II 

110TH CONGRESS 

1ST SESSION S. 929 

To streamline the regulation of nonadmitted insurance and reinsurance, and 

for other purposes. 

IN THE SENATE OF THE UNITED STATES 

MARCH 20, 2007 

Mr. MARTINEZ (for himself and Mr. NELSON of Florida) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs 

A BILL 

To streamline the regulation of nonadmitted insurance and 

reinsurance, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Nonadmitted and Reinsurance Reform Act of 2007’’. 

6 (b) TABLE OF CONTENTS.—The table of contents for 

7 this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Effective date. 

TITLE I—NONADMITTED INSURANCE 

Sec. 101. Reporting, payment, and allocation of premium taxes. 


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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. 

1 SEC. 2. EFFECTIVE DATE. 

2 Except as otherwise specifically provided in this Act, 

3 this Act shall take effect upon the expiration of the 12- 

4 month period beginning on the date of enactment of this 

5 Act. 

6 TITLE I—NONADMITTED 

7 INSURANCE 

8 SEC. 101. REPORTING, PAYMENT, AND ALLOCATION OF 

9 PREMIUM TAXES. 

10 (a) HOME STATE’S EXCLUSIVE AUTHORITY.—No 

11 State other than the home State of an insured may require 

12 any premium tax payment for nonadmitted insurance. 

13 (b) ALLOCATION OF NONADMITTED PREMIUM

14 TAXES.— 

15 (1) IN GENERAL.—The States may enter into a 

16 compact or otherwise establish procedures to allocate 

17 among the States the premium taxes paid to an in18 sured’s home State described in subsection (a). 


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1 (2) EFFECTIVE DATE.—Except as expressly 

2 otherwise provided in such compact or other proce3 dures, any such compact or other procedures— 

4 (A) if adopted on or before the expiration 

5 of the 330-day period that begins on the date 

6 of the enactment of this Act, shall apply to any 

7 premium taxes that, on or after such date of 

8 enactment, are required to be paid to any State 

9 that is subject to such compact or procedures; 

10 and 

11 (B) if adopted after the expiration of such 

12 330-day period, shall apply to any premium 

13 taxes that, on or after January 1 of the first 

14 calendar year that begins after the expiration of 

15 such 330-day period, are required to be paid to 

16 any State that is subject to such compact or 

17 procedures. 

18 (3) REPORT.—Upon the expiration of the 330- 

19 day period referred to in paragraph (2), the NAIC 

20 may submit a report to the Committee on Financial 

21 Services and Committee on the Judiciary of the 

22 House of Representatives and the Committee on 

23 Banking, Housing, and Urban Affairs of the Senate 

24 identifying and describing any compact or other pro25 cedures for allocation among the States of premium 


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1 taxes that have been adopted during such period by 

2 any States. 

3 (4) NATIONWIDE SYSTEM.—The Congress in4 tends that each State adopt a nationwide or uniform 

5 procedure, such as an interstate compact, that pro6 vides for the reporting, payment, collection, and allo7 cation of premium taxes for nonadmitted insurance 

8 consistent with this section. 

9 (c) ALLOCATION BASED ON TAX ALLOCATION RE10 PORT.—To facilitate the payment of premium taxes 

11 among the States, an insured’s home State may require 

12 surplus lines brokers and insureds who have independently 

13 procured insurance to annually file tax allocation reports 

14 with the insured’s home State detailing the portion of the 

15 nonadmitted insurance policy premium or premiums at16 tributable to properties, risks or exposures located in each 

17 State. The filing of a nonadmitted insurance tax allocation 

18 report and the payment of tax may be made by a person 

19 authorized by the insured to act as its agent. 

20 SEC. 102. REGULATION OF NONADMITTED INSURANCE BY 

21 INSURED’S HOME STATE. 

22 (a) HOME STATE AUTHORITY.—Except as otherwise 

23 provided in this section, the placement of nonadmitted in24 surance shall be subject to the statutory and regulatory 

25 requirements solely of the insured’s home State. 


