
licensees, insureds and other
persons, of premium tax and clearinghouse transaction data for Non-
admitted insurance of multi-state risks, in accordance with
this compact and rules to be adopted
by the commission.
(6) “Clearinghouse
transaction data” means the information regarding non-admitted
insurance of multi-state risks required to be reported,
accepted, collected, processed, and
disseminated by surplus lines licensees for surplus lines
insurance and insureds for independently
procured insurance under this compact and rules to be adopted
by the commission. Clearinghouse
transaction data includes information related to single-state
risks if a state elects to have the
clearinghouse collect taxes on single-state risks for such state.
(7) “
which has not withdrawn pursuant to Article XIV, Section 1,
or been terminated pursuant to
Article XIV, Section 2.
(8) “Commission”
means the “surplus lines insurance multi-state compliance compact
commission” established by this compact.
(9) “Commissioner”
means the chief insurance regulatory official of a state including, but
not limited to commissioner, superintendent, director or
administrator or their designee(s).
(10) “Contracting
state” means any state which has not enacted this compact legislation
but has entered into a written contract with the
commission to utilize the services of and fully
participate in the clearinghouse.
(11) “Control” An
entity has “control” over another entity if:
(i)
The entity directly or indirectly or acting through one or more other persons
own,
controls, or has the power to vote twenty-five percent (25%)
or more of any class of voting
securities of the other entity; or
(ii) The entity
controls, in any manner, the election of a majority of the directors or
trustees of the other entity.
(12) "Home
state"
(i) In general. Except as provided in subparagraph (ii), the
term “home state” means,
with respect to an insured:
(A) 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
(B) If one
hundred percent (100%) of the insured risk is located out of the state referred
to in subparagraph (i)(A), the
state to which the greatest percentage of the insured’s taxable
premium for that insurance contract is allocated.
(ii) Affiliated
groups. If more than one insured from an affiliated group are named
insureds on a single non-admitted insurance contract, the term
“home state” means the home
state, as determined pursuant to subparagraph (i), of the member of the affiliated group that has
the largest percentage of premium attributed to it under
such insurance contract.
(13) “Independently
procured insurance” means insurance procured by an insured
directly from a surplus lines insurer or other non-admitted
insurer as permitted by the laws of the
home state.
(14) “Insurer
eligibility requirements” means the criteria, forms and procedures
established to qualify as a surplus lines insurer under the law
of the home state provided that such
criteria, forms and procedures are consistent with the express
provisions of the NRRA on and
after July 21, 2011.
(15) “Member” means
the person or persons chosen by a compacting state as its
representative or representatives to the commission provided that
each compacting state shall be
limited to one vote.
(16). “Multi-state
risk” means a risk with insured exposures in more than one state.
(17) “Non-compacting
state” means any state which has not adopted this compact.
(18) “Non-admitted
insurance” means surplus lines insurance and independently
procured insurance.
(19)
"Non-admitted insurer" means an insurer that is not authorized or
admitted to
transact the business of insurance under the law of the home
state.
(20) “NRRA” means the
non-admitted and reinsurance reform act which is Title V,
Subtitle B of the
(21) “Policyholder
notice” means the disclosure notice or stamp that is required to be
furnished to the applicant or policyholder in connection with a
surplus lines insurance placement.
(22) “Premium tax”
means with respect to non-admitted insurance, any tax, fee,
assessment, or other charge imposed by a government entity
directly or indirectly based on any
payment made as consideration for such insurance, including
premium deposits, assessments,
registration fees, and any other compensation given in
consideration for a contract of insurance.
(23) “Principal place
of business” means with respect to determining the home state of
the insured, the state where the insured maintains its
headquarters and where the insured’s high-
level officers direct, control and coordinate the business
activities of the insured.
(24) “Purchasing
group” means any group formed pursuant to the liability risk retention
act which has as one of its purposes the purchase of liability
insurance on a group basis,
purchases such insurance only for its group members and only to
cover their similar or related
liability exposure and is composed of members whose businesses
or activities are similar or
related with respect to the liability to which members are
exposed by virtue of any related, similar
or common business, trade, product, services, premises
or operations and is domiciled in any
state.
(25) “Rule” means a
statement of general or particular applicability and future effect
promulgated by the commission designed to implement, interpret,
or prescribe law or policy or
describing the organization, procedure or practice requirements
of the commission which shall
have the force and effect of law in the compacting states.
(26)
"Single-state risk" means a risk with insured exposures in only one
state.
(27) “State” means
any state, district or territory of the
(28) “State
transaction documentation” means the information required under the laws of
the home state to be filed by surplus lines licensees in
order to report surplus lines insurance and
verify compliance with surplus lines laws, and by insureds in order to report independently
procured insurance.
(29) “Surplus lines
insurance” means insurance procured by a surplus lines licensee from
a surplus lines insurer or other non-admitted insurer
as permitted under the law of the home state;
for purposes of this compact “surplus lines insurance”
shall also mean excess lines insurance as
may be defined by applicable state law.
(30) "Surplus
lines insurer" means a non-admitted insurer eligible under the law of the
home state to accept business from a surplus lines
licensee; for purposes of this compact “surplus
lines insurer” shall also mean an insurer which is
permitted to write surplus lines insurance under
the laws of the state where such insurer is domiciled.
