I 

109TH CONGRESS 

2D SESSION H. R. 5637 

To streamline the regulation of nonadmitted insurance and reinsurance, and 

for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 19, 2006 

Ms. GINNY BROWN-WAITE of Florida (for herself, Mr. MOORE of Kansas, Mr. 

BAKER, Ms. HOOLEY, Mr. FEENEY, Ms. WASSERMAN SCHULTZ, Mr. 

SESSIONS, Mr. HOLDEN, Mr. FOSSELLA, Mr. SCOTT of Georgia, Mr. 

BACHUS, Ms. BEAN, Mr. RENZI, Mr. ISRAEL, Mr. FITZPATRICK of Pennsylvania, Mr. CROWLEY, and Mrs. BIGGERT) 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 2006’’. 

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

7 this Act is as follows: 
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Sec. 1. Short title and table of contents. 

Sec. 2. Definitions. 

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. Definitions. 

TITLE II—CREDIT FOR REINSURANCE 

Sec. 201. Prohibiting extraterritorial application of State laws. 

Sec. 202. Solvency regulation. 

Sec. 203. Definitions. 

1 SEC. 2. DEFINITIONS. 

2 For purposes of this Act, the following definitions 

3 shall apply: 

4 (1) INSURER.—The term ‘‘insurer’’— 

5 (A) means an entity chartered and licensed 

6 as an insurance company and authorized to en7 gage in the business of insurance under the 

8 laws of at least 1 State; and 

9 (B) includes any entity that, under the 

10 laws of a State, is considered to be an insurer 

11 specifically for purposes of this title. 

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

13 State, the District of Columbia, the Commonwealth 

14 of Puerto Rico, Guam, the Northern Mariana Is15 lands, the Virgin Islands, and American Samoa. 
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1 TITLE I—NONADMITTED 

2 INSURANCE 

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

4 PREMIUM TAXES. 

5 (a) HOME STATE’S EXCLUSIVE AUTHORITY.— 

6 (1) IN GENERAL.—No State other than the 

7 home State of an insured may require any premium 

8 tax payment for nonadmitted insurance. 

9 (2) AMOUNT OF PAYMENT.—The amount of 

10 any premium tax payment for nonadmitted insur11 ance permitted under paragraph (1) shall be deter12 mined on the basis of any compact or procedures en13 tered into under subsection (b). 

14 (b) ALLOCATION OF NONADMITTED PREMIUM

15 TAXES.—The States may enter into a compact or other16 wise establish procedures to allocate among the States the 

17 premium taxes paid to an insured’s home State described 

18 in subsection (a). 

19 (c) ALLOCATION BASED ON TAX ALLOCATION RE20 PORT.—To facilitate the payment of premium taxes 

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

22 surplus lines brokers and insureds who have independently 

23 procured insurance to annually file tax allocation reports 

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

25 nonadmitted insurance policy premium or premiums at-
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1 tributable to properties, risks or exposures located in each 

2 State. The filing of a nonadmitted insurance tax allocation 

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

4 authorized by the insured to act as its agent. 

5 SEC. 102. REGULATION OF NONADMITTED INSURANCE BY 

6 INSURED’S HOME STATE. 

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

8 provided in this title, nonadmitted insurance is subject to 

9 the applicable statutory and regulatory requirements sole10 ly of the insured’s home State. 

11 (b) BROKER LICENSING.—No State other than an in12 sured’s home State may require a surplus lines broker to 

13 be licensed in order to sell, solicit, or negotiate non14 admitted insurance with respect to such insured. 

15 (c) ENFORCEMENT PROVISION.—Any law, regula16 tion, provision, or action of any State that applies or pur17 ports to apply to nonadmitted insurance sold to, solicited 

18 by, or negotiated with an insured whose home State is an19 other State shall be preempted with respect to such appli20 cation. 

21 SEC. 103. PARTICIPATION IN NATIONAL PRODUCER DATA22 BASE. 

23 After the expiration of the 2-year period beginning 

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

25 not collect any fees relating to licensing of an individual 
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1 or entity as nonresident insurance broker in the State un2 less the State has in effect at such time laws or regulations 

3 that provide for participation by the State in the national 

4 insurance producer database of the NAIC, or any other 

5 equivalent uniform national database, for the licensure of 

6 surplus lines brokers and the renewal of such licenses. 

7 SEC. 104. UNIFORM STANDARDS FOR SURPLUS LINES ELI8 GIBILITY. 

9 After the expiration of the 2-year period beginning 

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

11 not— 

12 (1) impose eligibility requirements on, or other13 wise establish eligibility criteria for, nonadmitted in14 surers domiciled in a United States jurisdiction, ex15 cept in conformance with section 5C(2)(a) of the 

16 Non-Admitted Insurance Model Act; 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 Insurance Division 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. DEFINITIONS. 

20 For purposes of this title, the following definitions 

21 shall apply: 

22 (1) EXEMPT COMMERCIAL PURCHASER.—The 

23 term ‘‘exempt commercial purchaser’’ means any 

24 person purchasing commercial insurance that meets 

25 the following requirements: 
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1 (A) The person employs or retains a quali2 fied risk manager to negotiate insurance cov3 erage. 

4 (B) The person meets at least 2 of the fol5 lowing criteria: 

6 (i) The person possesses a net worth 

7 in excess of $20,000,000. 

8 (ii) The person generates annual reve9 nues in excess of $50,000,000. 

10 (iii) The person employs more than 

11 500 full time or full time equivalent em12 ployees per individual insured or is a mem13 ber of affiliated group employing more 

14 than 1,000 employees in the aggregate. 

15 (iv) The person pays annual aggregate 

16 nationwide insurance premiums in excess 

17 of $100,000 for covered lines of insurance. 

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

21 $30,000,000. 

