Important Message Regarding NIMA

NAPSLO has received notice of several states’ withdrawals from the Nonadmitted Insurance Multi-State Agreement (NIMA). Specifically, as reported in a Q&A on surplus lines taxes from the State of Hawaii on April 26th, the States of Connecticut, Mississippi and Alaska have submitted notice of withdrawal from NIMA.

NAPSLO will be reaching out to the remaining NIMA members (Florida, Hawaii, Louisiana, Nevada, Puerto Rico, South Dakota, Utah and Wyoming) to seek additional information and guidance for NIMA’s targeted July 1, 2012 effective date.

Redefining Tornado Alleys

This was recently published on Discovery News.

By John D. Cox Tue Apr 27, 2010 12:11 AM ET
It may come as little surprise and no comfort to survivors of the weekend tragedy in Mississippi, but recent research confirms that they are living in the most dangerous region in the most dangerous tornado country in the world."Tornado Alley" is an unofficial term traditionally used to describe a vaguely outlined swath of countryside from the deep south, through the southern plains and into the upper Midwest, but the label really doesn't tell you very much. New research on display recently at the annual meeting of the American Association of Geographers in Washington, DC adds new levels of detail and potential usefulness to the term. The analysis identifies four distinct regions in the eastern half of the US as worthy of the tornado alley label.Michael Frates, a graduate assistant at the University of Akron in Ohio, devised the new boundaries and a more nuanced set of "Tornado Alleys" by analyzing the spatial distribution of F3 to F5 tornadoes with tracks greater than 20 miles in the Central and Eastern US from 1950 to 2006. The output of that work is spread across grid of more than 3,000 cells across the region.Each cell was then given a different "frequency value" depending on the frequency of tornadoes with intersected the unit, and out of this process came "major spatial patterns, which served as the basis for delineating new tornado alleys," as shown on his map.

"Results from this analysis indicate that Dixie Alley has the highest frequency of long-track F3 to F5 tornadoes, making it the most active region in the United States," Frates concluded. Dixie Alley had a frequency value of 2.92, followed by Tornado Alley (2.59), Hoosier Alley (2.37) and Carolina Alley (2.00)."Based on this analysis," wrote Frates, "colloquial tornado alley fails to represent the areas of highest activity in the United States," a subject he suggested the National Weather Service might want to take up.For what it is worth, computer models saw the potential for tornadoes and other severe weather across a large region several days in advance as a cold storm system rolled in from the West toward the warm moisture of the Gulf. The first major outbreak of tornadoes arrived unusually late this spring, probably because El Nino conditions in the tropical Pacific Ocean have held the subtropical jet stream at a more southerly latitude than normal for this time of year.

IMAGE: Courtesy of Michael Frates, University of Akron.

Registration Deadline for E&S School is May 14

Registration for the 2010 NAPSLO E&S School, June 22-25 at the Eric P. Newman Education Center in St. Louis, is underway and there is still space remaining available in the school.

The cost of the school is $1,200 and the registration deadline is May 14. Brochures and registration forms are available to download from the NAPSLO website.

The curriculum focuses on seven segments: Risk Takers - and various markets; Distribution System - purpose & variations; MGA's and Brokers - managing the business; Market Dynamics - changing environments; Cops - regulatory agencies, Where's The Money? - financial statements and accounting procedures; and a new topic this year, Marketing.



This year’s Executive Panel will feature David Norris, Senior VP and Property Department Manager, RSUI Group, Inc.; James Drinkwater, President-Brokerage Division, AmWins Group, Inc., Glen Curley, CPCU, ARe, President, Markel, Northeast Region and Loti C. Woods, CPCU, Co-CEO, McAuley Woods & Associates.

 The school will open with the Perspectives From the Top presentation, given by Matt Nichols, President, All Risks, Ltd.

The NAPSLO E&S School is designed for insurance professionals with less than five years experience in the surplus lines industry. Persons with more than five years surplus lines experience are encouraged to attend the NAPSLO Advanced School, offered each Fall.

E&S School Registration Deadline is May 6

Limited space remains for the 2011 NAPSLO E&S School, scheduled to take place June 21-24 at the Eric P. Newman Education Center in St Louis. The deadline to register is May 6 and the cost of the school is $1,200. Registration materials can be downloaded from NAPSLO's website.

The E&S School's curriculum will focus on seven segments: Risk Takers - and various markets; Distribution System - purpose & variations; MGA's and Brokers - managing the business; Market Dynamics - changing environments; Cops - regulatory agencies; Where's the Money? - reviewing financial statements and accounting procedures; and E&S Marketing.

A focal point of the school will be the Perspectives from the Top by John Latham, President, Wholesale Division, Markel. In addition, there will be an Executive Panel featuring Orville Jones, Assistant to the Chairman, CRC; Patti Nunnally, President, Royal Oak Underwriters, Inc.; Matthew B. Scott, President, Penn-America Group/United National Group; and F. Marshall Turner, President/CEO, Maxum Specialty Insurance Group.

