Home State of the Insured NRRA definition
Premium Tax Multistate allocation agreement authorized; 100% to WV
taxed at rate of 4.55% unless/until an agreement is operational (per DOI guidance)
Exempt Commercial Purchaser NRRA approach
Eligible Insurer NRRA approach
Producer Licensing License required only for placements for WV insureds; WV law silent regarding participation in electronic licensing database
Effective Date July 1, 2011
WV S 435
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Defining “Home State of the Insured”
The home state is where an insured maintains its principal place of business or if the insured is an individual, the individual’s principal residence. § 33-12C-3(i)(1). However, if 100% of the insured risk is located outside of the state of the principal place of business or principal residence, the home state is the state that collects the greatest percentage of the insured’s taxable premium. § 33-12C-3(i)(2). Where more than one insured from an affiliated group are named insureds on a single nonadmitted insurance placement, West Virginia will be considered the home state if West Virginia is the home state of the member of the affiliated group that has the largest percentage of premium attributable to it under such insurance contract.
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Multi-State Risk Surplus Lines Premium Taxes
The commissioner is authorized to participate in NIMA or a similar allocation agreement for purposes of collecting and disbursing to signatory states any funds collected that are allocable to properties, risks, or exposures located or to be performed outside of West Virginia. § 33-12C-7(h). To the extent that other states where portions of the properties, risks or exposures reside have failed to enter into NIMA or a similar agreement with West Virginia, West Virginia will retain 100% of the net premium tax collected. § 33-12C-7(h).
According to a surplus lines bulletin issued by the insurance department on July 11, 2011, for policies with an effective date on or after July 1, 2011, where West Virginia is the home state of the insured, West Virginia will tax and collect 100% of multi-state premiums at a rate of 4.55% (note: this is not consistent with the statutory language, which indicates that premiums will be taxed at the rate of the state where the risk is located, but insurance department staff has confirmed that the state will tax according to the bulletin and not the statutory language). According to that same bulletin, if and when the state enters NIMA, taxes will be collected and allocated according to the NIMA clearinghouse scheme.
© 2011 The Council of Insurance Agents & Brokers and Steptoe & Johnson LLC 130 Under § 33-12C-3(f), an exempt commercial purchaser is a purchaser that procures insurance coverage through a qualified risk manager, paid at least $100,000 in property and casualty insurance premiums in the last year, and meets one of the following criteria:
o Had a net worth of over $20 million at the end of the preceding fiscal year;
o Had net revenues or sales over $50 million at the end of the preceding fiscal year;
o Has more than 500 full-time employees per individual company, or is a member of an affiliated group employing more than 1,000 employees in the aggregate;
o Is a municipality with a population of more than 50,000 people; or
o Is a nonprofit organization or public entity generating annual budgeted expenditures of at least $30 million.
Under § 33-12C-5(b)(3), brokers procuring or placing insurance for an exempt commercial purchaser are not required to make a due diligence search to determine whether the full amount or type of insurance sought by the exempt
commercial purchaser can be obtained from an admitted insurer if:
o The broker discloses to the exempt commercial purchaser that such insurance may or may not be available from the admitted market that may provide greater protection with more regulatory oversight; and
o The exempt commercial purchaser has subsequently requested in writing the broker to procure or place such insurance for a nonadmitted insurer.
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Surplus Line Insurer Eligibility Criteria
Under § 33-12C-5(d), surplus lines brokers shall not place coverage with a nonadmitted insurer unless, at the time of placement, the nonadmitted insurer:
o Is authorized to write such insurance in its domiciliary jurisdiction; and
o Possesses capital and surplus – or its equivalent under the laws of its domiciliary jurisdiction – that equals the greater of the minimum capital and surplus requirements under the laws of West Virginia or $15 million; and
o Has established satisfactory evidence of good repute and financial integrity,
The director may waive the above minimum capital and surplus requirement for a nonadmitted insurer if the director makes an affirmative finding of acceptability after considering: quality of management, capital and surplus of a parent company, company underwriting profit and investment trends, market availability, and company record and reputation within the industry. § 33-12C-5(d)(2)(A)(ii). The director may not make a finding of acceptability if the insurer’s capital and surplus is under $4.5 million. § 33-12C-5(d)(2)(A)(ii).
Alien insurers shall have capital and surplus meeting the same requirements as foreign insurers have a trust fund of the greater of: $5.4 million or 30% of U.S. surplus lines gross liabilities, excluding aviation, wet marine and transportation liabilities, not to exceed $60 million. §§ 33-12C-5(d)(2)(E)(i) – (ii). The insurer may request permission from the
commissioner to pay valid policyholder claims out of the trust account, but the amount in the account can never fall below the greater of $15 million or 30% of U.S. liabilities. § 33-12C-5(d)(2)(E)(ii)(II). An alien insurer must also be listed with the NAIC quarterly listing of alien insurers. § 33-12C-5(d)(3). The commissioner may waive these requirements for alien insurers upon an affirmative finding of acceptability after consideration of: the interests of the public and policyholders; the length of time the insurer has been authorized to do business in its domiciliary jurisdiction and elsewhere;
© 2011 The Council of Insurance Agents & Brokers and Steptoe & Johnson LLC 131 unavailability of particular coverages; the size of the company as measured by assets, capital and surplus, reserves,
premium writings, etc.; diversification of the company between lines of business and geographically; past projected trend in the company’s capital and surplus. § 33-12C-5(d)(3). The alien insurer must provide the commissioner with a current annual statement certified by the insurer and an actuarial opinion regarding the insurer’s loss reserves. § 33-12C-5(d)(4).
In addition, under the NRRA, West Virginia must permit the placement of coverage with an alien insurer listed on the NAIC’s quarterly listing of alien insurers.
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National Producer Database
The statute is silent on participation in the NAIC producer database or an equivalent national uniform database for producer licensing. Under the NRRA, West Virginia may not collect any fees relating to licensing of an individual or entity as a surplus lines broker in West Virginia unless the state has in effect by July 21, 2012, laws or regulations that provide for participation by the state in the national producer database of the NAIC, or any other equivalent uniform national database, for the licensure of surplus lines brokers and renewal of such licenses.
© 2011 The Council of Insurance Agents & Brokers and Steptoe & Johnson LLC 132