I 

111TH CONGRESS 

1ST SESSION H. R. 2571 

To streamline the regulation of nonadmitted insurance and reinsurance, and 

for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 21, 2009 

Mr. MOORE of Kansas (for himself, Mr. GARRETT of New Jersey, Mr. KANJORSKI, Ms. GINNY BROWN-WAITE of Florida, Mr. FRANK of Massachusetts, Mr. BACHUS, Mr. MCMAHON, Mr. NEUGEBAUER, Ms. BEAN, Mr. 

GARY G. MILLER of California, Mr. CROWLEY, Mr. KING of New York, 

Mr. HINOJOSA, Mrs. CAPITO, Mrs. MALONEY, Mrs. BACHMANN, Mr. 

ISRAEL, Mr. YOUNG of Florida, Mr. SHERMAN, Mr. MCHENRY, Mr. PUTNAM, and Mr. CAMPBELL) introduced the following bill; which was referred to the Committee on Financial Services, and in addition to the 

Committee on the Judiciary, for a period to be subsequently determined 

by the Speaker, in each case for consideration of such provisions as fall 

within the jurisdiction of the committee concerned 

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 AND TABLE OF CONTENTS. 

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

5 ‘‘Nonadmitted and Reinsurance Reform Act of 2009’’. 


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

2 this Act is as follows: 

Sec. 1. Short title and table of contents. 

Sec. 2. Effective date. 

TITLE I—NONADMITTED INSURANCE 

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

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. 

Sec. 302. Severability. 

3 SEC. 2. EFFECTIVE DATE. 

4 Except as otherwise specifically provided in this Act, 

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

6 month period beginning on the date of the enactment of 

7 this Act. 

8 TITLE I—NONADMITTED 

9 INSURANCE 

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

11 PREMIUM TAXES. 

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

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

14 any premium tax payment for nonadmitted insurance. 


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1 (b) ALLOCATION OF NONADMITTED PREMIUM

2 TAXES.— 

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

4 compact or otherwise establish procedures to allocate 

5 among the States the premium taxes paid to an in6 sured’s home State described in subsection (a). 

7 (2) EFFECTIVE DATE.—Except as expressly 

8 otherwise provided in such compact or other proce9 dures, any such compact or other procedures— 

10 (A) if adopted on or before the expiration 

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

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

13 premium taxes that, on or after such date of 

14 enactment, are required to be paid to any State 

15 that is subject to such compact or procedures; 

16 and 

17 (B) if adopted after the expiration of such 

18 330-day period, shall apply to any premium 

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

20 calendar year that begins after the expiration of 

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

22 any State that is subject to such compact or 

23 procedures. 

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

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


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1 may submit a report to the Committee on Financial 

2 Services and Committee on the Judiciary of the 

3 House of Representatives and the Committee on 

4 Banking, Housing, and Urban Affairs of the Senate 

5 identifying and describing any compact or other pro6 cedures for allocation among the States of premium 

7 taxes that have been adopted during such period by 

8 any States. 

9 (4) NATIONWIDE SYSTEM.—The Congress in10 tends that each State adopt nationwide uniform re11 quirements, forms, and procedures, such as an inter12 state compact, that provides for the reporting, pay13 ment, collection, and allocation of premium taxes for 

14 nonadmitted insurance consistent with this section. 

15 (c) ALLOCATION BASED ON TAX ALLOCATION RE16 PORT.—To facilitate the payment of premium taxes 

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

18 surplus lines brokers and insureds who have independently 

19 procured insurance to annually file tax allocation reports 

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

21 nonadmitted insurance policy premium or premiums at22 tributable to properties, risks or exposures located in each 

23 State. The filing of a nonadmitted insurance tax allocation 

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

25 authorized by the insured to act as its agent. 


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1 SEC. 102. REGULATION OF NONADMITTED INSURANCE BY 

2 INSURED’S HOME STATE. 

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

4 provided in this section, the placement of nonadmitted in5 surance shall be subject to the statutory and regulatory 

6 requirements solely of the insured’s home State. 

7 (b) BROKER LICENSING.—No State other than an in8 sured’s home State may require a surplus lines broker to 

9 be licensed in order to sell, solicit, or negotiate non10 admitted insurance with respect to such insured. 