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1 (b) BROKER LICENSING.—No State other than an in2 sured’s home State may require a surplus lines broker to 

3 be licensed in order to sell, solicit, or negotiate non4 admitted insurance with respect to such insured. 

5 (c) ENFORCEMENT PROVISION.—Any law, regula6 tion, provision, or action of any State that applies or pur7 ports to apply to nonadmitted insurance sold to, solicited 

8 by, or negotiated with an insured whose home State is an9 other State shall be preempted with respect to such appli10 cation. 

11 (d) WORKERS’ COMPENSATION EXCEPTION.—This 

12 section may not be construed to preempt any State law, 

13 rule, or regulation that restricts the placement of workers’ 

14 compensation insurance or excess insurance for self-fund15 ed workers’ compensation plans with a nonadmitted in16 surer. 

17 SEC. 103. PARTICIPATION IN NATIONAL PRODUCER DATA18 BASE. 

19 After the expiration of the 2-year period beginning 

20 on the date of the enactment of this Act, a State may 

21 not collect any fees relating to licensing of an individual 

22 or entity as a surplus lines broker in the State unless the 

23 State has in effect at such time laws or regulations that 

24 provide for participation by the State in the national in25 surance producer database of the NAIC, or any other 


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1 equivalent uniform national database, for the licensure of 

2 surplus lines brokers and the renewal of such licenses. 

3 SEC. 104. UNIFORM STANDARDS FOR SURPLUS LINES ELI4 GIBILITY. 

5 A State may not— 

6 (1) impose eligibility requirements on, or other7 wise establish eligibility criteria for, nonadmitted in8 surers domiciled in a United States jurisdiction, ex9 cept in conformance with section 5A(2) and 

10 5C(2)(a) of the Non-Admitted Insurance Model Act; 

11 and 

12 (2) prohibit a surplus lines broker from placing 

13 nonadmitted insurance with, or procuring non14 admitted insurance from, a nonadmitted insurer 

15 domiciled outside the United States that is listed on 

16 the Quarterly Listing of Alien Insurers maintained 

17 by the International Insurers Department of the 

18 NAIC. 

19 SEC. 105. STREAMLINED APPLICATION FOR COMMERCIAL 

20 PURCHASERS. 

21 A surplus lines broker seeking to procure or place 

22 nonadmitted insurance in a State for an exempt commer23 cial purchaser shall not be required to satisfy any State 

24 requirement to make a due diligence search to determine 

25 whether the full amount or type of insurance sought by 


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1 such exempt commercial purchaser can be obtained from 

2 admitted insurers if— 

3 (1) the broker procuring or placing the surplus 

4 lines insurance has disclosed to the exempt commer5 cial purchaser that such insurance may or may not 

6 be available from the admitted market that may pro7 vide greater protection with more regulatory over8 sight; and 

9 (2) the exempt commercial purchaser has sub10 sequently requested in writing the broker to procure 

11 or place such insurance from a nonadmitted insurer. 

12 SEC. 106. GAO STUDY OF NONADMITTED INSURANCE MAR13 KET. 

14 (a) IN GENERAL.—The Comptroller General of the 

15 United States shall conduct a study of the nonadmitted 

16 insurance market to determine the effect of the enactment 

17 of this title on the size and market share of the non18 admitted insurance market for providing coverage typi19 cally provided by the admitted insurance market. 