(31) “Surplus lines
licensee” means an individual, firm or corporation licensed under the
law of the home state to place surplus lines insurance.
ARTICLE
III
ESTABLISHMENT
OF THE COMMISSION AND VENUE
(a) The compacting
states hereby create and establish a joint public agency known as the
“surplus lines insurance
multi-state compliance compact commission.”
(b) Pursuant to
Article IV, the commission shall have the power to adopt mandatory rules
which establish exclusive home state authority regarding
non-admitted insurance of multi- state
risks, allocation formulas, clearinghouse transaction data,
a clearinghouse for receipt and
distribution of allocated premium tax and clearinghouse
transaction data, and uniform rulemaking
procedures and rules for the purpose of financing,
administering, operating and enforcing
compliance with the provisions of this compact, its bylaws and
rules.
(c) Pursuant to
Article IV, the commission shall have the power to adopt mandatory rules
establishing foreign insurer eligibility requirements and a
concise and objective policyholder
notice regarding the nature of a surplus lines placement.
(d) The commission is
a body corporate and politic, and an instrumentality of the
compacting states.
(e) The commission is
solely responsible for its liabilities except as otherwise specifically
provided in this compact.
(f) Venue is proper
and judicial proceedings by or against the commission shall be
brought solely and exclusively in a court of competent
jurisdiction where the principal office of
the commission is located. The commission may waive venue
and jurisdictional defenses to the
extent it adopts or consents to participate in alternative
dispute resolution proceedings.
ARTICLE
IV
AUTHORITY
TO ESTABLISH MANDATORY RULES
The commission shall
adopt mandatory rules which establish:
(1) Allocation
formulas for each type of non-admitted insurance coverage, which
allocation formulas must be used by each compacting state and
contracting state in acquiring
premium tax and clearinghouse transaction data from surplus
lines licensees and insureds for
reporting to the clearinghouse created by the compact
commission. Such allocation formulas shall
be established with input from surplus lines licensees
and be based upon readily available data
with simplicity and uniformity for the surplus line
licensee as a material consideration.
(2) Uniform
clearinghouse transaction data reporting requirements for all information
reported to the clearinghouse.
(3) Methods by which
compacting states and contracting states require surplus lines
licensees and insureds to pay premium
tax and to report clearinghouse transaction data to the
clearinghouse, including, but not limited to, processing
clearinghouse transaction data through
state stamping and service offices, state insurance departments,
or other state designated agencies
or entities.
(4) That non-admitted
insurance of multi-state risks shall be subject to all of the
regulatory compliance requirements of the home state exclusively.
Home state regulatory
compliance requirements applicable to surplus lines insurance
shall include, but not be limited to:
(i) Person(s) required to be
licensed to sell, solicit, or negotiate surplus lines insurance; (ii)
Insurer eligibility requirements or other approved
non-admitted insurer requirements; (iii)
Diligent search; (iv) State
transaction documentation and clearinghouse transaction data regarding
the payment of premium tax as set forth in this compact
and rules to be adopted by the
commission. Home state regulatory compliance requirements
applicable to independently
procured insurance placements shall include, but not be
limited to, providing state transaction
documentation and clearinghouse transaction data regarding the
payment of premium tax as set
forth in this compact and rules to be adopted by the
commission.
(5) That each
compacting state and contracting state may charge its own rate of taxation
on the premium allocated to such state based on the
applicable allocation formula provided that
the state establishes one single rate of taxation
applicable to all non-admitted insurance
transactions and no other tax, fee assessment or other charge by
any governmental or quasi-
governmental agency be permitted. Notwithstanding the foregoing,
stamping office fees may be
charged as a separate, additional cost unless such fees are
incorporated into a state’s single rate of
taxation.
(6) That any change
in the rate of taxation by any compacting state or contracting state be
restricted to changes made prospectively on not less than ninety
(90) days advance notice to the
compact commission.
(7) That each
compacting state and contracting state shall require premium tax payments
either annually, semi-annually, or quarterly utilizing one
or more of the following dates only:
March 1, June 1, September 1, and December 1.
(8) That each
compacting state and contracting state prohibit any other state agency or
political subdivision from requiring surplus lines licensees to
provide clearinghouse transaction
data and state transaction documentation other than to the
insurance department or tax officials of
the home state or one single designated agent thereof.
(9) The obligation of
the home state by itself, through a designated agent, surplus lines
stamping or service office, to collect clearinghouse
transaction data from surplus line licensees
and from insureds for
independently procured insurance, where applicable, for reporting to the
clearinghouse.
(10) A method for the
clearinghouse to periodically report to compacting states,
contracting states, surplus lines and insureds
who independently procure insurance, all premium
taxes owed to each of the compacting states and contracting
states, the dates upon which payment
of such premium taxes are due and a method to pay them
through the clearinghouse.
(11) That each
surplus line licensee is required to be licensed only in the home state of
each insured for whom surplus lines insurance has been
procured.