11 (c) ENFORCEMENT PROVISION.—With respect to sec12 tion 101 and subsections (a) and (b) of this section, any 

13 law, regulation, provision, or action of any State that ap14 plies or purports to apply to nonadmitted insurance sold 

15 to, solicited by, or negotiated with an insured whose home 

16 State is another State shall be preempted with respect to 

17 such application. 

18 (d) WORKERS’ COMPENSATION EXCEPTION.—This 

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

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

21 compensation insurance or excess insurance for self-fund22 ed workers’ compensation plans with a nonadmitted in23 surer. 


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1 SEC. 103. PARTICIPATION IN NATIONAL PRODUCER DATA2 BASE. 

3 After the expiration of the 2-year period beginning 

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

5 not collect any fees relating to licensing of an individual 

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

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

8 provide for participation by the State in the national in9 surance producer database of the NAIC, or any other 

10 equivalent uniform national database, for the licensure of 

11 surplus lines brokers and the renewal of such licenses. 

12 SEC. 104. UNIFORM STANDARDS FOR SURPLUS LINES ELI13 GIBILITY. 

14 A State may not— 

15 (1) impose eligibility requirements on, or other16 wise establish eligibility criteria for, nonadmitted in17 surers domiciled in a United States jurisdiction, ex18 cept in conformance with such requirements and cri19 teria in sections 5A(2) and 5C(2)(a) of the Non-Ad20 mitted Insurance Model Act, unless the State has 

21 adopted nationwide uniform requirements, forms, 

22 and procedures developed in accordance with section 

23 101(b) of this Act that include alternative nation24 wide uniform eligibility requirements; and 

25 (2) prohibit a surplus lines broker from placing 

26 nonadmitted insurance with, or procuring nonVerDate Nov 24 2008 19:16 May 24, 2009 Jkt 079200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H2571.IH H2571

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1 admitted insurance from, a nonadmitted insurer 

2 domiciled outside the United States that is listed on 

3 the Quarterly Listing of Alien Insurers maintained 

4 by the International Insurers Department of the 

5 NAIC. 

6 SEC. 105. STREAMLINED APPLICATION FOR COMMERCIAL 

7 PURCHASERS. 

8 A surplus lines broker seeking to procure or place 

9 nonadmitted insurance in a State for an exempt commer10 cial purchaser shall not be required to satisfy any State 

11 requirement to make a due diligence search to determine 

12 whether the full amount or type of insurance sought by 

13 such exempt commercial purchaser can be obtained from 

14 admitted insurers if— 

15 (1) the broker procuring or placing the surplus 

16 lines insurance has disclosed to the exempt commer17 cial purchaser that such insurance may or may not 

18 be available from the admitted market that may pro19 vide greater protection with more regulatory over20 sight; and 

21 (2) the exempt commercial purchaser has sub22 sequently requested in writing the broker to procure 

23 or place such insurance from a nonadmitted insurer. 


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1 SEC. 106. GAO STUDY OF NONADMITTED INSURANCE MAR2 KET. 

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

4 United States shall conduct a study of the nonadmitted 

5 insurance market to determine the effect of the enactment 

6 of this title on the size and market share of the non7 admitted insurance market for providing coverage typi8 cally provided by the admitted insurance market. 

9 (b) CONTENTS.—The study shall determine and ana10 lyze— 

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

12 the nonadmitted insurance market and in the num13 ber of insurance companies and insurance holding 

14 companies providing such business in the 18-month 

15 period that begins upon the effective date of this 

16 Act; 

17 (2) the extent to which insurance coverage typi18 cally provided by the admitted insurance market has 

19 shifted to the nonadmitted insurance market; 

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

21 and market share of the nonadmitted insurance 

22 market, including differences in the price and avail23 ability of coverage available in both the admitted 

24 and nonadmitted insurance markets; 

25 (4) the extent to which insurance companies 

26 and insurance holding companies that provide both 


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1 admitted and nonadmitted insurance have experi2 enced shifts in the volume of business between ad3 mitted and nonadmitted insurance; and 

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

5 in the number of individuals who have nonadmitted 

6 insurance policies, the type of coverage provided 

7 under such policies, and whether such coverage is 

8 available in the admitted insurance market. 

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

10 study under this section, the Comptroller General shall 

11 consult with the NAIC. 

