IB 
Union Calendar No. 404 
109TH CONGRESS 
2D SESSION 
H. R. 5637 
[Report No. 109–649, Part I] 
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 Penn-
sylvania, Mr. CROWLEY, and Mrs. BIGGERT) introduced the following bill; 
which was referred to the Committee on Financial Services, and in addi-
tion to the Committee on the Judiciary, for a period to be subsequently 
determined by the Speaker, in each case for consideration of such provi-
sions as fall within the jurisdiction of the committee concerned 
SEPTEMBER 12, 2006 
Reported from the Committee on Financial Services with an amendment 
[Strike out all after the enacting clause and insert the part printed in italic] 
SEPTEMBER 12, 2006 
Referral to the Committee on the Judiciary extended for a period ending not 
later than September 22, 2006 
SEPTEMBER 22, 2006 
Additional sponsors: Mr. GILLMOR, Mr. MCHENRY, Mr. CAMPBELL of 
California, and Mr. MANZULLO 
SEPTEMBER 22, 2006 
The Committee on the Judiciary discharged; committed to the Committee of 
the Whole House on the State of the Union and ordered to be printed 
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[For text of introduced bill, see copy of bill as introduced on June 19, 2006] 
A BILL 
To streamline the regulation of nonadmitted insurance and 
reinsurance, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives 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. 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. 
SEC. 2. EFFECTIVE DATE. 
Except as otherwise specifically provided in this Act, 
this Act shall take effect upon the expiration of the 12- 
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month period beginning on the date of the enactment of this 
Act. 
TITLE I—NONADMITTED 
INSURANCE 
SEC. 101. REPORTING, PAYMENT, AND ALLOCATION OF PRE-
MIUM TAXES. 
(a) HOME
STATE’S
EXCLUSIVE
AUTHORITY.—No 
State other than the home State of an insured may require 
any premium tax payment for nonadmitted insurance. 
(b) 
ALLOCATION
OF
NONADMITTED
PREMIUM 
TAXES.— 
(1) IN GENERAL.—The States may enter into a 
compact or otherwise establish procedures to allocate 
among the States the premium taxes paid to an in-
sured’s home State described in subsection (a). 
(2) EFFECTIVE DATE.—Except as expressly oth-
erwise provided in such compact or other procedures, 
any such compact or other procedures— 
(A) if adopted on or before the expiration of 
the 330-day period that begins on the date of the 
enactment of this Act, shall apply to any pre-
mium taxes that, on or after such date of enact-
ment, are required to be paid to any State that 
is subject to such compact or procedures; and 
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(B) if adopted after the expiration of such 
330-day period, shall apply to any premium 
taxes that, on or after January 1 of the first cal-
endar year that begins after the expiration of 
such 330-day period, are required to be paid to 
any State that is subject to such compact or pro-
cedures. 
(3) REPORT.—Upon the expiration of the 330- 
day period referred to in paragraph (2), the NAIC 
may submit a report to the Committee on Financial 
Services of the House of Representatives and the Com-
mittee on Banking, Housing, and Urban Affairs of 
the Senate identifying and describing any compact or 
other procedures for allocation among the States of 
premium taxes that have been adopted during such 
period by any States. 
(4) NATIONWIDE SYSTEM.—The Congress intends 
that each State adopt a nationwide or uniform proce-
dure, such as an interstate compact, that provides for 
the reporting, payment, collection, and allocation of 
premium taxes for nonadmitted insurance consistent 
with this section. 
(c) ALLOCATION BASED
ON TAX ALLOCATION RE-
PORT.—To facilitate the payment of premium taxes among 
the States, an insured’s home State may require surplus 
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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 non-
admitted insurance policy premium or premiums attrib-
utable 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 author-
ized 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 section, the placement of nonadmitted in-
surance shall be subject to the statutory and regulatory re-
quirements solely of the insured’s home State. 
(b) BROKER LICENSING.—No State other than an in-
sured’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. 
(d) WORKERS’ COMPENSATION EXCEPTION.—This sec-
tion may not be construed to preempt any State law, rule, 
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or regulation that restricts the placement of workers’ com-
pensation insurance or excess insurance for self-funded 
workers’ compensation plans with a nonadmitted insurer. 