22 (vi) The person is a municipality with 

23 a population in excess of 50,000 persons. 
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1 (2) HOME STATE.—The term ‘‘home State’’ 

2 means the State in which an insured maintains its 

3 principal place of business or principal residence. 

4 (3) INDEPENDENTLY PROCURED INSURANCE.— 

5 The term ‘‘independently procured insurance’’ 

6 means— 

7 (A) insurance procured directly by an in8 sured from a nonadmitted insurer on prop9 erties, risks, or exposures located or to be per10 formed in whole or in part in the home State 

11 of the insured; or 

12 (B) a multi-State insurance policy with a 

13 nonadmitted insurer, that covers properties, 

14 risks, or exposures only partially located or to 

15 be performed in a State, placed by a surplus 

16 lines broker in another State. 

17 (4) NAIC.—The term ‘‘NAIC’’ means the Na18 tional Association of Insurance Commissioners or 

19 any other association that regularly establishes in20 surance model acts or insurance standards. 

21 (5) NONADMITTED INSURANCE.—The term 

22 ‘‘nonadmitted insurance’’ means any property and 

23 casualty insurance permitted to be placed directly or 

24 through a surplus lines broker with a nonadmitted 

25 insurer eligible to accept such insurance. 
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1 (6) NON-ADMITTED INSURANCE MODEL ACT.— 

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

3 means the provisions of the Non-Admitted Insurance 

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

5 1994, and amended on September 30, 1996, Decem6 ber 6, 1997, October 2, 1999, and June 8, 2002, ex7 cept that such term shall not include any— 

8 (A) changes to the Non-Admitted Insur9 ance Model Act subsequent to the adoption of 

10 this Act; 

11 (B) State-specific deviations or alternative 

12 standards; or 

13 (C) best practices. 

14 (7) NONADMITTED INSURER.—The term ‘‘non15 admitted insurer’’ means, with respect to a State, an 

16 insurer not licensed to engage in the business of in17 surance in such State. 

18 (8) PREMIUM TAX.—The term ‘‘premium tax’’ 

19 means, with respect to surplus lines or independently 

20 procured insurance coverage, any tax, fee, assess21 ment, or other charge imposed by a State on an in22 sured based on any payment made as consideration 

23 for an insurance contract for such insurance, includ24 ing premium deposits, assessments, registration fees, 
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1 and any other compensation given in consideration 

2 for a contract of insurance. 

3 (9) SURPLUS LINES BROKER.—The term ‘‘sur4 plus lines broker’’ means an individual, firm, or cor5 poration which sells, solicits, or negotiates insurance 

6 on properties, risks, or exposures located or to be 

7 performed in a State with nonadmitted insurers. 

8 TITLE II—CREDIT FOR 

9 REINSURANCE 

10 SEC. 201. PROHIBITING EXTRATERRITORIAL APPLICATION 

11 OF STATE LAWS. 

12 (a) NO LIMIT ON DOMICILIARY STATE REGULA13 TION.—This section may not be construed to limit the 

14 State of domicile of a ceding insurer from applying such 

15 State’s laws and regulation to the ceding insurer. 

16 (b) PREEMPTION OF STATE LAW.—Except as pro17 vided in subsection (a) with respect to the State of domi18 cile of a ceding insurer, all laws, regulations, provisions, 

19 or other actions of a State are preempted to the extent 

20 that they— 

21 (1) restrict or eliminate the rights of a ceding 

22 insurer or reinsurer to resolve disputes pursuant to 

23 contractual arbitration to the extent such contrac24 tual provision is not inconsistent with the provisions 

25 of title 9, United States Code; 
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1 (2) require that a certain State’s law shall gov2 ern the reinsurance contract, disputes arising from 

3 the reinsurance contract, or requirements of the re4 insurance contract; 

5 (3) attempt to enforce a reinsurance contract 

6 on terms different than those set forth in the rein7 surance contract, to the extent that the terms are 

8 not inconsistent with this title; or 

9 (4) apply the laws of the State to ceding insur10 ers not domiciled in that State. 

11 SEC. 202. SOLVENCY REGULATION. 

12 (a) DOMICILIARY STATE REGULATION.—The State 

13 of domicile of a reinsurer shall be solely responsible for 

14 regulating the financial solvency of the reinsurer if such 

15 State is an NAIC accredited State. 

16 (b) NONDOMICILIARY STATES.— 

17 (1) LIMITATION ON FINANCIAL INFORMATION

18 REQUIREMENTS.—If the State of domicile of a rein19 surer is an NAIC accredited State, a State that is 

20 not the State of domicile of such reinsurer may not 

21 require the reinsurer to provide any additional finan22 cial information other than the information required 

23 to be filed with or by the domiciliary State. 

24 (2) RECEIPT OF INFORMATION.—No provision 

25 of this section shall be construed as preventing or 
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1 prohibiting a State that is not the State of domicile 

2 of a reinsurer from receiving a copy of any financial 

3 statement or information provided to the domiciliary 

4 State of the reinsurer. 

5 (3) CREDIT FOR REINSURANCE.—If a reinsurer 

6 qualifies for credit for reinsurance in the State of 

7 domicile of the reinsurer, each State other than the 

8 State of domicile shall accept such credit for reinsur9 ance. 

10 SEC. 203. DEFINITIONS. 

11 For purposes of this title, the following definitions 

12 shall apply: 

13 (1) 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 (2) REINSURANCE.—The term ‘‘reinsurance’’ 

19 means the sharing of underwriting risk by insurers 

20 and reinsurers, under which part of all of an insur21 er’s risk is assumed by the reinsurer in return for 

22 consideration. 
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1 (3) REINSURER.—The term ‘‘reinsurer’’ means 

2 an insurer engaged in the business of assuming in3 surers’ risk. 

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