IIB 

110TH CONGRESS 

1ST SESSION H. R. 1065 

IN THE SENATE OF THE UNITED STATES 

JUNE 26, 2007 

Received; read twice and referred to the Committee on Banking, Housing, and 

Urban Affairs 

AN ACT 

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, 


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1 SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. 

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

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

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

5 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. 

6 SEC. 2. EFFECTIVE DATE. 

7 Except as otherwise specifically provided in this Act, 

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

9 month period beginning on the date of the enactment of 

10 this Act. 


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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.—No 

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

7 any premium tax payment for nonadmitted insurance. 

8 (b) ALLOCATION OF NONADMITTED PREMIUM

9 TAXES.— 

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

11 compact or otherwise establish procedures to allocate 

12 among the States the premium taxes paid to an in13 sured’s home State described in subsection (a). 

14 (2) EFFECTIVE DATE.—Except as expressly 

15 otherwise provided in such compact or other proce16 dures, any such compact or other procedures— 

17 (A) if adopted on or before the expiration 

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

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

20 premium taxes that, on or after such date of 

21 enactment, are required to be paid to any State 

22 that is subject to such compact or procedures; 

23 and 

24 (B) if adopted after the expiration of such 

25 330-day period, shall apply to any premium 


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

2 calendar year that begins after the expiration of 

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

4 any State that is subject to such compact or 

5 procedures. 

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

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

8 may submit a report to the Committee on Financial 

9 Services and Committee on the Judiciary of the 

10 House of Representatives and the Committee on 

11 Banking, Housing, and Urban Affairs of the Senate 

12 identifying and describing any compact or other pro13 cedures for allocation among the States of premium 

14 taxes that have been adopted during such period by 

15 any States. 

16 (4) NATIONWIDE SYSTEM.—The Congress in17 tends that each State adopt a nationwide or uniform 

18 procedure, such as an interstate compact, that pro19 vides for the reporting, payment, collection, and allo20 cation of premium taxes for nonadmitted insurance 

21 consistent with this section. 

22 (c) ALLOCATION BASED ON TAX ALLOCATION RE23 PORT.—To facilitate the payment of premium taxes 

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

25 surplus lines brokers and insureds who have independently 


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1 procured insurance to annually file tax allocation reports 

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

3 nonadmitted insurance policy premium or premiums at4 tributable to properties, risks or exposures located in each 

5 State. The filing of a nonadmitted insurance tax allocation 

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

7 authorized by the insured to act as its agent. 

8 SEC. 102. REGULATION OF NONADMITTED INSURANCE BY 

9 INSURED’S HOME STATE. 

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

11 provided in this section, the placement of nonadmitted in12 surance shall be subject to the statutory and regulatory 

13 requirements solely of the insured’s home State. 

14 (b) BROKER LICENSING.—No State other than an in15 sured’s home State may require a surplus lines broker to 

16 be licensed in order to sell, solicit, or negotiate non17 admitted insurance with respect to such insured. 

18 (c) ENFORCEMENT PROVISION.—Any law, regula19 tion, provision, or action of any State that applies or pur20 ports to apply to nonadmitted insurance sold to, solicited 

21 by, or negotiated with an insured whose home State is an22 other State shall be preempted with respect to such appli23 cation. 

24 (d) WORKERS’ COMPENSATION EXCEPTION.—This 

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


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

2 compensation insurance or excess insurance for self-fund3 ed workers’ compensation plans with a nonadmitted in4 surer. 

5 SEC. 103. PARTICIPATION IN NATIONAL PRODUCER DATA6 BASE. 

7 After the expiration of the 2-year period beginning 

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

9 not collect any fees relating to licensing of an individual 

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

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

12 provide for participation by the State in the national in13 surance producer database of the NAIC, or any other 

14 equivalent uniform national database, for the licensure of 

15 surplus lines brokers and the renewal of such licenses. 

16 SEC. 104. UNIFORM STANDARDS FOR SURPLUS LINES ELI17 GIBILITY. 

18 A State may not— 

19 (1) impose eligibility requirements on, or other20 wise establish eligibility criteria for, nonadmitted in21 surers domiciled in a United States jurisdiction, ex22 cept in conformance with section 5A(2) and 

23 5C(2)(a) of the Non-Admitted Insurance Model Act; 

24 and 


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1 (2) prohibit a surplus lines broker from placing 

2 nonadmitted insurance with, or procuring non3 admitted insurance from, a nonadmitted insurer 

4 domiciled outside the United States that is listed on 

5 the Quarterly Listing of Alien Insurers maintained 

6 by the International Insurers Department of the 

7 NAIC. 

8 SEC. 105. STREAMLINED APPLICATION FOR COMMERCIAL 

9 PURCHASERS. 

10 A surplus lines broker seeking to procure or place 

11 nonadmitted insurance in a State for an exempt commer12 cial purchaser shall not be required to satisfy any State 

