```

[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5637 Introduced in House (IH)]

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.

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

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Nonadmitted and 
Reinsurance Reform Act of 2006''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

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.

SEC. 2. DEFINITIONS.

    For purposes of this Act, the following definitions shall apply:
            (1) Insurer.--The term ``insurer''--
                    (A) means an entity chartered and licensed as an 
                insurance company and authorized to engage in the 
                business of insurance under the laws of at least 1 
                State; and
                    (B) includes any entity that, under the laws of a 
                State, is considered to be an insurer specifically for 
                purposes of this title.
            (2) State.--The term ``State'' includes any State, the 
        District of Columbia, the Commonwealth of Puerto Rico, Guam, 
        the Northern Mariana Islands, the Virgin Islands, and American 
        Samoa.

                     TITLE I--NONADMITTED INSURANCE

SEC. 101. REPORTING, PAYMENT, AND ALLOCATION OF PREMIUM TAXES.

    (a) Home State's Exclusive Authority.--
            (1) In general.--No State other than the home State of an 
        insured may require any premium tax payment for nonadmitted 
        insurance.
            (2) Amount of payment.--The amount of any premium tax 
        payment for nonadmitted insurance permitted under paragraph (1) 
        shall be determined on the basis of any compact or procedures 
        entered into under subsection (b).
    (b) Allocation of Nonadmitted Premium Taxes.--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 described in 
subsection (a).
    (c) Allocation Based on Tax Allocation Report.--To facilitate the 
payment of premium taxes among the States, an insured's home State may 
require surplus lines brokers and insureds who have independently 
procured insurance to annually file tax allocation reports with the 
insured's home State detailing the portion of the nonadmitted insurance 
policy premium or premiums attributable to properties, risks or 
exposures located in each State. The filing of a nonadmitted insurance 
tax allocation report and the payment of tax may be made by a person 
authorized by the insured to act as its agent.

SEC. 102. REGULATION OF NONADMITTED INSURANCE BY INSURED'S HOME STATE.

    (a) Home State Authority.--Except as otherwise provided in this 
title, nonadmitted insurance is subject to the applicable statutory and 
regulatory requirements solely of the insured's home State.
    (b) Broker Licensing.--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 nonadmitted insurance with respect to such 
insured.
    (c) Enforcement Provision.--Any law, regulation, provision, or 
action of any State that applies or purports to apply to nonadmitted 
insurance sold to, solicited by, or negotiated with an insured whose 
home State is another State shall be preempted with respect to such 
application.

SEC. 103. PARTICIPATION IN NATIONAL PRODUCER DATABASE.

    After the expiration of the 2-year period beginning on the date of 
the enactment of this Act, a State may not collect any fees relating to 
licensing of an individual or entity as nonresident insurance broker 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 brokers 
and the renewal of such licenses.

SEC. 104. UNIFORM STANDARDS FOR SURPLUS LINES ELIGIBILITY.

    After the expiration of the 2-year period beginning on the date of 
the enactment of this Act, a State may not--
            (1) impose eligibility requirements on, or otherwise 
        establish eligibility criteria for, nonadmitted insurers 
        domiciled in a United States jurisdiction, except in 
        conformance with section 5C(2)(a) of the Non-Admitted Insurance 
        Model Act; and
            (2) prohibit a surplus lines broker from placing 
        nonadmitted insurance with, or procuring nonadmitted insurance 
        from, a nonadmitted insurer domiciled outside the United States 
        that is listed on the Quarterly Listing of Alien Insurers 
        maintained by the International Insurance Division of the NAIC.

SEC. 105. STREAMLINED APPLICATION FOR COMMERCIAL PURCHASERS.

    A surplus lines broker seeking to procure or place nonadmitted 
insurance in a State for an exempt commercial purchaser shall not be 
required to satisfy any State requirement to make a due diligence 
search to determine whether the full amount or type of insurance sought 
by such exempt commercial purchaser can be obtained from admitted 
insurers if--
            (1) the broker procuring or placing the surplus lines 
        insurance has disclosed to the exempt commercial purchaser that 
        such insurance may or may not be available from the admitted 
        market that may provide greater protection with more regulatory 
        oversight; and
            (2) the exempt commercial purchaser has subsequently 
        requested in writing the broker to procure or place such 
        insurance from a nonadmitted insurer.

SEC. 106. DEFINITIONS.

    For purposes of this title, the following definitions shall apply:
            (1) Exempt commercial purchaser.--The term ``exempt 
        commercial purchaser'' means any person purchasing commercial 
        insurance that meets the following requirements:
                    (A) The person employs or retains a qualified risk 
                manager to negotiate insurance coverage.
                    (B) The person meets at least 2 of the following 
                criteria:
                            (i) The person possesses a net worth in 
                        excess of $20,000,000.
                            (ii) The person generates annual revenues 
                        in excess of $50,000,000.
                            (iii) The person employs more than 500 full 
                        time or full time equivalent employees per 
                        individual insured or is a member of affiliated 
                        group employing more than 1,000 employees in 
                        the aggregate.
                            (iv) The person pays annual aggregate 
                        nationwide insurance premiums in excess of 
                        $100,000 for covered lines of insurance.
                            (v) The person is a not-for-profit 
                        organization or public entity generating annual 
                        budgeted expenditures of at least $30,000,000.