(12) That a policy
considered to be surplus lines insurance in the
insured’s home state
shall be considered surplus lines insurance in all
compacting states and contracting states, and
taxed as a surplus lines transaction in all states to which
a portion of the risk is allocated. Each
compacting state and contracting state shall require each
surplus lines licensee to pay to every
other compacting state and contracting state premium taxes
on each multi-state risk through the
clearinghouse at such tax rate charged on surplus lines
transactions in such other compacting
states and contracting states on the portion of the risk in
each such compacting state and
contracting state as determined by the applicable uniform
allocation formula adopted by the
commission. A policy considered to be independently procured
insurance in the insured’s home
state shall be considered independently procured insurance
in all compacting states and
contracting states. Each compacting state and contracting state
shall require the insured to pay
every other compacting state and contracting state the
independently procured insurance premium
tax on each multi-state risk through the clearinghouse
pursuant to the uniform allocation formula
adopted by the commission.
(13) Uniform foreign
insurer eligibility requirements as authorized by the NRRA.
(14) A uniform
policyholder notice.
(15) Uniform
treatment of purchasing group surplus lines insurance placements.
ARTICLE
V
POWERS
OF THE COMMISSION
The commission shall
have the following powers:
(1) To promulgate
rules and operating procedures, pursuant to Article VIII of this
compact, which shall have the force and effect of law and
shall be binding in the compacting
States to the extent and in the manner provided in
this compact;
(2) To bring and
prosecute legal proceedings or actions in the name of the commission,
provided that the standing of any state insurance department
to sue or be sued under applicable
law shall not be affected;
(3) To issue
subpoenas requiring the attendance and testimony of witnesses and the
production of evidence, provided however, the commission is not empowered
to demand or
subpoena records or data from non-admitted insurers;
(4) To establish and
maintain offices including the creation of a clearinghouse for the
receipt of premium tax and clearinghouse transaction data
regarding non-admitted insurance of
multi-state risks, single-state risks for states which elect to
require surplus lines licensees to pay
premium tax on single state risks through the clearinghouse
and tax reporting forms;
(5) To purchase and
maintain insurance and bonds;
(6) To borrow, accept
or contract for services of personnel, including, but not limited to,
employees of a compacting state or stamping office, pursuant to
an open, transparent, objective
competitive process and procedure adopted by the commission;
(7) To hire
employees, professionals or specialists, and elect or appoint officers, and to
fix their compensation, define their duties and give them
appropriate authority to carry out the
purposes of the compact, and determine their qualifications,
pursuant to an open, transparent,
objective competitive process and procedure adopted by the
commission; and to establish the
commission’s personnel policies and programs relating to conflicts
of interest, rates of
compensation and qualifications of personnel, and other related
personnel matters;
(8) To accept any and
all appropriate donations and grants of money, equipment,
supplies, materials and services, and to receive, utilize and
dispose of the same; provided that at
all times the commission shall avoid any appearance of
impropriety and/or conflict of interest;
(9) To lease,
purchase, accept appropriate gifts or donations of, or otherwise to own,
hold, improve or use, any property, real, personal or
mixed; provided that, at all times the
commission shall avoid any appearance of impropriety and/or
conflict of interest;
(10) To sell convey,
mortgage, pledge, lease, exchange, abandon or otherwise dispose of
any property real, personal or mixed;
(11) To provide for
tax audit rules and procedures for the compacting states with respect
to the allocation of premium taxes including:
(i)
Minimum audit standards, including sampling methods;
(ii) Review of
internal controls;
(iii) Cooperation and
sharing of audit responsibilities between compacting states;
(iv)
Handling of refunds or credits due to overpayments or improper
allocation of
premium taxes;
(v) Taxpayer records
to be reviewed including a minimum retention period;
(vi)
Authority of compacting states to review, challenge, or re-audit
taxpayer records.
(12) To enforce
compliance by compacting states and contracting states with rules and
bylaws pursuant to the authority set forth in Article XIV;
(13) To provide for
dispute resolution among compacting states and contracting states;
(14) To advise
compacting states and contracting states on tax-related issues relating to
insurers, insureds, surplus lines
licensees, agents or brokers domiciled or doing business in non-
compacting states, consistent with the purposes of this compact;
(15) To make
available advice and training to those personnel in state stamping offices,
state insurance departments or other state departments for
record keeping, tax compliance, and
tax allocations; and to be a resource for state insurance
departments and other state departments;
(16) To establish a
budget and make expenditures;
(17) To borrow money;
(18) To appoint and
oversee committees, including advisory committees comprised of
members, state insurance regulators, state legislators or
their representatives, insurance industry
and consumer representatives, and such other interested
persons as may be designated in this
compact and the bylaws;
(19) To establish an
executive committee of not less than seven (7) nor more than fifteen
(15) representatives, which
shall include officers elected by the commission and such other
representatives as provided for herein and determined by the bylaws.
Representatives of the
executive committee shall serve a one-year term.
Representatives of the executive committee
shall be entitled to one vote each. The executive committee
shall have the power to act on behalf
of the commission, with the exception of rulemaking,
during periods when the commission is not
in session. The executive committee shall oversee the
day to day activities of the administration
of the compact, including the activities of the
operations committee created under this Article and
compliance and enforcement of the provisions of the compact, its
bylaws, and rules, and such
other duties as provided herein and as deemed necessary.
(20) To establish an
operations committee of not less than seven (7) and not more than
fifteen (15) representatives to provide analysis, advice,
determinations and recommendations
regarding technology, software, and systems integration to be
acquired by the commission and to
provide analysis, advice, determinations and recommendations
regarding the establishment of
mandatory rules to be adopted to be by the commission.