13 requirement to make a due diligence search to determine 

14 whether the full amount or type of insurance sought by 

15 such exempt commercial purchaser can be obtained from 

16 admitted insurers if— 

17 (1) the broker procuring or placing the surplus 

18 lines insurance has disclosed to the exempt commer19 cial purchaser that such insurance may or may not 

20 be available from the admitted market that may pro21 vide greater protection with more regulatory over22 sight; and 

23 (2) the exempt commercial purchaser has sub24 sequently requested in writing the broker to procure 

25 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) EXEMPT COMMERCIAL PURCHASER.—The 

2 term ‘‘exempt commercial purchaser’’ means any 

3 person purchasing commercial insurance that, at the 

4 time of placement, meets the following requirements: 

5 (A) The person employs or retains a quali6 fied risk manager to negotiate insurance cov7 erage. 

8 (B) The person has paid aggregate nation9 wide commercial property and casualty insur10 ance premiums in excess of $100,000 in the im11 mediately preceding 12 months. 

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

13 following criteria: 

14 (I) The person possesses a net worth 

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

16 is adjusted pursuant to clause (ii). 

17 (II) The person generates annual rev18 enues in excess of $50,000,000, as such 

19 amount is adjusted pursuant to clause (ii). 

20 (III) The person employs more than 

21 500 full time or full time equivalent em22 ployees per individual insured or is a mem23 ber of affiliated group employing more 

24 than 1,000 employees in the aggregate. 


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1 (IV) The person is a not-for-profit or2 ganization or public entity generating an3 nual budgeted expenditures of at least 

4 $30,000,000, as such amount is adjusted 

5 pursuant to clause (ii). 

6 (V) The person is a municipality with 

7 a population in excess of 50,000 persons. 

8 (ii) Effective on the fifth January 1 occur9 ring after the date of the enactment of this Act 

10 and each fifth January 1 occurring thereafter, 

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

12 clause (i) shall be adjusted to reflect the per13 centage change for such five-year period in the 

14 Consumer Price Index for All Urban Con15 sumers published by the Bureau of Labor Sta16 tistics of the Department of Labor. 

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

18 means the State in which an insured maintains its 

19 principal place of business or, in the case of an indi20 vidual, the individual’s principal residence. 

21 (4) INDEPENDENTLY PROCURED INSURANCE.— 

22 The term ‘‘independently procured insurance’’ 

23 means insurance procured directly by an insured 

24 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— 

6 (i)(I) has a bachelor’s degree or high7 er from an accredited college or university 

8 in risk management, business administra9 tion, finance, economics, or any other field 

10 determined by a State insurance commis11 sioner or other State regulatory official or 

12 entity to demonstrate minimum com13 petence in risk management; and 

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

15 in risk financing, claims administration, 

16 loss prevention, risk and insurance anal17 ysis, or purchasing commercial lines of in18 surance; or 

19 (bb) has one of the following designa20 tions: 

21 (AA) a designation as a Char22 tered Property and Casualty Under23 writer (in this subparagraph referred 

24 to as ‘‘CPCU’’) issued by the AmerVerDate Aug 31 2005 03:54 Jun 27, 2007 Jkt 059200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\H1065.RFS H1065

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1 ican Institute for CPCU/Insurance In2 stitute of America; 

3 (BB) a designation as an Asso4 ciate in Risk Management (ARM) 

5 issued by the American Institute for 

6 CPCU/Insurance Institute of America; 

7 (CC) a designation as Certified 

8 Risk Manager (CRM) issued by the 

9 National Alliance for Insurance Edu10 cation & Research; 

11 (DD) a designation as a RIMS 

12 Fellow (RF) issued by the Global Risk 

13 Management Institute; or 

14 (EE) 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 (ii)(I) has at least seven years of ex21 perience in risk financing, claims adminis22 tration, loss prevention, risk and insurance 

23 coverage analysis, or purchasing commer24 cial lines of insurance; and 


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1 (II) has any one of the designations 

2 specified in subitems (AA) through (EE) 

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

4 (iii) has at least 10 years of experi5 ence in risk financing, claims administra6 tion, loss prevention, risk and insurance 

7 coverage analysis, or purchasing commer8 cial lines of insurance; or 

9 (iv) has a graduate degree from an 

10 accredited college or university in risk 

11 management, business administration, fi12 nance, economics, or any other field deter13 mined by a State insurance commissioner 

14 or other State regulatory official or entity 

15 to demonstrate minimum competence in 

16 risk management. 

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

18 means, with respect to surplus lines or independently 

19 procured insurance coverage, any tax, fee, assess20 ment, or other charge imposed by a State on an in21 sured based on any payment made as consideration 

22 for an insurance contract for such insurance, includ23 ing premium deposits, assessments, registration fees, 

24 and any other compensation given in consideration 

25 for a contract of insurance. 