                            (vi) The person is a municipality with a 
                        population in excess of 50,000 persons.
            (2) Home state.--The term ``home State'' means the State in 
        which an insured maintains its principal place of business or 
        principal residence.
            (3) Independently procured insurance.--The term 
        ``independently procured insurance'' means--
                    (A) insurance procured directly by an insured from 
                a nonadmitted insurer on properties, risks, or 
                exposures located or to be performed in whole or in 
                part in the home State of the insured; or
                    (B) a multi-State insurance policy with a 
                nonadmitted insurer, that covers properties, risks, or 
                exposures only partially located or to be performed in 
                a State, placed by a surplus lines broker in another 
                State.
            (4) NAIC.--The term ``NAIC'' means the National Association 
        of Insurance Commissioners or any other association that 
        regularly establishes insurance model acts or insurance 
        standards.
            (5) Nonadmitted insurance.--The term ``nonadmitted 
        insurance'' means any property and casualty insurance permitted 
        to be placed directly or through a surplus lines broker with a 
        nonadmitted insurer eligible to accept such insurance.
            (6) Non-admitted insurance model act.--The term ``Non-
        Admitted Insurance Model Act'' means the provisions of the Non-
        Admitted Insurance Model Act, as adopted by the NAIC on August 
        3, 1994, and amended on September 30, 1996, December 6, 1997, 
        October 2, 1999, and June 8, 2002, except that such term shall 
        not include any--
                    (A) changes to the Non-Admitted Insurance Model Act 
                subsequent to the adoption of this Act;
                    (B) State-specific deviations or alternative 
                standards; or
                    (C) best practices.
            (7) Nonadmitted insurer.--The term ``nonadmitted insurer'' 
        means, with respect to a State, an insurer not licensed to 
        engage in the business of insurance in such State.
            (8) Premium tax.--The term ``premium tax'' means, with 
        respect to surplus lines or independently procured insurance 
        coverage, any tax, fee, assessment, or other charge imposed by 
        a State on an insured based on any payment made as 
        consideration for an insurance contract for such insurance, 
        including premium deposits, assessments, registration fees, and 
        any other compensation given in consideration for a contract of 
        insurance.
            (9) Surplus lines broker.--The term ``surplus lines 
        broker'' means an individual, firm, or corporation which sells, 
        solicits, or negotiates insurance on properties, risks, or 
        exposures located or to be performed in a State with 
        nonadmitted insurers.

                    TITLE II--CREDIT FOR REINSURANCE

SEC. 201. PROHIBITING EXTRATERRITORIAL APPLICATION OF STATE LAWS.

    (a) No Limit on Domiciliary State Regulation.--This section may not 
be construed to limit the State of domicile of a ceding insurer from 
applying such State's laws and regulation to the ceding insurer.
    (b) Preemption of State Law.--Except as provided in subsection (a) 
with respect to the State of domicile of a ceding insurer, all laws, 
regulations, provisions, or other actions of a State are preempted to 
the extent that they--
            (1) restrict or eliminate the rights of a ceding insurer or 
        reinsurer to resolve disputes pursuant to contractual 
        arbitration to the extent such contractual provision is not 
        inconsistent with the provisions of title 9, United States 
        Code;
            (2) require that a certain State's law shall govern the 
        reinsurance contract, disputes arising from the reinsurance 
        contract, or requirements of the reinsurance contract;
            (3) attempt to enforce a reinsurance contract on terms 
        different than those set forth in the reinsurance contract, to 
        the extent that the terms are not inconsistent with this title; 
        or
            (4) apply the laws of the State to ceding insurers not 
        domiciled in that State.

SEC. 202. SOLVENCY REGULATION.

    (a) Domiciliary State Regulation.--The State of domicile of a 
reinsurer shall be solely responsible for regulating the financial 
solvency of the reinsurer if such State is an NAIC accredited State.
    (b) Nondomiciliary States.--
            (1) Limitation on financial information requirements.--If 
        the State of domicile of a reinsurer is an NAIC accredited 
        State, a State that is not the State of domicile of such 
        reinsurer may not require the reinsurer to provide any 
        additional financial information other than the information 
        required to be filed with or by the domiciliary State.
            (2) Receipt of information.--No provision of this section 
        shall be construed as preventing or prohibiting a State that is 
        not the State of domicile of a reinsurer from receiving a copy 
        of any financial statement or information provided to the 
        domiciliary State of the reinsurer.
            (3) Credit for reinsurance.--If a reinsurer qualifies for 
        credit for reinsurance in the State of domicile of the 
        reinsurer, each State other than the State of domicile shall 
        accept such credit for reinsurance.

SEC. 203. DEFINITIONS.

    For purposes of this title, the following definitions shall apply:
            (1) Domiciliary state.--The terms ``State of domicile'' and 
        ``domiciliary State'' means, with respect to an insurer or 
        reinsurer, the State in which the insurer or reinsurer is 
        incorporated or entered through, and licensed.
            (2) Reinsurance.--The term ``reinsurance'' means the 
        sharing of underwriting risk by insurers and reinsurers, under 
        which part of all of an insurer's risk is assumed by the 
        reinsurer in return for consideration.
            (3) Reinsurer.--The term ``reinsurer'' means an insurer 
        engaged in the business of assuming insurers' risk.
                                 <all>
```