(21) To enter into
contracts with contracting states so that contracting states can utilize
the services of and fully participate in the
clearinghouse subject to the terms and conditions set
forth in such contracts;
(22) To adopt and use
a corporate seal; and
(23) To perform such
other functions as may be necessary or appropriate to achieve the
purposes of this compact consistent with the state regulation
of the business of insurance.
ARTICLE
VI
ORGANIZATION
OF THE COMMISSION
(1) Membership,
Voting and Bylaws
(i)
Each compacting state shall have and be limited to one member. Each state shall
determine the qualifications and the method by which it selects
a member and set forth the
selection process in the enabling provision of the legislation
which enacts this compact. In the
absence of such a provision the member shall be appointed by
the governor of such compacting
state. Any member may be removed or suspended from office
as provided by the law of the state
from which he or she shall be appointed. Any vacancy
occurring in the commission shall be filled
in accordance with the laws of the compacting state
wherein the vacancy exists.
(ii) Each member
shall be entitled to one vote and shall otherwise have an opportunity to
participate in the governance of the commission in accordance
with the bylaws.
(iii) The commission
shall, by a majority vote of the members, prescribe bylaws to
govern its conduct as may be necessary or appropriate to
carry out the purposes and exercise the
powers of the compact including, but not limited to:
(A) Establishing the
fiscal year of the commission;
(B) Providing
reasonable procedures for holding meetings of the commission, the
executive committee, and the operations committee;
(C) Providing
reasonable standards and procedures: (I) For the
establishment and
meetings of committees, and (II) Governing any general or
specific delegation of any authority or
function of the commission;
(D) Providing
reasonable procedures for calling and conducting meetings of the
commission that consist of a majority of commission members,
ensuring reasonable advance
notice of each such meeting and providing for the right of
citizens to attend each such meeting
with enumerated exceptions designed to protect the
public’s interest, the privacy of individuals,
and insurers’ and surplus lines licensees’ proprietary
information, including trade secrets. The
commission may meet in camera only after a majority of the
entire membership votes to close a
meeting in total or in part. As soon as practicable, the
commission must make public: (I) A copy
of the vote to close the meeting revealing the vote of
each member with no proxy votes allowed,
and (II) Votes taken during such meeting;
(E) Establishing the
titles, duties and authority and reasonable procedures for the election
of the officers of the commission;
(F) Providing
reasonable standards and procedures for the establishment of the personnel
policies and programs of the commission. Notwithstanding any
civil service or other similar laws
of any compacting state, the bylaws shall exclusively
govern the personnel policies and programs
of the commission;
(G) Promulgating a
code of ethics to address permissible and prohibited activities of
commission members and employees;
(H) Providing a
mechanism for winding up the operations of the commission and the
equitable disposition of any surplus funds that may exist after
the termination of the compact after
the payment and/or reserving of all of its debts and
obligations;
(iv)
The commission shall publish its bylaws in a convenient form and
file a copy thereof
and a copy of any amendment thereto, with the appropriate
agency or officer in each of the
compacting states.
(2) Executive
committee, personnel and chairperson
(i)
An executive committee of the commission (“executive committee”) shall be
established. All actions of the executive committee, including
compliance and enforcement are
subject to the review and ratification of the commission as
provided in the bylaws. The executive
committee shall have no more than fifteen (15) representatives,
or one for each state if there are
less than fifteen (15) compacting states, who shall serve
for a term and be established in
accordance with the bylaws.
(ii) The executive
committee shall have such authority and duties as may be set forth in
the bylaws, including, but not limited to:
(A) Managing the
affairs of the commission in a manner consistent with the bylaws and
purposes of the commission;
(B) Establishing and
overseeing an organizational structure within, and appropriate
procedures for the commission to provide for the creation of
rules and operating procedures;
(C) Overseeing the
offices of the commission; and
(D) Planning,
implementing, and coordinating communications and activities with other
state, federal and local government organizations in order
to advance the goals of the
commission.
(iii) The commission
shall annually elect officers from the executive committee, with
each having such authority and duties, as may be specified
in the bylaws.
(iv)
The executive committee may, subject to the approval of the
commission, appoint or
retain an executive director for such period, upon such
terms and conditions and for such
compensation as the commission may deem appropriate. The executive
director shall serve as
secretary to the commission, but shall not be a member of the
commission. The executive director
shall hire and supervise such other persons as may be
authorized by the commission.
(3) Operations
Committee
(i)
An operations committee shall be established. All actions of the operations
committee
are subject to the review and oversight of the commission
and the executive committee and must
be approved by the commission. The executive committee
will accept the determinations and
recommendations of the operations committee unless good cause is
shown why such
determinations and recommendations should not be approved. Any
disputes as to whether good
cause exists to reject any determination or recommendation
of the operations committee shall be
resolved by the majority vote of the commission.
The operations
committee shall have no more than fifteen (15) representatives or one for
each state if there are less than fifteen (15) compacting
states, who shall serve for a term and shall
be established as set forth in the bylaws.
The operations
committee shall have responsibility for:
(A) Evaluating
technology requirements for the clearinghouse, assessing existing systems
used by state regulatory agencies and state stamping
offices to maximize the efficiency and
successful integration of the clearinghouse technology systems
with state and state stamping
office technology platforms and to minimize costs to the
states, state stamping offices and the
clearinghouse.