12 (d) REPORT.—The Comptroller General shall com13 plete the study under this section and submit a report to 

14 the Committee on Financial Services of the House of Rep15 resentatives and the Committee on Banking, Housing, and 

16 Urban Affairs of the Senate regarding the findings of the 

17 study not later than 30 months after the effective date 

18 of this Act. 

19 SEC. 107. DEFINITIONS. 

20 For purposes of this title, the following definitions 

21 shall apply: 

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

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

24 licensed to engage in the business of insurance in 

25 such State. 


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1 (2) AFFILIATE.—The term ‘‘affiliate’’ means, 

2 with respect to an insured, any entity that controls, 

3 is controlled by, or is under common control with the 

4 insured. 

5 (3) AFFILIATED GROUP.—The term ‘‘affiliated 

6 group’’ means any group of entities that are all af7 filiated. 

8 (4) CONTROL.—An entity has ‘‘control’’ over 

9 another entity if— 

10 (A) the entity directly or indirectly or act11 ing through one or more other persons owns, 

12 controls or has the power to vote 25 percent or 

13 more of any class of voting securities of the 

14 other entity; or 

15 (B) the entity controls in any manner the 

16 election of a majority of the directors or trust17 ees of the other entity. 

18 (5) EXEMPT COMMERCIAL PURCHASER.—The 

19 term ‘‘exempt commercial purchaser’’ means any 

20 person purchasing commercial insurance that, at the 

21 time of placement, meets the following requirements: 

22 (A) The person employs or retains a quali23 fied risk manager to negotiate insurance cov24 erage. 


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1 (B) The person has paid aggregate nation2 wide commercial property and casualty insur3 ance premiums in excess of $100,000 in the im4 mediately preceding 12 months. 

5 (C)(i) The person meets at least one of the 

6 following criteria: 

7 (I) The person possesses a net worth 

8 in excess of $20,000,000, as such amount 

9 is adjusted pursuant to clause (ii). 

10 (II) The person generates annual rev11 enues in excess of $50,000,000, as such 

12 amount is adjusted pursuant to clause (ii). 

13 (III) The person employs more than 

14 500 full time or full time equivalent em15 ployees per individual insured or is a mem16 ber of an affiliated group employing more 

17 than 1,000 employees in the aggregate. 

18 (IV) The person is a not-for-profit or19 ganization or public entity generating an20 nual budgeted expenditures of at least 

21 $30,000,000, as such amount is adjusted 

22 pursuant to clause (ii). 

23 (V) The person is a municipality with 

24 a population in excess of 50,000 persons. 


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1 (ii) Effective on the fifth January 1 occur2 ring after the date of the enactment of this Act 

3 and each fifth January 1 occurring thereafter, 

4 the amounts in subclauses (I), (II), and (IV) of 

5 clause (i) shall be adjusted to reflect the per6 centage change for such five-year period in the 

7 Consumer Price Index for All Urban Con8 sumers published by the Bureau of Labor Sta9 tistics of the Department of Labor. 

10 (6) HOME STATE.— 

11 (A) IN GENERAL.—Except as provided in 

12 subparagraph (B), the term ‘‘home State’’ 

13 means, with respect to an insured— 

14 (i) the State in which an insured 

15 maintains its principal place of business or, 

16 in the case of an individual, the individ17 ual’s principal residence; or 

18 (ii) if 100 percent of the insured risk 

19 is located out of the State referred to in 

20 subparagraph (A), the State to which the 

21 greatest percentage of the insured’s tax22 able premium for that insurance contract 

23 is allocated. 

24 (B) AFFILIATED GROUPS.—If more than 

25 one insured from an affiliated group are named 


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1 insureds on a single nonadmitted insurance con2 tract, the term ‘‘home State’’ means the home 

3 State, as determined pursuant to subparagraph 

4 (A), of the member of the affiliated group that 

5 has the largest percentage of premium attrib6 uted to it under such insurance contract. 

7 (7) INDEPENDENTLY PROCURED INSURANCE.— 

8 The term ‘‘independently procured insurance’’ 

9 means insurance procured directly by an insured 

10 from a nonadmitted insurer. 

11 (8) NAIC.—The term ‘‘NAIC’’ means the Na12 tional Association of Insurance Commissioners or 

13 any successor entity. 

14 (9) NONADMITTED INSURANCE.—The term 

15 ‘‘nonadmitted insurance’’ means any property and 

16 casualty insurance permitted to be placed directly or 

17 through a surplus lines broker with a nonadmitted 

18 insurer eligible to accept such insurance. 

