Louisiana Joins NIMA, Membership Grows to 11 States and Puerto Rico
BATON ROUGE, La. – Member states of the Non-Admitted Insurance Multi-State Agreement (NIMA) welcomed five new states and Puerto Rico to NIMA on July 21, the first anniversary of the passage of the Dodd-Frank Wall Street Reform legislation. With these new members, the participating states collectively represent 22 percent of the surplus lines market by premium. The new members include Alaska, Nebraska, Nevada, Puerto Rico, Utah and Wyoming.
The Louisiana Legislature passed Act 361 in the 2011 Regular Session. It authorized Louisiana to enter into NIMA, a reciprocal allocation arrangement with other states for the collection of surplus lines premium taxes. “NIMA was developed by a National Association of Insurance Commissioners (NAIC) Task Force, which I chaired in response to the Non-admitted and Reinsurance Reform Act of 2010 (NRRA) provision in the federal Dodd-Frank Act,” said Commissioner Donelon. “NIMA creates an avenue for the fair distribution of surplus lines taxes as intended by the Dodd-Frank legislation.” Three states were the founding members of NIMA with Louisiana and Connecticut being the fourth and fifth states. Donelon signed NIMA on July 1.
The Department of Insurance sent Bulletin 2011-01 to all insurers, brokers, producers and others involved in surplus lines or nonadmitted insurance in Louisiana notifying them of the changes to expect from NRRA and NIMA on July 21, the effective date of NRRA. This bulletin may be found on the Department of Insurance Web site at www.ldi.la.gov under the Companies tab.
“We are expecting to see a number of states join NIMA now that the July 21, 2011 deadline established in the federal legislation has passed,” said Donelon. “The agreement allows state authorities to work cooperatively to collect and allocate premium taxes for multi-state surplus lines insurance transactions based on the risk or exposure in each state as has been done in the past. These premium taxes provide support to the states’ general funds,” said Donelon. Surplus lines insurance companies cover risks that are not insurable in the admitted or licensed insurance market.
NIMA is an agreement that provides a mechanism to report, collect, allocate and distribute surplus lines tax revenues consistent with the Non-Admitted and Reinsurance Reform Act (NRRA). The NRRA became part of the Dodd-Frank Wall Street Reform legislation passed in 2010 that allows only the home state to require premium tax payments for non-admitted insurance. Without this agreement, several states could potentially lose surplus lines tax revenues to the “home state” as defined in the NRRA (Louisiana has about $25 million per year at risk).
NIMA participants now include Alaska, Connecticut, Florida, Hawaii, Mississippi, Nebraska, Nevada, Puerto Rico, Louisiana, South Dakota, Utah and Wyoming. NIMA members predict more states will join once a clearinghouse is established and is ready to begin administering funds. The State of Florida has agreed to temporarily house the NIMA website (http://www.floir.com/Sections/PandC/NIMA.aspx),
which contains the signature documents from member states.