II 

111TH CONGRESS 

1ST SESSION S. 1363 

To streamline the regulation of nonadmitted insurance and reinsurance, and 

for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JUNE 25, 2009 

Mr. MARTINEZ (for himself, Mr. BAYH, Mr. NELSON of Florida, and Mr. 

CRAPO) 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 AND TABLE OF CONTENTS. 

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

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

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

7 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. 


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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. 

Sec. 302. Severability. 

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 the enactment of 

5 this 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 nationwide uniform re5 quirements, forms, and procedures, such as an inter6 state compact, that provides for the reporting, pay7 ment, collection, and allocation of premium taxes for 

8 nonadmitted insurance 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.—With respect to sec6 tion 101 and subsections (a) and (b) of this section, any 

7 law, regulation, provision, or action of any State that ap8 plies or purports to apply to nonadmitted insurance sold 

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

10 State is another State shall be preempted with respect to 

11 such application. 

12 (d) WORKERS’ COMPENSATION EXCEPTION.—This 

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

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

15 compensation insurance or excess insurance for self-fund16 ed workers’ compensation plans with a nonadmitted in17 surer. 

18 SEC. 103. PARTICIPATION IN NATIONAL PRODUCER DATA19 BASE. 

20 After the expiration of the 2-year period beginning 

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

22 not collect any fees relating to licensing of an individual 

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

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

25 provide for participation by the State in the national inVerDate Nov 24 2008 04:19 Jun 26, 2009 Jkt 079200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1363.IS S1363

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1 surance producer database of the NAIC, or any other 

2 equivalent uniform national database, for the licensure of 

3 surplus lines brokers and the renewal of such licenses. 

4 SEC. 104. UNIFORM STANDARDS FOR SURPLUS LINES ELI5 GIBILITY. 

6 A State may not— 

7 (1) impose eligibility requirements on, or other8 wise establish eligibility criteria for, nonadmitted in9 surers domiciled in a United States jurisdiction, ex10 cept in conformance with such requirements and cri11 teria in sections 5A(2) and 5C(2)(a) of the Non-Ad12 mitted Insurance Model Act, unless the State has 

13 adopted nationwide uniform requirements, forms, 

14 and procedures developed in accordance with section 

15 101(b) of this Act that include alternative nation16 wide uniform eligibility requirements; and 

17 (2) prohibit a surplus lines broker from placing 

18 nonadmitted insurance with, or procuring non19 admitted insurance from, a nonadmitted insurer 

20 domiciled outside the United States that is listed on 

21 the Quarterly Listing of Alien Insurers maintained 

22 by the International Insurers Department of the 

23 NAIC. 


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1 SEC. 105. STREAMLINED APPLICATION FOR COMMERCIAL 

2 PURCHASERS. 

3 A surplus lines broker seeking to procure or place 

4 nonadmitted insurance in a State for an exempt commer5 cial purchaser shall not be required to satisfy any State 

6 requirement to make a due diligence search to determine 

7 whether the full amount or type of insurance sought by 

8 such exempt commercial purchaser can be obtained from 

9 admitted insurers if— 

10 (1) the broker procuring or placing the surplus 

11 lines insurance has disclosed to the exempt commer12 cial purchaser that such insurance may or may not 

13 be available from the admitted market that may pro14 vide greater protection with more regulatory over15 sight; and 

16 (2) the exempt commercial purchaser has sub17 sequently requested in writing the broker to procure 

18 or place such insurance from a nonadmitted insurer. 

19 SEC. 106. GAO STUDY OF NONADMITTED INSURANCE MAR20 KET. 

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

22 United States shall conduct a study of the nonadmitted 

23 insurance market to determine the effect of the enactment 

24 of this title on the size and market share of the non25 admitted insurance market for providing coverage typi26 cally provided by the admitted insurance market. 


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1 (b) CONTENTS.—The study shall determine and ana2 lyze— 

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

4 the nonadmitted insurance market and in the num5 ber of insurance companies and insurance holding 

6 companies providing such business in the 18-month 

7 period that begins upon the effective date of this 

8 Act; 

9 (2) the extent to which insurance coverage typi10 cally provided by the admitted insurance market has 

11 shifted to the nonadmitted insurance market; 

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

13 and market share of the nonadmitted insurance 

14 market, including differences in the price and avail15 ability of coverage available in both the admitted 

16 and nonadmitted insurance markets; 

17 (4) the extent to which insurance companies 

18 and insurance holding companies that provide both 

19 admitted and nonadmitted insurance have experi20 enced shifts in the volume of business between ad21 mitted and nonadmitted insurance; and 

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

23 in the number of individuals who have nonadmitted 

24 insurance policies, the type of coverage provided 


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1 under such policies, and whether such coverage is 

2 available in the admitted insurance market. 