20 (b) CONTENTS.—The study shall determine and ana21 lyze— 

22 (1) the change in the size and market share of 

23 the nonadmitted insurance market and in the num24 ber of insurance companies and insurance holding 

25 companies providing such business in the 18-month 


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1 period that begins upon the effective date of this 

2 Act; 

3 (2) the extent to which insurance coverage typi4 cally provided by the admitted insurance market has 

5 shifted to the nonadmitted insurance market; 

6 (3) the consequences of any change in the size 

7 and market share of the nonadmitted insurance 

8 market, including differences in the price and avail9 ability of coverage available in both the admitted 

10 and nonadmitted insurance markets; 

11 (4) the extent to which insurance companies 

12 and insurance holding companies that provide both 

13 admitted and nonadmitted insurance have experi14 enced shifts in the volume of business between ad15 mitted and nonadmitted insurance; and 

16 (5) the extent to which there has been a change 

17 in the number of individuals who have nonadmitted 

18 insurance policies, the type of coverage provided 

19 under such policies, and whether such coverage is 

20 available in the admitted insurance market. 

21 (c) CONSULTATION WITH NAIC.—In conducting the 

22 study under this section, the Comptroller General shall 

23 consult with the NAIC. 

24 (d) REPORT.—The Comptroller General shall com25 plete the study under this section and submit a report to 


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1 the Committee on Financial Services of the House of Rep2 resentatives and the Committee on Banking, Housing, and 

3 Urban Affairs of the Senate regarding the findings of the 

4 study not later than 30 months after the effective date 

5 of this Act. 

6 SEC. 107. DEFINITIONS. 

7 For purposes of this title, the following definitions 

8 shall apply: 

9 (1) ADMITTED INSURER.—The term ‘‘admitted 

10 insurer’’ means, with respect to a State, an insurer 

11 licensed to engage in the business of insurance in 

12 such State. 

13 (2) EXEMPT COMMERCIAL PURCHASER.—The 

14 term ‘‘exempt commercial purchaser’’ means any 

15 person purchasing commercial insurance that meets 

16 the following requirements: 

17 (A) The person employs or retains a quali18 fied risk manager to negotiate insurance cov19 erage. 

20 (B) The person has paid aggregate nation21 wide commercial property and casualty insur22 ance premiums in excess of $100,000 in the im23 mediately preceding 12 months. 

24 (C) The person meets at least one of the 

25 following criteria: 


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1 (i) The person possesses a net worth 

2 in excess of $20,000,000. 

3 (ii) The person generates annual reve4 nues in excess of $50,000,000. 

5 (iii) The person employs more than 

6 500 full time or full time equivalent em7 ployees per individual insured or is a mem8 ber of affiliated group employing more 

9 than 1,000 employees in the aggregate. 

10 (iv) The person is a not-for-profit or11 ganization or public entity generating an12 nual budgeted expenditures of at least 

13 $30,000,000. 

14 (v) The person is a municipality with 

15 a population in excess of 50,000 persons. 

16 (3) HOME STATE.—The term ‘‘home State’’ 

17 means the State in which an insured maintains its 

18 principal place of business or, in the case of an indi19 vidual, the individual’s principal residence. 

20 (4) INDEPENDENTLY PROCURED INSURANCE.— 

21 The term ‘‘independently procured insurance’’ 

22 means insurance procured directly by an insured 

23 from a nonadmitted insurer. 


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1 (5) NAIC.—The term ‘‘NAIC’’ means the Na2 tional Association of Insurance Commissioners, or 

3 any successor entity. 

4 (6) NONADMITTED INSURANCE.—The term 

5 ‘‘nonadmitted insurance’’ means any property and 

6 casualty insurance permitted to be placed directly or 

7 through a surplus lines broker with a nonadmitted 

8 insurer eligible to accept such insurance. 

9 (7) NON-ADMITTED INSURANCE MODEL ACT.— 

10 The term ‘‘Non-Admitted Insurance Model Act’’ 

11 means the provisions of the Non-Admitted Insurance 

12 Model Act, as adopted by the NAIC on August 3, 

13 1994, and amended on September 30, 1996, Decem14 ber 6, 1997, October 2, 1999, and June 8, 2002. 

15 (8) NONADMITTED INSURER.—The term ‘‘non16 admitted insurer’’ means, with respect to a State, an 

17 insurer not licensed to engage in the business of in18 surance in such State. 