19 (10) NON-ADMITTED INSURANCE MODEL

20 ACT.—The term ‘‘Non-Admitted Insurance Model 

21 Act’’ means the provisions of the Non-Admitted In22 surance Model Act, as adopted by the NAIC on Au23 gust 3, 1994, and amended on September 30, 1996, 

24 December 6, 1997, October 2, 1999, and June 8, 

25 2002. 


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1 (11) NONADMITTED INSURER.—The term 

2 ‘‘nonadmitted insurer’’ means, with respect to a 

3 State, an insurer not licensed to engage in the busi4 ness of insurance in such State. 

5 (12) QUALIFIED RISK MANAGER.—The term 

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

7 policyholder of commercial insurance, a person who 

8 meets all of the following requirements: 

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

10 party consultant retained by, the commercial 

11 policyholder. 

12 (B) The person provides skilled services in 

13 loss prevention, loss reduction, or risk and in14 surance coverage analysis, and purchase of in15 surance. 

16 (C) The person— 

17 (i)(I) has a bachelor’s degree or high18 er from an accredited college or university 

19 in risk management, business administra20 tion, finance, economics, or any other field 

21 determined by a State insurance commis22 sioner or other State regulatory official or 

23 entity to demonstrate minimum com24 petence in risk management; and 


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1 (II)(aa) has three years of experience 

2 in risk financing, claims administration, 

3 loss prevention, risk and insurance anal4 ysis, or purchasing commercial lines of in5 surance; or 

6 (bb) has one of the following designa7 tions: 

8 (AA) a designation as a Char9 tered Property and Casualty Under10 writer (in this subparagraph referred 

11 to as ‘‘CPCU’’) issued by the Amer12 ican Institute for CPCU/Insurance In13 stitute of America; 

14 (BB) a designation as an Asso15 ciate in Risk Management (ARM) 

16 issued by the American Institute for 

17 CPCU/Insurance Institute of America; 

18 (CC) a designation as Certified 

19 Risk Manager (CRM) issued by the 

20 National Alliance for Insurance Edu21 cation & Research; 

22 (DD) a designation as a RIMS 

23 Fellow (RF) issued by the Global Risk 

24 Management Institute; or 


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1 (EE) any other designation, cer2 tification, or license determined by a 

3 State insurance commissioner or other 

4 State insurance regulatory official or 

5 entity to demonstrate minimum com6 petency in risk management; 

7 (ii)(I) has at least seven years of ex8 perience in risk financing, claims adminis9 tration, loss prevention, risk and insurance 

10 coverage analysis, or purchasing commer11 cial lines of insurance; and 

12 (II) has any one of the designations 

13 specified in subitems (AA) through (EE) 

14 of clause (i)(II)(bb); 

15 (iii) has at least 10 years of experi16 ence in risk financing, claims administra17 tion, loss prevention, risk and insurance 

18 coverage analysis, or purchasing commer19 cial lines of insurance; or 

20 (iv) has a graduate degree from an 

21 accredited college or university in risk 

22 management, business administration, fi23 nance, economics, or any other field deter24 mined by a State insurance commissioner 

25 or other State regulatory official or entity 


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1 to demonstrate minimum competence in 

2 risk management. 

3 (13) PREMIUM TAX.—The term ‘‘premium tax’’ 

4 means, with respect to surplus lines or independently 

5 procured insurance coverage, any tax, fee, assess6 ment, or other charge imposed by a government en7 tity directly or indirectly based on any payment 

8 made as consideration for an insurance contract for 

9 such insurance, including premium deposits, assess10 ments, registration fees, and any other compensation 

11 given in consideration for a contract of insurance. 

12 (14) SURPLUS LINES BROKER.—The term ‘‘sur13 plus lines broker’’ means an individual, firm, or cor14 poration which is licensed in a State to sell, solicit, 

15 or negotiate insurance on properties, risks, or expo16 sures located or to be performed in a State with 

17 nonadmitted insurers. 

18 (15) STATE.—The term ‘‘State’’ includes any 

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

20 the Commonwealth of Puerto Rico, Guam, the 

21 Northern Mariana Islands, the Virgin Islands, and 

22 American Samoa. 


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1 TITLE II—REINSURANCE 

2 SEC. 201. REGULATION OF CREDIT FOR REINSURANCE AND 

3 REINSURANCE AGREEMENTS. 

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

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

6 or has financial solvency requirements substantially simi7 lar to the requirements necessary for NAIC accreditation, 

8 and recognizes credit for reinsurance for the insurer’s 

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

10 reinsurance. 