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

4 study under this section, the Comptroller General shall 

5 consult with the NAIC. 

6 (d) REPORT.—The Comptroller General shall com7 plete the study under this section and submit a report to 

8 the Committee on Financial Services of the House of Rep9 resentatives and the Committee on Banking, Housing, and 

10 Urban Affairs of the Senate regarding the findings of the 

11 study not later than 30 months after the effective date 

12 of this Act. 

13 SEC. 107. DEFINITIONS. 

14 For purposes of this title, the following definitions 

15 shall apply: 

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

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

18 licensed to engage in the business of insurance in 

19 such State. 

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

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

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

23 insured. 


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

2 group’’ means any group of entities that are all af3 filiated. 

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

5 another entity if— 

6 (A) the entity directly or indirectly or act7 ing through one or more other persons owns, 

8 controls or has the power to vote 25 percent or 

9 more of any class of voting securities of the 

10 other entity; or 

11 (B) the entity controls in any manner the 

12 election of a majority of the directors or trust13 ees of the other entity. 

14 (5) EXEMPT COMMERCIAL PURCHASER.—The 

15 term ‘‘exempt commercial purchaser’’ means any 

16 person purchasing commercial insurance that, at the 

17 time of placement, meets the following requirements: 

18 (A) The person employs or retains a quali19 fied risk manager to negotiate insurance cov20 erage. 

21 (B) The person has paid aggregate nation22 wide commercial property and casualty insur23 ance premiums in excess of $100,000 in the im24 mediately preceding 12 months. 


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

2 following criteria: 

3 (I) The person possesses a net worth 

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

5 is adjusted pursuant to clause (ii). 

6 (II) The person generates annual rev7 enues in excess of $50,000,000, as such 

8 amount is adjusted pursuant to clause (ii). 

9 (III) The person employs more than 

10 500 full-time or full-time equivalent em11 ployees per individual insured or is a mem12 ber of an affiliated group employing more 

13 than 1,000 employees in the aggregate. 

14 (IV) The person is a not-for-profit or15 ganization or public entity generating an16 nual budgeted expenditures of at least 

17 $30,000,000, as such amount is adjusted 

18 pursuant to clause (ii). 

19 (V) The person is a municipality with 

20 a population in excess of 50,000 persons. 

21 (ii) Effective on the fifth January 1 occur22 ring after the date of the enactment of this Act 

23 and each fifth January 1 occurring thereafter, 

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

25 clause (i) shall be adjusted to reflect the perVerDate Nov 24 2008 04:19 Jun 26, 2009 Jkt 079200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S1363.IS S1363

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1 centage change for such five-year period in the 

2 Consumer Price Index for All Urban Con3 sumers published by the Bureau of Labor Sta4 tistics of the Department of Labor. 

5 (6) HOME STATE.— 

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

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

8 means, with respect to an insured— 

9 (i) the State in which an insured 

10 maintains its principal place of business or, 

11 in the case of an individual, the individ12 ual’s principal residence; or 

13 (ii) if 100 percent of the insured risk 

14 is located out of the State referred to in 

15 subparagraph (A), the State to which the 

16 greatest percentage of the insured’s tax17 able premium for that insurance contract 

18 is allocated. 

19 (B) AFFILIATED GROUPS.—If more than 

20 one insured from an affiliated group are named 

21 insureds on a single nonadmitted insurance con22 tract, the term ‘‘home State’’ means the home 

23 State, as determined pursuant to subparagraph 

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


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1 has the largest percentage of premium attrib2 uted to it under such insurance contract. 

3 (7) INDEPENDENTLY PROCURED INSURANCE.— 

4 The term ‘‘independently procured insurance’’ 

5 means insurance procured directly by an insured 

6 from a nonadmitted insurer. 

7 (8) NAIC.—The term ‘‘NAIC’’ means the Na8 tional Association of Insurance Commissioners or 

9 any successor entity. 