(B) Making
recommendations to the executive committee based on its analysis and
determination of the clearinghouse technology requirements and
compatibility with existing state
and state stamping office systems,
(C) Evaluating the
most suitable proposals for adoption as mandatory rules, assessing
such proposals for ease of integration by states, and
likelihood of successful implementation and
to report to the executive committee its determinations
and recommendations.
(D) Such other duties
and responsibilities as are delegated to it by the bylaws, the
executive committee or the commission.
(ii) All
representatives of the operations committee shall be individuals who have
extensive experience and/or employment in the surplus lines
insurance business including, but not
limited to, executives and attorneys employed by surplus line
insurers, surplus line licensees, law
firms, state insurance departments and/or state stamping
offices. Operations committee
representatives from compacting states which utilize the services of
a state stamping office must
appoint the chief operating officer or a senior manager of
the state stamping office to the
operations committee.
(4) Legislative and
Advisory Committees
(i)
A legislative committee comprised of state legislators or their designees shall
be
established to monitor the operations of, and make
recommendations to, the commission,
including the executive committee; provided, that the manner of
selection and term of any
legislative committee member shall be as set forth in the bylaws.
Prior to the adoption by the
commission of any uniform standard, revision to the bylaws,
annual budget or other significant
matter as may be provided in the bylaws, the executive
committee shall consult with and report to
the legislative committee.
(ii) The commission
may establish additional advisory committees as its bylaws may
provide for the carrying out of its functions.
(5) Corporate records
of the commission
The commission shall
maintain its corporate books and records in accordance with the
bylaws.
(6) Qualified
immunity, defense and indemnification
(i)
The members, officers, executive director, employees and representatives of the
commission, the executive committee and any other committee of
the commission shall be
immune from suit and liability, either personally or in
their official capacity, for any claim for
damage to or loss of property or personal injury or other
civil liability caused by or arising out of
any actual or alleged act, error or omission that
occurred, or that the person against whom the
claim is made had a reasonable basis for believing occurred
within the scope of commission
employment, duties or responsibilities; provided, that nothing
in this paragraph shall be construed
to protect any such person from suit and/or liability
for any damage, loss, injury or liability
caused by the intentional or willful or wanton misconduct of
that person.
(ii) The commission
shall defend any member, officer, executive director, employee or
representative of the commission, the executive committee or any
other committee of the
commission in any civil action seeking to impose liability
arising out of any actual or alleged act,
error or omission that occurred within the scope of
commission employment, duties or
responsibilities, or that the person against whom the claim is made
had a reasonable basis for
believing occurred within the scope of commission employment,
duties or responsibilities;
provided, that nothing herein shall be construed to prohibit
that person from retaining his or her
own counsel; and provided further, that the actual or
alleged act, error or omission did not result
from that person’s intentional or willful or wanton
misconduct.
(iii)
The commission shall indemnify and hold harmless any member, officer, executive
director, employee or representative of the commission,
executive committee or any other
committee of the commission for the amount of any settlement or
judgment obtained against that
person arising out of any actual or alleged act, error or
omission that occurred within the scope of
commission employment, duties or responsibilities, or that such
person had a reasonable basis for
believing occurred within the scope of commission employment,
duties or responsibilities,
provided that the actual or alleged act, error or omission did
not result from the intentional or
willful or wanton misconduct of that person.
ARTICLE
VII
MEETINGS
AND ACTS OF THE COMMISSION
(a) The commission
shall meet and take such actions as are consistent with the provisions
of this compact and the bylaws.
(b) Each member of
the commission shall have the right and power to cast a vote to
which that compacting state is entitled and to participate
in the business and affairs of the
commission. A member shall vote in person or by such other means
as provided in the bylaws.
The bylaws may provide for members’ participation in
meetings by telephone or other means of
communication.
(c) The commission
shall meet at least once during each calendar year. Additional
meetings shall be held as set forth in the bylaws.
(d) Public notice
shall be given of all meetings and all meetings shall be open to the
public, except as set forth in the rules or otherwise
provided in the compact.
(e) The commission
shall promulgate rules concerning its meetings consistent with the
principles contained in the “Government in the Sunshine Act,” 5 U.S.C.,
Section 552b, as may be
amended.
(f) The commission
and its committees may close a meeting, or portion thereof, where it
determines by majority vote that an open meeting would be likely
to:
(1) Relate solely to
the commission’s internal personnel practices and procedures;
(2) Disclose matters
specifically exempted from disclosure by federal and state statute;
(3) Disclose trade
secrets or commercial or financial information which is privileged or
confidential;
(4) Involve accusing
a person of a crime, or formally censuring a person;
(5) Disclose
information of a personal nature where disclosure would constitute a clearly
unwarranted invasion of personal privacy;
(6) Disclose
investigative records compiled for law enforcement purposes;
(7) Specifically
relate to the commission’s issuance of a subpoena, or its participation in a
civil action or other legal proceeding.
(g) For a meeting, or
portion of a meeting, closed pursuant to this provision, the
commission’s legal counsel or designee shall certify that the
meeting may be closed and shall
reference each relevant exemptive
provision. The commission shall keep minutes which shall
fully and clearly describe all matters discussed in a
meeting and shall provide a full and accurate
summary of actions taken, and the reasons therefore,
including a description of the views
expressed and the record of a roll call vote. All documents
considered in connection with an
action shall be identified in such minutes. All minutes and
documents of a closed meeting shall
remain under seal, subject to release by a majority vote of
the commission.