11 (b) ADDITIONAL PREEMPTION OF

12 EXTRATERRITORIAL APPLICATION OF STATE LAW.—In 

13 addition to the application of subsection (a), all laws, regu14 lations, provisions, or other actions of a State that is not 

15 the domiciliary State of the ceding insurer, except those 

16 with respect to taxes and assessments on insurance com17 panies or insurance income, are preempted to the extent 

18 that they— 

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

20 insurer or the assuming insurer to resolve disputes 

21 pursuant to contractual arbitration to the extent 

22 such contractual provision is not inconsistent with 

23 the provisions of title 9, United States Code; 

24 (2) require that a certain State’s law shall gov25 ern the reinsurance contract, disputes arising from 


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1 the reinsurance contract, or requirements of the re2 insurance contract; 

3 (3) attempt to enforce a reinsurance contract 

4 on terms different than those set forth in the rein5 surance contract, to the extent that the terms are 

6 not inconsistent with this title; or 

7 (4) otherwise apply the laws of the State to re8 insurance agreements of ceding insurers not domi9 ciled in that State. 

10 SEC. 202. REGULATION OF REINSURER SOLVENCY. 

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

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

13 has financial solvency requirements substantially similar 

14 to the requirements necessary for NAIC accreditation, 

15 such State shall be solely responsible for regulating the 

16 financial solvency of the reinsurer. 

17 (b) NONDOMICILIARY STATES.— 

18 (1) LIMITATION ON FINANCIAL INFORMATION

19 REQUIREMENTS.—If the State of domicile of a rein20 surer is an NAIC-accredited State or has financial 

21 solvency requirements substantially similar to the re22 quirements necessary for NAIC accreditation, no 

23 other State may require the reinsurer to provide any 

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1 mation the reinsurer is required to file with its 

2 domiciliary State. 

3 (2) RECEIPT OF INFORMATION.—No provision 

4 of this section shall be construed as preventing or 

5 prohibiting a State that is not the State of domicile 

6 of a reinsurer from receiving a copy of any financial 

7 statement filed with its domiciliary State. 

8 SEC. 203. DEFINITIONS. 

9 For purposes of this title, the following definitions 

10 shall apply: 

11 (1) CEDING INSURER.—The term ‘‘ceding in12 surer’’ means an insurer that purchases reinsurance. 

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

14 domicile’’ and ‘‘domiciliary State’’ means, with re15 spect to an insurer or reinsurer, the State in which 

16 the insurer or reinsurer is incorporated or entered 

17 through, and licensed. 

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

19 means the assumption by an insurer of all or part 

20 of a risk undertaken originally by another insurer. 

21 (4) REINSURER.— 

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

23 means an insurer to the extent that the in24 surer— 


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1 (i) is principally engaged in the busi2 ness of reinsurance; 

3 (ii) does not conduct significant 

4 amounts of direct insurance as a percent5 age of its net premiums; and 

6 (iii) is not engaged in an ongoing 

7 basis in the business of soliciting direct in8 surance. 

9 (B) DETERMINATION.—A determination of 

10 whether an insurer is a reinsurer shall be made 

11 under the laws of the State of domicile in ac12 cordance with this paragraph. 

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

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

15 the Commonwealth of Puerto Rico, Guam, the 

16 Northern Mariana Islands, the Virgin Islands, and 

17 American Samoa. 

18 TITLE III—RULE OF 

19 CONSTRUCTION 

20 SEC. 301. RULE OF CONSTRUCTION. 

21 Nothing in this Act or amendments to this Act shall 

22 be construed to modify, impair, or supersede the applica23 tion of the antitrust laws. Any implied or actual conflict 

24 between this Act and any amendments to this Act and 


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1 the antitrust laws shall be resolved in favor of the oper2 ation of the antitrust laws. 

3 SEC. 302. SEVERABILITY. 

4 If any section or subsection of this Act, or any appli5 cation of such provision to any person or circumstance, 

6 is held to be unconstitutional, the remainder of this Act, 

7 and the application of the provision to any other person 

8 or circumstance, shall not be affected. 

Æ 


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