10 (9) NONADMITTED INSURANCE.—The term 

11 ‘‘nonadmitted insurance’’ means any property and 

12 casualty insurance permitted to be placed directly or 

13 through a surplus lines broker with a nonadmitted 

14 insurer eligible to accept such insurance. 

15 (10) NON-ADMITTED INSURANCE MODEL

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

17 Act’’ means the provisions of the Non-Admitted In18 surance Model Act, as adopted by the NAIC on Au19 gust 3, 1994, and amended on September 30, 1996, 

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

21 2002. 

22 (11) NONADMITTED INSURER.—The term 

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

24 State, an insurer not licensed to engage in the busi25 ness of insurance in such State. 


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1 (12) QUALIFIED RISK MANAGER.—The term 

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

3 policyholder of commercial insurance, a person who 

4 meets all of the following requirements: 

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

6 party consultant retained by, the commercial 

7 policyholder. 

8 (B) The person provides skilled services in 

9 loss prevention, loss reduction, or risk and in10 surance coverage analysis, and purchase of in11 surance. 

12 (C) The person— 

13 (i)(I) has a bachelor’s degree or high14 er from an accredited college or university 

15 in risk management, business administra16 tion, finance, economics, or any other field 

17 determined by a State insurance commis18 sioner or other State regulatory official or 

19 entity to demonstrate minimum com20 petence in risk management; and 

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

22 in risk financing, claims administration, 

23 loss prevention, risk and insurance anal24 ysis, or purchasing commercial lines of in25 surance; or 


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1 (bb) has one of the following designa2 tions: 

3 (AA) a designation as a Char4 tered Property and Casualty Under5 writer (in this subparagraph referred 

6 to as ‘‘CPCU’’) issued by the Amer7 ican Institute for CPCU/Insurance In8 stitute of America; 

9 (BB) a designation as an Asso10 ciate in Risk Management (ARM) 

11 issued by the American Institute for 

12 CPCU/Insurance Institute of America; 

13 (CC) a designation as Certified 

14 Risk Manager (CRM) issued by the 

15 National Alliance for Insurance Edu16 cation & Research; 

17 (DD) a designation as a RIMS 

18 Fellow (RF) issued by the Global Risk 

19 Management Institute; or 

20 (EE) any other designation, cer21 tification, or license determined by a 

22 State insurance commissioner or other 

23 State insurance regulatory official or 

24 entity to demonstrate minimum com25 petency in risk management; 


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1 (ii)(I) has at least seven years of ex2 perience in risk financing, claims adminis3 tration, loss prevention, risk and insurance 

4 coverage analysis, or purchasing commer5 cial lines of insurance; and 

6 (II) has any one of the designations 

7 specified in subitems (AA) through (EE) 

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

9 (iii) has at least 10 years of experi10 ence in risk financing, claims administra11 tion, loss prevention, risk and insurance 

12 coverage analysis, or purchasing commer13 cial lines of insurance; or 

14 (iv) has a graduate degree from an 

15 accredited college or university in risk 

16 management, business administration, fi17 nance, economics, or any other field deter18 mined by a State insurance commissioner 

19 or other State regulatory official or entity 

20 to demonstrate minimum competence in 

21 risk management. 

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

23 means, with respect to surplus lines or independently 

24 procured insurance coverage, any tax, fee, assess25 ment, or other charge imposed by a government enVerDate Nov 24 2008 04:19 Jun 26, 2009 Jkt 079200 PO 00000 Frm 00016 Fmt 6652 Sfmt 6201 E:\BILLS\S1363.IS S1363

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1 tity directly or indirectly based on any payment 

2 made as consideration for an insurance contract for 

3 such insurance, including premium deposits, assess4 ments, registration fees, and any other compensation 

5 given in consideration for a contract of insurance. 

6 (14) SURPLUS LINES BROKER.—The term ‘‘sur7 plus lines broker’’ means an individual, firm, or cor8 poration which is licensed in a State to sell, solicit, 

9 or negotiate insurance on properties, risks, or expo10 sures located or to be performed in a State with 

11 nonadmitted insurers. 