19 (9) QUALIFIED RISK MANAGER.—The term 

20 ‘‘qualified risk manager’’ means, with respect to a 

21 policyholder of commercial insurance, a person who 

22 meets all of the following requirements: 

23 (A) The person is an employee of, or third 

24 party consultant retained by, the commercial 

25 policyholder. 


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1 (B) The person provides skilled services in 

2 loss prevention, loss reduction, or risk and in3 surance coverage analysis, and purchase of in4 surance. 

5 (C) The person possesses at least two of 

6 the following credentials: 

7 (i) An advanced degree in risk man8 agement issued by an accredited college or 

9 university. 

10 (ii) At least 5 years of experience in 

11 one or more of the following areas of com12 mercial property insurance or commercial 

13 casualty insurance: 

14 (I) Risk financing. 

15 (II) Claims administration. 

16 (III) Loss prevention. 

17 (IV) Risk and insurance coverage 

18 analysis. 

19 (iii) At least one of the following des20 ignations: 

21 (I) A designation as a Chartered 

22 Property and Casualty Underwriter 

23 (in this clause referred to as 

24 ‘‘CPCU’’) issued by the American InVerDate Aug 31 2005 23:11 Mar 21, 2007 Jkt 059200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S929.IS S929

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1 stitute for CPCU/Insurance Institute 

2 of America. 

3 (II) A designation as an Asso4 ciate in Risk Management (ARM) 

5 issued by American Institute for 

6 CPCU/Insurance Institute of America. 

7 (III) A designation as a Certified 

8 Risk Manager (CRM) issued by the 

9 National Alliance for Insurance Edu10 cation & Research. 

11 (IV) A designation as a RIMS 

12 Fellow (RF) issued by the Global Risk 

13 Management Institute. 

14 (V) Any other designation, cer15 tification, or license determined by a 

16 State insurance commissioner or other 

17 State insurance regulatory official or 

18 entity to demonstrate minimum com19 petency in risk management. 

20 (10) PREMIUM TAX.—The term ‘‘premium tax’’ 

21 means, with respect to surplus lines or independently 

22 procured insurance coverage, any tax, fee, assess23 ment, or other charge imposed by a State on an in24 sured based on any payment made as consideration 

25 for an insurance contract for such insurance, includVerDate Aug 31 2005 23:11 Mar 21, 2007 Jkt 059200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\S929.IS S929

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1 ing premium deposits, assessments, registration fees, 

2 and any other compensation given in consideration 

3 for a contract of insurance. 

4 (11) SURPLUS LINES BROKER.—The term ‘‘sur5 plus lines broker’’ means an individual, firm, or cor6 poration which is licensed in a State to sell, solicit, 

7 or negotiate insurance on properties, risks, or expo8 sures located or to be performed in a State with 

9 nonadmitted insurers. 

10 (12) STATE.—The term ‘‘State’’ includes any 

11 State of the United States, the District of Columbia, 

12 the Commonwealth of Puerto Rico, Guam, the 

13 Northern Mariana Islands, the Virgin Islands, and 

14 American Samoa. 

15 TITLE II—REINSURANCE 

16 SEC. 201. REGULATION OF CREDIT FOR REINSURANCE AND 

17 REINSURANCE AGREEMENTS. 

18 (a) CREDIT FOR REINSURANCE.—If the State of 

19 domicile of a ceding insurer is an NAIC-accredited State, 

20 or has financial solvency requirements substantially simi21 lar to the requirements necessary for NAIC accreditation, 

22 and recognizes credit for reinsurance for the insurer’s 

23 ceded risk, then no other State may deny such credit for 

24 reinsurance. 