ARTICLE
VIII
RULES
AND OPERATING PROCEDURES: RULEMAKING
Rulemaking Functions
of the Commission:
1. Rulemaking
Authority.--The commission shall promulgate reasonable rules in order to
effectively and efficiently achieve the purposes of this compact.
Notwithstanding the foregoing,
in the event the commission exercises its rulemaking
authority in a manner that is beyond the
scope of the purposes of this chapter, or the powers
granted hereunder, then such an action by the
commission shall be invalid and have no force or effect.
2. Rulemaking
Procedure.--Rules shall be made pursuant to a rulemaking process that
substantially conforms to the “
Laws Annotated, Vol. 15, p.1 (2000) as amended, as may
be appropriate to the operations of the
Commission.
3. Effective Date. --
All rules and amendments, thereto, shall become effective as of the
date specified in each rule, operating procedure or
amendment.
4. Not later than
thirty (30) days after a rule is promulgated, any person may file a
petition for judicial review of the rule; provided, that the filing
of such a petition shall not stay or
otherwise prevent the rule from becoming effective unless the
court finds that the petitioner has a
substantial likelihood of success. The court shall give deference
to the actions of the commission
consistent with applicable law and shall not find the rule to be
unlawful if the rule represents a
reasonable exercise of the commission’s authority.
ARTICLE
IX
COMMISSION
RECORDS AND ENFORCEMENT
(a) The commission
shall promulgate rules establishing conditions and procedures for
public inspection and copying of its information and
official records, except such information and
records involving the privacy of individuals, insurers, insureds or surplus lines licensee trade
secrets. State transaction documentation and clearinghouse
transaction data collected by the
clearinghouse shall be used for only those purposes expressed in or
reasonably implied under the
provisions of this compact and the commission shall afford this
data the broadest protections as
permitted by any applicable law for proprietary information,
trade secrets or personal data. The
commission may promulgate additional rules under which it may
make available to federal and
state agencies, including law enforcement agencies, records
and information otherwise exempt
from disclosure, and may enter into agreements with such
agencies to receive or exchange
information or records subject to nondisclosure and
confidentiality provisions.
(b) Except as to
privileged records, data and information, the laws of any compacting
state pertaining to confidentiality or nondisclosure shall
not relieve any compacting state member
of the duty to disclose any relevant records, data or
information to the commission; provided that
disclosure to the commission shall not be deemed to waive or otherwise
affect any confidentiality
requirement, and further provided that, except as otherwise
expressly provided in this chapter, the
commission shall not be subject to the compacting state’s laws
pertaining to confidentiality and
nondisclosure with respect to records, data and information in its
possession. Confidential
information of the commission shall remain confidential after
such information is provided to any
member, and the commission shall maintain the
confidentiality of any information provided by a
member that is confidential under that member’s state law.
(c) The commission
shall monitor compacting states for compliance with duly adopted
bylaws and rules. The commission shall notify any
non-complying compacting state in writing of
its noncompliance with commission bylaws or rules. If a
non-complying compacting state fails to
remedy its noncompliance within the time specified in the
notice of noncompliance, the
compacting state shall be deemed to be in default as set forth
in Article XIV.
ARTICLE
X
DISPUTE
RESOLUTION
(a) Before a member
may bring an action in a court of competent jurisdiction for
violation of any provision, standard or requirement of the
compact, the commission shall attempt,
upon the request of a member, to resolve any disputes or
other issues that are subject to this
compact and which may arise between two (2) or more
compacting states, contracting states or
non-compacting states, and the commission shall promulgate a rule
providing alternative dispute
resolution procedures for such disputes.
(b) The commission
shall also provide alternative dispute resolution procedures to
resolve any disputes between insureds
or surplus lines licensees concerning a tax calculation or
allocation or related issues which are the subject of this
compact.
(c) Any alternative
dispute resolution procedures shall be utilized in circumstances where
a dispute arises as to which state constitutes the home
state.
ARTICLE
XI
REVIEW
OF COMMISSION DECISIONS
Regarding Commission
decisions:
(1) Except as
necessary for promulgating Rules to fulfill the purposes of this compact, the
commission shall not have authority to otherwise regulate
insurance in the compacting states.
(2) Not later than
thirty (30) days after the commission has given notice of any Rule or
allocation formula, any third-party filer or compacting state
may appeal the determination to a
review panel appointed by the commission. The commission
shall promulgate rules to establish
procedures for appointing such review panels and provide for
notice and hearing. An allegation
that the commission, in making compliance or tax
determinations acted arbitrarily, capriciously,
or in a manner that is an abuse of discretion or
otherwise not in accordance with the law, is
subject to judicial review in accordance with Article III,
subsection (f).
(3) The commission
shall have authority to monitor, review and reconsider commission
decisions upon a finding that the determinations or allocations
do not meet the relevant rule.
Where appropriate, the commission may withdraw or
modify its determination or allocation after
proper notice and hearing, subject to the appeal process in
subsection (2) above.
ARTICLE
XII
FINANCE
(a) The commission
shall pay or provide for the payment of the reasonable expenses of
its establishment and organization. To fund the cost of
its initial operations the commission may
accept contributions, grants, and other forms of funding
from the state stamping offices,
compacting states and other sources.