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1 (11) SURPLUS LINES BROKER.—The term ‘‘sur2 plus lines broker’’ means an individual, firm, or cor3 poration which is licensed in a State to sell, solicit, 

4 or negotiate insurance on properties, risks, or expo5 sures located or to be performed in a State with 

6 nonadmitted insurers. 

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

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

9 the Commonwealth of Puerto Rico, Guam, the 

10 Northern Mariana Islands, the Virgin Islands, and 

11 American Samoa. 

12 TITLE II—REINSURANCE 

13 SEC. 201. REGULATION OF CREDIT FOR REINSURANCE AND 

14 REINSURANCE AGREEMENTS. 

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

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

17 or has financial solvency requirements substantially simi18 lar to the requirements necessary for NAIC accreditation, 

19 and recognizes credit for reinsurance for the insurer’s 

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

21 reinsurance. 

22 (b) ADDITIONAL PREEMPTION OF

23 EXTRATERRITORIAL APPLICATION OF STATE LAW.—In 

24 addition to the application of subsection (a), all laws, regu25 lations, provisions, or other actions of a State that is not 


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1 the domiciliary State of the ceding insurer, except those 

2 with respect to taxes and assessments on insurance com3 panies or insurance income, are preempted to the extent 

4 that they— 

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

6 insurer or the assuming insurer to resolve disputes 

7 pursuant to contractual arbitration to the extent 

8 such contractual provision is not inconsistent with 

9 the provisions of title 9, United States Code; 

10 (2) require that a certain State’s law shall gov11 ern the reinsurance contract, disputes arising from 

12 the reinsurance contract, or requirements of the re13 insurance contract; 

14 (3) attempt to enforce a reinsurance contract 

15 on terms different than those set forth in the rein16 surance contract, to the extent that the terms are 

17 not inconsistent with this title; or 

18 (4) otherwise apply the laws of the State to re19 insurance agreements of ceding insurers not domi20 ciled in that State. 

21 SEC. 202. REGULATION OF REINSURER SOLVENCY. 

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

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

24 has financial solvency requirements substantially similar 

25 to the requirements necessary for NAIC accreditation, 


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1 such State shall be solely responsible for regulating the 

2 financial solvency of the reinsurer. 

3 (b) NONDOMICILIARY STATES.— 

4 (1) LIMITATION ON FINANCIAL INFORMATION

5 REQUIREMENTS.—If the State of domicile of a rein6 surer is an NAIC-accredited State or has financial 

7 solvency requirements substantially similar to the re8 quirements necessary for NAIC accreditation, no 

9 other State may require the reinsurer to provide any 

10 additional financial information other than the infor11 mation the reinsurer is required to file with its 

12 domiciliary State. 

13 (2) RECEIPT OF INFORMATION.—No provision 

14 of this section shall be construed as preventing or 

15 prohibiting a State that is not the State of domicile 

16 of a reinsurer from receiving a copy of any financial 

17 statement filed with its domiciliary State. 

18 SEC. 203. DEFINITIONS. 

19 For purposes of this title, the following definitions 

20 shall apply: 

21 (1) CEDING INSURER.—The term ‘‘ceding in22 surer’’ means an insurer that purchases reinsurance. 

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

24 domicile’’ and ‘‘domiciliary State’’ means, with re25 spect to an insurer or reinsurer, the State in which 


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1 the insurer or reinsurer is incorporated or entered 

2 through, and licensed. 

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

4 means the assumption by an insurer of all or part 

5 of a risk undertaken originally by another insurer. 

6 (4) REINSURER.— 

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

8 means an insurer to the extent that the in9 surer— 

10 (i) is principally engaged in the busi11 ness of reinsurance; 

12 (ii) does not conduct significant 

13 amounts of direct insurance as a percent14 age of its net premiums; and 

15 (iii) is not engaged in an ongoing 

16 basis in the business of soliciting direct in17 surance. 

18 (B) DETERMINATION.—A determination of 

19 whether an insurer is a reinsurer shall be made 

20 under the laws of the State of domicile in ac21 cordance with this paragraph. 

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

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

24 the Commonwealth of Puerto Rico, Guam, the 


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1 Northern Mariana Islands, the Virgin Islands, and 

2 American Samoa. 

3 TITLE III—RULE OF 

4 CONSTRUCTION 

5 SEC. 301. RULE OF CONSTRUCTION. 

6 Nothing in this Act or amendments to this Act shall 

7 be construed to modify, impair, or supersede the applica8 tion of the antitrust laws. Any implied or actual conflict 

9 between this Act and any amendments to this Act and 

10 the antitrust laws shall be resolved in favor of the oper11 ation of the antitrust laws. 

Passed the House of Representatives June 25, 2007. 

Attest: LORRAINE C. MILLER, 

Clerk. 


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