conflicting state law.
Home State of the Insured NRRA definition
Premium Tax Beginning July 21, 2011, WI may only collect taxes on SL
premiums where WI is the home state of the insured; under current law, WI taxes 3% of net premium on a pro rata basis
Exempt Commercial Purchaser NRRA approach as of July 21, 2011
Eligible Insurer No eligibility requirements
Producer Licensing License required only for placements for WI insureds; WI law silent regarding participation in electronic licensing database
Effective Date July 21, 2011
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Defining “Home State of the Insured”
Under the NRRA, 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. 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. If more than one insured from an affiliated group are named insureds on a single nonadmitted insurance contract, the home state is the home state of the member of the affiliated group that has the largest percentage of premium attributed to it under the insurance contract.
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Multi-State Risk Surplus Lines Premium Taxes
As of July 21, 2011, therefore, Wisconsin may only collect surplus lines premium taxes where it is the home state of the insured.
Wisconsin has not entered into a multistate agreement or compact for tax allocation purposes.
Based on current law, taxes are paid on the portion of the premium applicable to the risk located in Wisconsin, except that all premiums received in this state or charged on policies written or negotiated in this state shall be taxable in full, with a credit for any tax actually paid in another state to the extent of a reasonable allocation on the basis of risk
allocations. Wis. Stat. § 618.43(6); Wis Admin. Code § 6.17. The rate of taxation is 3%. Wis. Admin. Code § 6.17; Wis. Stat. § 618.43.
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Exempt Commercial Purchasers
© 2011 The Council of Insurance Agents & Brokers and Steptoe & Johnson LLC 133 According to the NRRA, an exempt commercial purchaser is one 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 the NRRA, a surplus lines broker seeking to procure or place nonadmitted insurance in Wisconsin for an exempt commercial 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:
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
Wisconsin does not currently impose eligibility requirements on foreign insurers. If Wisconsin does impose such requirements after July 21, 2011, however, those requirements must match the NRRA.
Under the NRRA, as of July 21, 2011, Wisconsin may not impose eligibility requirements on, or otherwise establish eligibility criteria for, nonadmitted insurers domiciled in a U.S. jurisdiction, except:
o Wisconsin may require that the insurer be authorized to write the type of insurance in its domiciliary jurisdiction; and
o Wisconsin may require that the insurer have capital and surplus or its equivalent under the laws of its domiciliary jurisdiction which equals the greater of:
The minimum capital and surplus requirements under the law of Wisconsin; or
$15,000,000
The insurance commissioner may waive the minimum capital and surplus requirements above if the commissioner 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. The commissioner may not make a finding of acceptability if the insurer’s capital and surplus is under $4.5 million.
Under the NRRA, a state may not prohibit a surplus lines broker from placing nonadmitted insurance with, or procuring nonadmitted insurance from, a nonadmitted insurer domiciled outside the U.S. that is listed on the Quarterly Listing of Alien Insurers maintained by the International Insurers Department of the NAIC.
© 2011 The Council of Insurance Agents & Brokers and Steptoe & Johnson LLC 134
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National Producer Database
Under the NRRA, Wisconsin may not collect any fees relating to licensing of an individual or entity as a surplus lines broker in Wisconsin 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 135
Wyoming
Home State of the Insured NRRA definition
Premium Tax Signed NIMA; 100% to WY at a rate of 3% until Dec. 31,
2011; according to NIMA formula on Jan. 1, 2012 Exempt Commercial Purchaser WY industrial insured + NRRA approach after July 21
Eligible Insurer NRRA approach after July 21
Producer Licensing License required only for placements for WY insureds; WY law silent regarding participation in electronic licensing database
Effective Date July 1, 2011
WY H 242
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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. § 26-11-103(a)(iv)(A)(I). 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. § 26-11-103(a)(iv)(A)(II). If more than one insured from an affiliate group are named insureds on a single nonadmitted insurance contract, the home state is the home state of the member of the affiliated group that has the largest percentage of premium attributed to it under the insurance contract. § 26-11- 103(a)(iv)(B).
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Multi-State Risk Surplus Lines Premium Taxes
The commissioner may participate in a multi-state agreement or clearinghouse for purposes of collecting, allocating or disbursing taxes collected on multi-state premiums. § 26-11-118(g). To the extent that other states where portions of the properties, risks or exposures reside have failed to enter into an agreement with Wyoming, Wyoming will retain 100% of the net premium tax collected. § 26-11-118(g). The state has joined NIMA.
According to Insurance Department Guidance issued on November 2, 2011, until NIMA is operational on January 1, 2012, for multi-state policies, the entire gross premium will be taxed at Wyoming’s rate of 3%. Effective January 1, 2012, the NIMA tax allocation formula will apply.
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Exempt Commercial Purchasers
Wyoming has an industrial insured exemption. That exemption will remain in effect. As of July 21, 2011, the NRRA commercial purchaser exemption will also be effective.
Under the NRRA, 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:
© 2011 The Council of Insurance Agents & Brokers and Steptoe & Johnson LLC 136
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 the NRRA, a surplus lines broker seeking to procure or place nonadmitted insurance in Wyoming for an exempt commercial 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:
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
Wyoming’s current eligibility requirements will be preempted and replaced by the NRRA requirements on July 21, 2011. Therefore, beginning July 21, Wyoming may only impose the following eligibility requirements for nonadmitted insurers domiciled in a U.S. jurisdiction:
o the insurer must be authorized to write the type of insurance in its domiciliary jurisdiction; and
o the insurer must have capital and surplus or its equivalent under the laws of its domiciliary jurisdiction which equals the greater of:
The minimum capital and surplus requirements under the law of Wyoming; or
$15,000,000.
The insurance commissioner may waive the minimum capital and surplus requirements above if the commissioner 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. The commissioner may not make a finding of acceptability if the insurer’s capital and surplus is under $4.5 million.
In addition, under the NRRA, Wyoming may not prohibit a surplus lines broker from placing nonadmitted insurance with, or procuring nonadmitted insurance from, a nonadmitted insurer domiciled outside the U.S. that is listed on the Quarterly Listing of Alien Insurers maintained by the International Insurers Department of the NAIC.
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National Producer Database
Wyoming’s law is silent on joining the NAIC producer database or any other uniform national database for producer licensing and renewal of licenses. Under the NRRA, Wyoming may not collect any fees relating to licensing of an individual or entity as a surplus lines broker in Wyoming 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 138