SEC. 103. PARTICIPATION IN NATIONAL PRODUCER DATA-
BASE. 
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 
a surplus lines broker in the State unless the State has in 
effect at such time laws or regulations that provide for par-
ticipation by the State in the national insurance producer 
database of the NAIC, or any other equivalent uniform na-
tional database, for the licensure of surplus lines brokers 
and the renewal of such licenses. 
SEC. 104. UNIFORM STANDARDS FOR SURPLUS LINES ELIGI-
BILITY. 
A State may not— 
(1) impose eligibility requirements on, or other-
wise establish eligibility criteria for, nonadmitted in-
surers domiciled in a United States jurisdiction, ex-
cept in conformance with section 5A(2) and 5C(2)(a) 
of the Non-Admitted Insurance Model Act; and 
(2) prohibit a surplus lines broker from placing 
nonadmitted insurance with, or procuring non-
admitted insurance from, a nonadmitted insurer 
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domiciled outside the United States that is listed on 
the Quarterly Listing of Alien Insurers maintained 
by the International Insurers Department of the 
NAIC. 
SEC. 105. STREAMLINED APPLICATION FOR COMMERCIAL 
PURCHASERS. 
A surplus lines broker seeking to procure or place non-
admitted insurance in a State for an exempt commercial 
purchaser shall not be required to satisfy any State require-
ment 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 insur-
ers if— 
(1) the broker procuring or placing the surplus 
lines insurance has disclosed to the exempt commer-
cial purchaser that such insurance may or may not 
be available from the admitted market that may pro-
vide greater protection with more regulatory over-
sight; and 
(2) the exempt commercial purchaser has subse-
quently requested in writing the broker to procure or 
place such insurance from a nonadmitted insurer. 
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SEC. 106. GAO STUDY OF NONADMITTED INSURANCE MAR-
KET. 
(a) IN GENERAL.—The Comptroller General of the 
United States shall conduct a study of the nonadmitted in-
surance market to determine the effect of the enactment of 
this title on the size and market share of the nonadmitted 
insurance market for providing coverage typically provided 
by the admitted insurance market. 
(b) CONTENTS.—The study shall determine and ana-
lyze— 
(1) the change in the size and market share of 
the nonadmitted insurance market and in the number 
of insurance companies and insurance holding com-
panies providing such business in the 18-month pe-
riod that begins upon the effective date of this Act; 
(2) the extent to which insurance coverage typi-
cally provided by the admitted insurance market has 
shifted to the nonadmitted insurance market; 
(3) the consequences of any change in the size 
and market share of the nonadmitted insurance mar-
ket, including differences in the price and availability 
of coverage available in both the admitted and non-
admitted insurance markets; 
(4) the extent to which insurance companies and 
insurance holding companies that provide both ad-
mitted and nonadmitted insurance have experienced 
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shifts in the volume of business between admitted and 
nonadmitted insurance; and 
(5) the extent to which there has been a change 
in the number of individuals who have nonadmitted 
insurance policies, the type of coverage provided 
under such policies, and whether such coverage is 
available in the admitted insurance market. 
(c) CONSULTATION WITH NAIC.—In conducting the 
study under this section, the Comptroller General shall con-
sult with the NAIC. 
(d) REPORT.—The Comptroller General shall complete 
the study under this section and submit a report to the 
Committee on Financial Services of the House of Represent-
atives and the Committee on Banking, Housing, and Urban 
Affairs of the Senate regarding the findings of the study 
not later than 30 months after the effective date of this Act. 
SEC. 107. DEFINITIONS. 
For purposes of this title, the following definitions 
shall apply: 
(1) ADMITTED INSURER.—The term ‘‘admitted 
insurer’’ means, with respect to a State, an insurer 
licensed to engage in the business of insurance in such 
State. 
(2) EXEMPT
COMMERCIAL
PURCHASER.—The 
term ‘‘exempt commercial purchaser’’ means any per-
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son purchasing commercial insurance that meets the 
following requirements: 
(A) The person employs or retains a quali-
fied risk manager to negotiate insurance cov-
erage. 