(b) The commission
shall collect a fee payable by the insured directly or through a
surplus lines licensee on each transaction processed through
the compact clearinghouse, to cover
the cost of the operations and activities of the
commission and its staff in a total amount sufficient
to cover the commission’s annual budget.
(c) The commission’s
budget for a fiscal year shall not be approved until it has been
subject to notice and comment as set forth in Article VIII of
this compact.
(d) The commission
shall be regarded as performing essential governmental functions in
exercising such powers and functions and in carrying out the
provisions of this compact and of
any law relating thereto, and shall not be required to
pay any taxes or assessments of any
character, levied by any state or political subdivision
thereof, upon any of the property used by it
for such purposes, or any income or revenue therefrom, including any profit from a sale or
exchange.
(e) The commission
shall keep complete and accurate accounts of all its internal receipts,
including grants and donations, and disbursements for all funds
under its control. The internal
financial accounts of the commission shall be subject to the
accounting procedures established
under its bylaws. The financial accounts and reports
including the system of internal controls and
procedures of the commission shall be audited annually by an
independent certified public
accountant. Upon the determination of the commission, but not
less frequently than every three
(3) years, the review of the
independent auditor shall include a management and performance
audit of the commission. The commission shall make an
annual report to the governor and
legislature of the compacting states, which shall include a
report of the independent audit. The
commission’s internal accounts shall not be confidential and such
materials may be shared with
the commissioner, the controller, or the stamping office
of any compacting state upon request
provided, however, that any work papers related to any
internal or independent audit and any
information regarding the privacy of individuals, and licensees’
and insurers’ proprietary
information, including trade secrets, shall remain confidential.
(f) No compacting
state shall have any claim to or ownership of any property held by or
vested in the commission or to any commission funds held
pursuant to the provisions of this
compact.
(g) The commission
shall not make any political contributions to candidates for elected
office, elected officials, political parties nor political
action committees. The commission shall
not engage in lobbying except with respect to changes to
this compact.
ARTICLE
XIII
COMPACTING
STATES, EFFECTIVE DATE AND AMENDMENT
(a) Any state is
eligible to become a compacting state.
(b) The compact shall
become effective and binding upon legislative enactment of the
compact into law by two (2) compacting states, provided the
commission shall become effective
for purposes of adopting rules, and creating the
clearinghouse when there are a total of ten (10)
compacting states and contracting states or, alternatively, when
there are compacting states and
contracting states representing greater than forty percent (40%)
of the surplus lines insurance
premium volume based on records of the percentage of surplus
lines insurance premium based on
records of the National Association of Insurance
Commissioners for the prior year. Thereafter, it
shall become effective and binding as to any other
compacting state upon enactment of the
compact into law by that state. Notwithstanding the
foregoing, the clearinghouse operations and
the duty to report clearinghouse transaction data shall
begin on the first January 1st or July 1st
following the first anniversary of the commission’s effective
date. For states which join the
compact subsequent to the effective date, a start date for
reporting clearinghouse transaction data
shall be set by the commission provided Surplus Lines
Licensees and all other interested parties
receive not less than ninety (90) days advance notice.
(c) Amendments to the
compact may be proposed by the commission for enactment by
the compacting states. No amendment shall become
effective and binding upon the commission
and the compacting states unless and until all compacting
states enact the amendment into law.
(d)(1) If this
commission does not take effect as set forth in subsection (b) or becomes
ineffective, the superintendent of insurance has the authority to
enter into a different multi-state
agreement or contracts to implement the requirements of the
"Nonadmitted and Reinsurance
Reform Act of 2010," 124 Stat. 1589, 15 U.S.C.
8201 et seq., or any successor or replacement
law.
(2) The
superintendent of insurance shall not enter into a multi-state agreement or
contract under subdivision (d)(1) unless the division of
insurance has done all of the following:
(i)
Completed a fiscal analysis of the impact of the agreement or contract that
examines
the expected effects on
(ii) Reviewed whether
the contract will create additional administrative burdens on the
State of
(iii) Concluded,
after conducting a public hearing, that entering into the agreement or
contract:
(A) Is in
(B) Is consistent with the requirements of the NRRA.
ARTICLE
XIV
WITHDRAWAL,
DEFAULT AND TERMINATION
(a) Withdrawal
(1) Once effective,
the compact shall continue in force and remain binding upon each and
every compacting state, provided that a compacting state
may withdraw from the compact
("withdrawing
state") by enacting a statute specifically repealing the statute which
enacted the
compact into law.
(2) The effective
date of withdrawal is the effective date of the repealing statute.
However, the withdrawal shall not apply to any tax or
compliance determinations approved on
the date the repealing statute becomes effective, except
by mutual agreement of the commission
and the withdrawing state unless the approval is
rescinded by the commission.
(3) The member of the
withdrawing state shall immediately notify the executive
committee of the commission in writing upon the introduction of
legislation repealing this
compact in the withdrawing state.
(4) The commission
shall notify the other compacting states of the introduction of such
legislation within ten (10) days after its receipt of notice
thereof.
(5) The withdrawing
state is responsible for all obligations, duties and liabilities incurred
through the effective date of withdrawal, including any
obligations, the performance of which
extend beyond the effective date of withdrawal. To the
extent those obligations may have been
released or relinquished by mutual agreement of the commission
and the
commission’s determinations prior to the effective date of
withdrawal shall continue to be
effective and be given full force and effect in the withdrawing
state, unless formally rescinded by
the commission.
