Establishes the surplus lines insurance multi-state compliance compact with respect to surplus lines insurance and premium tax allocation

Summary of provisions

Section one of the bill sets forth a series of legislative findings that provide the foundation rationale for the bill.

Section two of the bill adds a new Article 29 to the Insurance Law establishing a surplus lines insurance multi-state compliance compact Specifically, section two sets forth the following:

* Provides a title to the compact;

* Enumerates the purposes of a compact;

* Contains a definitions section specifying the meanings of the terminology used in the enabling legislation;

* Creates a commission empowered to adopt rules and procedures in connection with financing, administering, operating and enforcing compliance with the provisions of the compact;

* Specifically grants the commission the authority to establish mandatory rules and procedures;

* Delineates the various powers of the commission;

* Sets forth the organization of the commission;

* Sets forth the requirements regarding commission meetings, activities revolving around such meetings, and disclosure parameters in connection with such meetings;

* Describes the required rulemaking function and process of the commission;

* Establishes procedures dealing with commission records;

* Provides for a dispute resolution system to settle issues subject to the compact that may arise between two or more compacting states;

* Provides that the commission shall not be authorized to regulate insurance in the compacting states, and further provides that any compacting state may appeal a commission determination to a review panel appointed by the commission;

* Provides for a compact funding mechanism;

* States that the compact shall become effective and binding upon legislative enactment of the compact into law by two or more compacting states;

* Provides for a withdrawal, a default, and a termination process with respect to a state that may find itself in a situation that may trigger one of these processes;

* Contains a severability clause; and

* States that nothing within the compact prevents the enforcement of any of the law of a compacting state, except decisions of the commission and rules promulgated by the commission, with respect to excess line insurance of multi-state risks in certain enumerated circumstances.

Section three of the bill amends Insurance Law Section 2118 to add a new paragraph stipulating that in the event the compact is enacted and the commission becomes active, where New York is the home state of the insured, New York will require the payment of taxes to be allocated based upon the compact's provisions to all other states that have adopted the compact, but where a state has not adopted the compact, New York will apply its state tax to the premiums for the insured exposures allocated to New York as well as to risk exposures located in non-compacting states.

Section four of the bill amends Insurance Law Section 9102 to reiterate New York's exclusive application of its state tax where risk exposures located in states that have not enacted the compact are involved.

Section five of the bill amends Tax Law Section 1552 to, again, establish the rules regarding states that have not joined the compact and New York's application of its state tax to risks located in such non-compacting states.

Finally, section six of the bill establishes an effective date of October 19, 2011.

Justification

Last year Congress enacted the Dodd Frank Wall Street Reform and Consumer Protection Act. A component of this law intended to regulate the tax allocation aspect of multi-state excess line placements was the Nonadmitted Reinsurance Reform Act of 2010 ("NRRA"). The NRRA preempted state law in connection with certain aspects of excess line insurance placements. Congress, however, expressed its intent within the NRRA to permit the individual states to establish an interstate compact to regulate and facilitate the reporting, payment, collection and allocation of excess line placement premium taxes. This bill sets forth the structure for a premium tax allocation and distribution system as envisioned by Congress.

Legislative history

New bill.

Fiscal implications

The compact will maintain the tax allocation structure for excess line risks insured, and revenue to New York desired from such placements.

Effective date

This act shall take effect October 19, 2011.