109TH CONGRESS 
2D SESSION 
H. R. 5637
AN ACT 
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. 
TITLE III—RULE OF CONSTRUCTION 
Sec. 301. Rule of Construction.
SEC. 2. EFFECTIVE DATE. 
Except as otherwise specifically provided in this Act, 
this Act shall take effect upon the expiration of the 12-
month period beginning on the date of the enactment of 
this Act.
TITLE I—NONADMITTED 
INSURANCE 
SEC. 101. REPORTING, PAYMENT, AND ALLOCATION OF 
PREMIUM 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 
otherwise provided in such compact or other proce-
dures, 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 
premium taxes that, on or after such date of 
enactment, are required to be paid to any State 
that is subject to such compact or procedures; 
and 
(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 
calendar 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 
procedures. 
(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 and Committee on the Judiciary of the 
House of Representatives and the Committee on 
Banking, Housing, and Urban Affairs of the Senate 
identifying and describing any compact or other pro-
cedures for allocation among the States of premium 
taxes that have been adopted during such period by 
any States. 
(4) NATIONWIDE SYSTEM.—The Congress in-
tends that each State adopt a nationwide or uniform 
procedure, such as an interstate compact, that pro-
vides for the reporting, payment, collection, and allo-
cation 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 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 at-
tributable 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 section, the placement of nonadmitted in-
surance shall be subject to the statutory and regulatory 
requirements 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 non-
admitted insurance with respect to such insured. 
(c) ENFORCEMENT PROVISION.—Any law, regula-
tion, provision, or action of any State that applies or pur-
ports to apply to nonadmitted insurance sold to, solicited 
by, or negotiated with an insured whose home State is an-
other State shall be preempted with respect to such appli-
cation. 
(d) WORKERS’ COMPENSATION EXCEPTION.—This 
section may not be construed to preempt any State law,
rule, or regulation that restricts the placement of workers’ 
compensation insurance or excess insurance for self-fund-
ed workers’ compensation plans with a nonadmitted in-
surer. 
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 participation by the State in the national in-
surance 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 ELI-
GIBILITY. 
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 
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 
nonadmitted insurance in a State for an exempt commer-
cial 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 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 sub-
sequently requested in writing the broker to procure 
or place such insurance from a nonadmitted insurer.
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 
insurance market to determine the effect of the enactment 
of this title on the size and market share of the non-
admitted insurance market for providing coverage typi-
cally 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 num-
ber of insurance companies and insurance holding 
companies providing such business in the 18-month 
period 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 
market, including differences in the price and avail-
ability of coverage available in both the admitted 
and nonadmitted insurance markets; 
(4) the extent to which insurance companies 
and insurance holding companies that provide both
admitted and nonadmitted insurance have experi-
enced shifts in the volume of business between ad-
mitted 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 
consult with the NAIC. 
(d) REPORT.—The Comptroller General shall com-
plete the study under this section and submit a report to 
the Committee on Financial Services of the House of Rep-
resentatives 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 
person 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 
following 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. 
(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 
‘‘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. 
(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, Decem-
ber 6, 1997, October 2, 1999, and June 8, 2002. 
(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 in-
surance coverage analysis, and purchase of in-
surance. 
(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-