(6) Reinstatement
following withdrawal of any compacting state shall occur upon the
effective date of the withdrawing state reenacting the compact.
(b) Default
(1) If the commission
determines that any compacting state has at any time defaulted
("defaulting
state") in the performance of any of its obligations or responsibilities
under this
compact, the bylaws or duly promulgated rules then after
notice and hearing as set forth in the
bylaws, all rights, privileges and benefits conferred by
this compact on the defaulting state shall
be suspended from the effective date of default as fixed
by the commission. The grounds for
default include, but are not limited to, failure of a
compacting state to perform its obligations or
responsibilities, and any other grounds designated in commission
rules. The commission shall
immediately notify the defaulting state in writing of the
defaulting state’s suspension pending a
cure of the default. The commission shall stipulate the
conditions and the time period within
which the defaulting state must cure its default. If the
defaulting state fails to cure the default
within the time period specified by the commission, the defaulting
state shall be terminated from
the compact and all rights, privileges and benefits
conferred by this compact shall be terminated
from the effective date of termination.
(2) Decisions of the
commission that are issued on the effective date of termination shall
remain in force in the defaulting state in the same manner
as if the defaulting state had withdrawn
voluntarily pursuant to subsection (a) of this Article.
(3) Reinstatement
following termination of any compacting state requires a reenactment
of the compact.
(c) Dissolution of
compact
(1) The compact
dissolves effective upon the date of the withdrawal or default of the
compacting state which reduces membership in the compact to one
compacting state.
(2) Upon the
dissolution of this compact, the compact becomes null and void and shall
have no further force or effect, and the business and
affairs of the commission shall be wound up
and any surplus funds shall be distributed in accordance
with the rules and bylaws.
ARTICLE
XV
SEVERABILITY
AND CONSTRUCTION
(a) The provisions of
this compact shall be severable and if any phrase, clause, sentence
or provision is deemed unenforceable, the remaining
provisions of the compact shall be
enforceable.
(b) The provisions of
this compact shall be liberally construed to effectuate its purposes.
(c) Throughout this
compact the use of the singular shall include the plural and vice-
versa.
(d) The headings and
captions of articles, sections and sub-sections used in this compact
are for convenience only and shall be ignored in
construing the substantive provisions of this
compact.
ARTICLE
XVI
BINDING
EFFECT OF COMPACT AND OTHER LAWS
(a) Other laws
(1) Nothing herein
prevents the enforcement of any other law of a compacting state
except as provided in subdivision (2) of this section.
(2) Decisions of the
commission, and any rules, and any other requirements of the
commission shall constitute the exclusive rule, or determination
applicable to the compacting
states. Any law or regulation regarding non-admitted
insurance of multi-state risks that is contrary
to rules of the commission is preempted with respect to
the following:
(i) Clearinghouse transaction data reporting requirements;
(ii) Allocation
formula;
(iii)
Clearinghouse transaction data collection requirements;
(iv) Premium tax payment time frames and rules concerning
dissemination of data
among the compacting states for non-admitted insurance of
multi-state risks and single-state
risks;
(v) Exclusive
compliance with surplus lines law of the home state of the insured;
(vi)
Rules for reporting to a clearinghouse for receipt and
distribution of clearinghouse
transaction data related to non-admitted insurance of multi-state
risks;
(vii) Uniform
foreign insurers eligibility requirements;
(viii) Uniform
policyholder notice; and
(ix) Uniform
treatment of purchasing groups procuring non-admitted insurance.
(3) Except as stated
in subdivision (2), any rule, uniform standard or other requirement of
the commission shall constitute the exclusive provision
that a commissioner may apply to
compliance or tax determinations. Notwithstanding the foregoing,
no action taken by the
commission shall abrogate or restrict: (i)
The access of any person to state courts; (ii) The
availability of alternative dispute resolution under Article X of
this compact (iii) Remedies
available under state law related to breach of contract, tort,
or other laws not specifically directed
to compliance or tax determinations; (iv) State law
relating to the construction of insurance
contracts; or (v) The authority of the attorney general of the
state, including but not limited to
maintaining any actions or proceedings, as authorized by law.
(b) Binding effect of
this compact
(1) All lawful
actions of the commission, including all Rules promulgated by the
commission, are binding upon the compacting states, except as
provided herein.
(2) All agreements
between the commission and the compacting states are binding in
accordance with their terms.
(3) Upon the request
of a party to a conflict over the meaning or interpretation of
commission actions, and upon a majority vote of the compacting states,
the commission may
issue advisory opinions regarding the meaning or
interpretation in dispute. This provision may be
implemented by rule at the discretion of the commission.
(4) In the event any
provision of this compact exceeds the constitutional limits imposed
on the legislature of any compacting state, the
obligations, duties, powers or jurisdiction sought to
be conferred by that provision upon the commission shall
be ineffective as to that state and those
obligations duties, powers or jurisdiction shall remain in the
compacting state and shall be
exercised by the agency thereof to which those obligations, duties,
powers or jurisdiction are
delegated by law in effect at the time this compact becomes
effective.
SECTION 2. This act shall take effect upon passage.
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LC00465/SUB A
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