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

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

14 the Commonwealth of Puerto Rico, Guam, the 

15 Northern Mariana Islands, the Virgin Islands, and 

16 American Samoa. 

17 TITLE II—REINSURANCE 

18 SEC. 201. REGULATION OF CREDIT FOR REINSURANCE AND 

19 REINSURANCE AGREEMENTS. 

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

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

22 or has financial solvency requirements substantially simi23 lar to the requirements necessary for NAIC accreditation, 

24 and recognizes credit for reinsurance for the insurer’s 


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

2 reinsurance. 

3 (b) ADDITIONAL PREEMPTION OF

4 EXTRATERRITORIAL APPLICATION OF STATE LAW.—In 

5 addition to the application of subsection (a), all laws, regu6 lations, provisions, or other actions of a State that is not 

7 the domiciliary State of the ceding insurer, except those 

8 with respect to taxes and assessments on insurance com9 panies or insurance income, are preempted to the extent 

10 that they— 

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

12 insurer or the assuming insurer to resolve disputes 

13 pursuant to contractual arbitration to the extent 

14 such contractual provision is not inconsistent with 

15 the provisions of title 9, United States Code; 

16 (2) require that a certain State’s law shall gov17 ern the reinsurance contract, disputes arising from 

18 the reinsurance contract, or requirements of the re19 insurance contract; 

20 (3) attempt to enforce a reinsurance contract 

21 on terms different than those set forth in the rein22 surance contract, to the extent that the terms are 

23 not inconsistent with this title; or 


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1 (4) otherwise apply the laws of the State to re2 insurance agreements of ceding insurers not domi3 ciled in that State. 

4 SEC. 202. REGULATION OF REINSURER SOLVENCY. 

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

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

7 has financial solvency requirements substantially similar 

8 to the requirements necessary for NAIC accreditation, 

9 such State shall be solely responsible for regulating the 

10 financial solvency of the reinsurer. 

11 (b) NONDOMICILIARY STATES.— 

12 (1) LIMITATION ON FINANCIAL INFORMATION

13 REQUIREMENTS.—If the State of domicile of a rein14 surer is an NAIC-accredited State or has financial 

15 solvency requirements substantially similar to the re16 quirements necessary for NAIC accreditation, no 

17 other State may require the reinsurer to provide any 

18 additional financial information other than the infor19 mation the reinsurer is required to file with its 

20 domiciliary State. 

21 (2) RECEIPT OF INFORMATION.—No provision 

22 of this section shall be construed as preventing or 

23 prohibiting a State that is not the State of domicile 

24 of a reinsurer from receiving a copy of any financial 

25 statement filed with its domiciliary State. 


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1 SEC. 203. DEFINITIONS. 

2 For purposes of this title, the following definitions 

3 shall apply: 

4 (1) CEDING INSURER.—The term ‘‘ceding in5 surer’’ means an insurer that purchases reinsurance. 

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

7 domicile’’ and ‘‘domiciliary State’’ means, with re8 spect to an insurer or reinsurer, the State in which 

9 the insurer or reinsurer is incorporated or entered 

10 through, and licensed. 

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

12 means the assumption by an insurer of all or part 

13 of a risk undertaken originally by another insurer. 

14 (4) REINSURER.— 

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

16 means an insurer to the extent that the in17 surer— 

18 (i) is principally engaged in the busi19 ness of reinsurance; 

20 (ii) does not conduct significant 

21 amounts of direct insurance as a percent22 age of its net premiums; and 

23 (iii) is not engaged in an ongoing 

24 basis in the business of soliciting direct in25 surance. 


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1 (B) DETERMINATION.—A determination of 

2 whether an insurer is a reinsurer shall be made 

3 under the laws of the State of domicile in ac4 cordance with this paragraph. 

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

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

7 the Commonwealth of Puerto Rico, Guam, the 

8 Northern Mariana Islands, the Virgin Islands, and 

9 American Samoa. 

10 TITLE III—RULE OF 

11 CONSTRUCTION 

12 SEC. 301. RULE OF CONSTRUCTION. 

13 Nothing in this Act or amendments to this Act shall 

14 be construed to modify, impair, or supersede the applica15 tion of the antitrust laws. Any implied or actual conflict 

16 between this Act and any amendments to this Act and 

17 the antitrust laws shall be resolved in favor of the oper18 ation of the antitrust laws. 

19 SEC. 302. SEVERABILITY. 

20 If any section or subsection of this Act, or any appli21 cation of such provision to any person or circumstance, 

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

23 and the application of the provision to any other person 

24 or circumstance, shall not be affected. 

Æ 


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