Disability Insurance: The Basics

Disability Insurance: The Basics
by Richard F. O’Boyle, Jr. LUTCF, MBA

Disability insurance, also called “disability income protection” or “disability income insurance,” is designed to pay you a monthly income in the event that you can’t work due to physical or mental incapacity.

Disability insurance can be one of the most difficult policies to understand, which makes it especially aggravating since most people who need it the most can be turned off by its perceived complexity. It’s advisable to thoroughly understand your disability insurance policy prior to receiving it, so that if you were to become ill or get into an accident, you will know exactly what is and is not covered. For those who find themselves overwhelmed, start by understanding just the basics. Any more intricate questions should always be discussed with a licensed insurance representative.

à If you are in New York and would like to schedule a confidential, no-obligation consultation, please contact me directly. If you are not in New York and would like to speak with a licensed disability specialist in your area, please complete this information request form…

à If you are currently exploring your need for disability insurance, you are welcome to download our free Disability Insurance Worksheet to help you better assess how much coverage you might need.

Definitions of Disability

How “disability” is defined is really the crux of why this type of coverage is so valuable to individuals and their families. It is also what creates a lot of distrust on the part of individuals and insurers alike. It’s crucial to discuss the actual definition of “disability” with your advisor at the time of application and again when your policy has been approved. Don’t wait until you are sick or injured. There are three possible definitions for disability:

1. Own Occupation Definition: The priciest of the bunch, the own occupation definition is usually only held by professionals and many jobs do not qualify for such a coverage plan. What the system basically dictates is that when someone has an own occupation definition, they can still receive disability benefits even if they have found a job elsewhere. What the insurance is based upon is the inability to complete tasks at a particular job, regardless of whether you have another profession you may continue with. The own occupation standard may change if you are still disabled after two years, and you might be required to work at an occupation that provides you with a percentage of your previous income.

2. Regular Occupation Definition: With the regular occupation or “modified own occupation” definition, you can’t be coerced or pressured into finding a different field to work in. If you can’t carry out your job responsibilities for your current occupation, then you should expect to receive total disability nonetheless. This is the most popular out of the disability insurance options, and allows people who have become sick or injured to still live out their dreams rather than just grasping for a job or money for the disability insurance anywhere they can look.

3. Any Occupation Definition: Finally, the strictest of the three policies is the any occupation definition. This is a rigidly issued policy because it deals with the idea that an individual is unable to successfully work in any occupation any longer. This happens often with older people, though people of any age may qualify. Situations that may warrant an any occupation definition include a serious accident, terminal or chronic sickness or severe mental illness.

Short Term Disability Insurance

There are two different types of disability insurance – short term and long term. Just as their names suggest, short term disability coverage provides a benefit that starts soon after you get sick or hurt, but is limited in duration. A long term disability policy may only kick in if your condition is more severe, but it carries the recipient further down the road.

Short term disability is usually processed within two weeks once an injury or illness has been reported. The benefit period typically lasts between 13 and 26 weeks, while this can vary depending upon the individual plan in question. Depending upon whom you work for at the time of your need for disability insurance benefits, your employer may authorize 100% salary replacement. It completely depends on the state you live in and who you work for.

In many instances, short term disability costs are covered by the employer, and then the benefits are taxable to the employee. Short term disability is great to have if you find yourself in a sudden accident or overcoming an unexpected serious illness. Most businesses will offer short term disability as part of the job, and you may receive a packet of information on it during your first day visit to human resources. Some companies sponsor private plans such as AFLAC through the jobsite which allow the employee to pay for the coverage themselves.

Long Term Disability Insurance

Since disability in the long term sense is more complex and open to risks like fraud, the process is lengthier. It usually takes between 60 and 180 days before you can receive a payment, with the most common time frame being around 90 days. Your employer may pay your premium of up to 70% of your pre-tax income, but some premiums must be paid by the employee. Most long-term disability insurance plans are privately paid for.

Group Disability Insurance

Group plans are cheaper for everyone involved, and usually do not require a medical exam. The company is always the policy owner in the instance of a group plan, and the individual may lose the policy if they lose their job. With an individual plan, there is more flexibility since you are the owner of the policy. Many companies offer some form of short term and long term disability insurance. It is sometimes the most cost effective way to ensure you will have appropriate financial support in the event of accident or illness. Keep in mind that if the employer is paying your insurance premiums, the benefit paid to you will probably be taxable as income, reducing its value.

How to Choose an Individual Disability Insurance Policy

Buying private disability insurance generally will give you more freedom to customize the plans features and enhance the income payment amount. Begin by selecting an insurance agent who has experience with disability insurance. The agent can help you “run the numbers” to see how much coverage is appropriate and which companies offer the most competitive plans. Keep in mind that when selecting a company, the lowest monthly premium is only part of the choice: find a company with a solid financial background and claims paying history. Always look for a policy that is guaranteed renewable and non-cancelable.