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1 (b) ADDITIONAL PREEMPTION OF

2 EXTRATERRITORIAL APPLICATION OF STATE LAW.—In 

3 addition to the application of subsection (a), all laws, regu4 lations, provisions, or other actions of a State other than 

5 those of the State of domicile of the ceding insurer are 

6 preempted to the extent that they— 

7 (1) restrict or eliminate the rights of the ceding 

8 insurer or the assuming insurer to resolve disputes 

9 pursuant to contractual arbitration to the extent 

10 such contractual provision is not inconsistent with 

11 the provisions of title 9, United States Code; 

12 (2) require that a certain State’s law shall gov13 ern the reinsurance contract, disputes arising from 

14 the reinsurance contract, or requirements of the re15 insurance contract; 

16 (3) attempt to enforce a reinsurance contract 

17 on terms different than those set forth in the rein18 surance contract, to the extent that the terms are 

19 not inconsistent with this title; or 

20 (4) otherwise apply the laws of the State to re21 insurance agreements of ceding insurers not domi22 ciled in that State. 

23 SEC. 202. REGULATION OF REINSURER SOLVENCY. 

24 (a) DOMICILIARY STATE REGULATION.—If the State 

25 of domicile of a reinsurer is an NAIC-accredited State or 


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1 has financial solvency requirements substantially similar 

2 to the requirements necessary for NAIC accreditation, 

3 such State shall be solely responsible for regulating the 

4 financial solvency of the reinsurer. 

5 (b) NONDOMICILIARY STATES.— 

6 (1) LIMITATION ON FINANCIAL INFORMATION

7 REQUIREMENTS.—If the State of domicile of a rein8 surer is an NAIC-accredited State or has financial 

9 solvency requirements substantially similar to the re10 quirements necessary for NAIC accreditation, no 

11 other State may require the reinsurer to provide any 

12 additional financial information other than the infor13 mation the reinsurer is required to file with its 

14 domiciliary State. 

15 (2) RECEIPT OF INFORMATION.—No provision 

16 of this section shall be construed as preventing or 

17 prohibiting a State that is not the State of domicile 

18 of a reinsurer from receiving a copy of any financial 

19 statement filed with its domiciliary State. 

20 SEC. 203. DEFINITIONS. 

21 For purposes of this title, the following definitions 

22 shall apply: 

23 (1) CEDING INSURER.—The term ‘‘ceding in24 surer’’ means an insurer that purchases reinsurance. 


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1 (2) DOMICILIARY STATE.—The terms ‘‘State of 

2 domicile’’ and ‘‘domiciliary State’’ means, with re3 spect to an insurer or reinsurer, the State in which 

4 the insurer or reinsurer is incorporated or entered 

5 through, and licensed. 

6 (3) REINSURANCE.—The term ‘‘reinsurance’’ 

7 means the assumption by an insurer of all or part 

8 of a risk undertaken originally by another insurer. 

9 (4) REINSURER.— 

10 (A) IN GENERAL.—The term ‘‘reinsurer’’ 

11 means an insurer to the extent that the in12 surer— 

13 (i) is principally engaged in the busi14 ness of reinsurance; 

15 (ii) does not conduct significant 

16 amounts of direct insurance as a percent17 age of its net premiums; and 

18 (iii) is not engaged in an ongoing 

19 basis in the business of soliciting direct in20 surance. 

21 (B) DETERMINATION.—A determination of 

22 whether an insurer is a reinsurer shall be made 

23 under the laws of the State of domicile in ac24 cordance with this paragraph. 


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1 (5) STATE.—The term ‘‘State’’ includes any 

2 State of the United States, the District of Columbia, 

3 the Commonwealth of Puerto Rico, Guam, the 

4 Northern Mariana Islands, the Virgin Islands, and 

5 American Samoa. 

6 TITLE III—RULE OF 

7 CONSTRUCTION 

8 SEC. 301. RULE OF CONSTRUCTION. 

9 Nothing in this Act or the amendments to this Act 

10 shall be construed to modify, impair, or supersede the ap11 plication of the antitrust laws. Any implied or actual con12 flict between this Act and any amendments to this Act 

13 and the antitrust laws shall be resolved in favor of the 

14 operation of the antitrust laws. 

Æ 


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