(B) The person has paid aggregate nation-
wide commercial property and casualty insur-
ance premiums in excess of $100,000 in the im-
mediately preceding 12 months. 
(C) The person meets at least one of the fol-
lowing criteria: 
(i) The person possesses a net worth in 
excess of $20,000,000. 
(ii) The person generates annual reve-
nues in excess of $50,000,000. 
(iii) The person employs more than 
500 full time or full time equivalent em-
ployees per individual insured or is a mem-
ber of affiliated group employing more than 
1,000 employees in the aggregate. 
(iv) The person is a not-for-profit or-
ganization or public entity generating an-
nual budgeted expenditures of at least 
$30,000,000. 
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(v) The person is a municipality with 
a population in excess of 50,000 persons. 
(3) HOME
STATE.—The term ‘‘home State’’ 
means the State in which an insured maintains its 
principal place of business or, in the case of an indi-
vidual, the individual’s principal residence. 
(4) INDEPENDENTLY
PROCURED
INSURANCE.— 
The term ‘‘independently procured insurance’’ means 
insurance procured directly by an insured from a 
nonadmitted insurer. 
(5) NAIC.—The term ‘‘NAIC’’ means the Na-
tional Association of Insurance Commissioners or any 
successor entity. 
(6) NONADMITTED INSURANCE.—The term ‘‘non-
admitted insurance’’ means any property and cas-
ualty insurance permitted to be placed directly or 
through a surplus lines broker with a nonadmitted in-
surer eligible to accept such insurance. 
(7) 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. 
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(8) NONADMITTED
INSURER.—The term ‘‘non-
admitted insurer’’ means, with respect to a State, an 
insurer not licensed to engage in the business of in-
surance in such State. 
(9) QUALIFIED
RISK
MANAGER.—The term 
‘‘qualified risk manager’’ means, with respect to a 
policyholder of commercial insurance, a person who 
meets all of the following requirements: 
(A) The person is an employee of, or third 
party consultant retained by, the commercial 
policyholder. 
(B) The person provides skilled services in 
loss prevention, loss reduction, or risk and insur-
ance coverage analysis, and purchase of insur-
ance. 
(C) The person possesses at least two of the 
following credentials: 
(i) An advanced degree in risk man-
agement issued by an accredited college or 
university. 
(ii) At least 5 years of experience in 
one or more of the following areas of com-
mercial property insurance or commercial 
casualty insurance: 
(I) Risk financing. 
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(II) Claims administration. 
(III) Loss prevention. 
(IV) Risk and insurance coverage 
analysis. 
(iii) At least one of the following des-
ignations: 
(I) A designation as a Chartered 
Property and Casualty Underwriter 
(in this clause referred to as ‘‘CPCU’’) 
issued by the American Institute for 
CPCU/Insurance Institute of America. 
(II) A designation as an Associate 
in Risk Management (ARM) issued by 
American Institute for CPCU/Insur-
ance Institute of America. 
(III) A designation as a Certified 
Risk Manager (CRM) issued by the 
National Alliance for Insurance Edu-
cation & Research. 
(IV) A designation as a RIMS 
Fellow (RF) issued by the Global Risk 
Management Institute. 
(V) Any other designation, certifi-
cation, or license determined by a 
State insurance commissioner or other 
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State insurance regulatory official or 
entity to demonstrate minimum com-
petency in risk management. 
(10) 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 pre-
mium deposits, assessments, registration fees, and any 
other compensation given in consideration for a con-
tract of insurance. 
(11) SURPLUS LINES BROKER.—The term ‘‘sur-
plus lines broker’’ means an individual, firm, or cor-
poration which is licensed in a State to sell, solicit, 
or negotiate insurance on properties, risks, or expo-
sures located or to be performed in a State with non-
admitted insurers. 
(12) STATE.—The term ‘‘State’’ includes any 
State of the United States, the District of Columbia, 
the Commonwealth of Puerto Rico, Guam, the North-
ern Mariana Islands, the Virgin Islands, and Amer-
ican Samoa. 
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TITLE II—REINSURANCE 
SEC. 201. REGULATION OF CREDIT FOR REINSURANCE AND 
REINSURANCE AGREEMENTS. 
(a) CREDIT FOR REINSURANCE.—If the State of domi-
cile of a ceding insurer is an NAIC-accredited State, or has 
financial solvency requirements substantially similar to the 
requirements necessary for NAIC accreditation, and recog-
nizes credit for reinsurance for the insurer’s ceded risk, then 
no other State may deny such credit for reinsurance. 
(b) ADDITIONAL PREEMPTION OF EXTRATERRITORIAL 
APPLICATION OF STATE LAW.—In addition to the applica-
tion of subsection (a), all laws, regulations, provisions, or 
other actions of a State other than those of the State of 
domicile of the ceding insurer are preempted to the extent 
that they— 
(1) restrict or eliminate the rights of the ceding 
insurer or the assuming insurer to resolve disputes 
pursuant to contractual arbitration to the extent such 
contractual provision is not inconsistent with the pro-
visions of title 9, United States Code; 
(2) require that a certain State’s law shall gov-
ern the reinsurance contract, disputes arising from 
the reinsurance contract, or requirements of the rein-
surance contract; 
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(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 incon-
sistent with this title; or 
(4) otherwise apply the laws of the State to rein-
surance agreements of ceding insurers not domiciled 
in that State. 
SEC. 202. REGULATION OF REINSURER SOLVENCY. 
(a) DOMICILIARY STATE REGULATION.—If the State 
of domicile of a reinsurer is an NAIC-accredited State or 
has financial solvency requirements substantially similar 
to the requirements necessary for NAIC accreditation, such 
State shall be solely responsible for regulating the financial 
solvency of the reinsurer. 
(b) NONDOMICILIARY STATES.— 
(1) LIMITATION ON FINANCIAL INFORMATION RE-
QUIREMENTS.—If the State of domicile of a reinsurer 
is an NAIC-accredited State or has financial solvency 
requirements substantially similar to the require-
ments necessary for NAIC accreditation, no other 
State may require the reinsurer to provide any addi-
tional financial information other than the informa-
tion the reinsurer is required to file with its domi-
ciliary State. 
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(2) RECEIPT OF INFORMATION.—No provision of 
this section shall be construed as preventing or pro-
hibiting a State that is not the State of domicile of 
a reinsurer from receiving a copy of any financial 
statement filed with its domiciliary State. 
SEC. 203. DEFINITIONS. 
For purposes of this title, the following definitions 
shall apply: 
(1) CEDING
INSURER.—The term ‘‘ceding in-
surer’’ means an insurer that purchases reinsurance. 
(2) DOMICILIARY STATE.—The terms ‘‘State of 
domicile’’ and ‘‘domiciliary State’’ means, with re-
spect to an insurer or reinsurer, the State in which 
the insurer or reinsurer is incorporated or entered 
through, and licensed. 
(3) REINSURANCE.—The term ‘‘reinsurance’’ 
means the assumption by an insurer of all or part of 
a risk undertaken originally by another insurer. 
(4) REINSURER.— 
(A) IN
GENERAL.—The term ‘‘reinsurer’’ 
means an insurer to the extent that the in-
surer— 
(i) is principally engaged in the busi-
ness of reinsurance; 
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(ii) 
does 
not 
conduct 
significant 
amounts of direct insurance as a percentage 
of its net premiums; and 
(iii) is not engaged in an ongoing 
basis in the business of soliciting direct in-
surance. 
(B) DETERMINATION.—A determination of 
whether an insurer is a reinsurer shall be made 
under the laws of the State of domicile in accord-
ance with this paragraph. 
(5) STATE.—The term ‘‘State’’ includes any 
State of the United States, the District of Columbia, 
the Commonwealth of Puerto Rico, Guam, the North-
ern Mariana Islands, the Virgin Islands, and Amer-
ican Samoa. 
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Union Calendar No. 404 
109TH CONGRESS 
2D SESSION 
H. R. 5637 
[Report No. 109–649, Part I] 
A BILL 
To streamline the regulation of nonadmitted 
insurance and reinsurance, and for other purposes. 
SEPTEMBER 22, 2006 
The Committee on the Judiciary discharged; committed 
to the Committee of the Whole House on the State of 
the Union and ordered to be printed 
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