Choose a Monthly Benefit Amount: Use the Disability Income Insurance Worksheet to find an approximate range of monthly benefit that you should insure yourself for. Generally, an insurance company will allow a maximum amount of coverage of up to 60% of your recent earned income. Earned income for most professionals is income reported on your tax return from W-2 or 1099 sources.

Choose an Elimination or Waiting Period: Your monthly benefit payment usually does not kick in right away. Assess your “rainy day” savings to see how long you can cover your own expenses before you need the insurance company to start paying you. The longer the waiting period, the lower the monthly premium payment. Typical waiting periods are 60, 90, 180 and 360 days.

Choose the Benefit Period: The benefit period is the duration that the insurance company will pay you. You may select a period of 2, 3, 4 or 5 years; or else a benefit period up to age 65 or 67. The longer the benefit period, the higher the monthly premium payment. Some clients tie their benefit period to an expectation that they will qualify for federal Social Security Disability Income payments after two years. Lengthier benefit periods cover catastrophic conditions.

Choose Optional Riders and Supplemental Benefits: Private disability insurance allows you to enhance your policy with additional benefits. Most companies offer each of these riders in some form. Specifics will vary greatly from company to company.
- Waiver of Premium Rider: While you are on claim, you will not have to pay the monthly premium
- Cost of Living Adjustment Rider: Each year that you are on claim, the monthly benefit amount will increase
- Catastrophic Disability Rider: Your monthly benefit is increased dramatically if you become permanently and profoundly disabled.
- Future Increase Rider: Each year you can increase your monthly benefit amount (with a corresponding increase in the monthly premium) without a medical exam.
- Residual Disability Rider: If you are able to return to work following a disability claim, but are not functioning at 100% of your capacity, you will continue to receive a portion of your benefit payment.
- Retirement Income Protection Rider: A trust is established and the insurance company funds it with cash to serve as a supplemental retirement account, assuming that you had an active retirement plan at the time the policy is approved.
- Long-Term Care Insurance Conversion: When you reach age 65 or 67 you can convert your disability insurance plan (which would normally expire) into a Long-Term Care Insurance plan without a medical exam.

Underwriting Guidelines for Disability Insurance

Qualifying for a disability insurance policy requires a somewhat different application process compared to life insurance or long-term care insurance. In addition to standard medical underwriting, underwriters will ask questions about your occupation and financial history. Not all riders are available to all applicants.

Medical Underwriting: Disability insurance providers are looking for the likelihood not that you will die (mortality), so much as the likelihood that you will become incapacitated (morbidity). While a condition like arthritis might not impact your life insurance application, it would likely impact your chances of getting a cost-effective disability plan. Medical underwriting includes asking detailed medical questions, collecting copies of doctor records and running new blood. After analyzing your medical state, the insurer may offer you a policy, but exclude coverage for certain preexisting medical conditions, tag on an extra premium for a period of time or limit the inclusion of certain riders.

Financial Underwriting: Your “insurable income” may not be what you consider to be your actual income since the insurance company focuses on what you are actually “earning” in a given year. “Earned income” is your compensation. “Unearned income” is generally cash flow that would continue whether or not you were working, such as rental income, royalties, pensions, dividends and alimony. You will be required to submit your most recent tax filings as part of the overall application to justify the maximum benefit amount.

Occupational Underwriting: Jobs are ranked and rated according to how hazardous they are. The occupational rating also includes the actual duties performed in the job, size of the organization, level of education, moral hazard, time spent traveling, and other factors. For most policies, a minimum of 30 hours per week are required to be considered full-time. Home-based businesses generally are also acceptable occupational classes.

Making a Claim to Receive Disability Insurance Payments

Ultimately receiving disability insurance benefit payments from the insurance company hinges on which definition of disability is specified in your policy. This is where most people get turned off by insurance companies, in my opinion and experience. It is absolutely crucial to have a frank discussion with your agent at the time you are applying for the policy so that you understand what “disability” actually means. If you do meet the criteria and are working with a reputable company, the payments can mean the difference between financial stability and ruin for you and your family.

Remember that some disability payments to you may be taxable, depending on who paid the premiums: if your employer paid for part of your group coverage, then that portion will be considered taxable income. If you paid for the premiums out of your own pocket, then you can expect the benefit payments will not be taxable. This is a tricky area and often misunderstood, so please consult your advisor.

If your disability is not presumed to be permanent, the insurance company will expect you to have regular check-ups with an approved doctor, and perhaps even receive specific treatments or surgery to improve your condition. The company may also give you financial incentives to ease back to work part-time. In the event that you are seriously disabled and qualify for federal Social Security Disability Income payments, the insurer may reduce their payment to you according to the terms of your policy.

à If you are in New York and would like to schedule a confidential, no-obligation consultation, please contact me directly. If you are not in New York and would like to speak with a licensed disability specialist in your area, please complete this information request form…

à If you are currently exploring your need for disability insurance, you are welcome to download our free disability insurance worksheet to help you better assess how much coverage you might need.

Florida House Passes Bill to Fix Zota Problem

On a vote of 116-0 the Florida House of Representatives passed HB 853 this morning. The bill would clarify the surplus lines regulatory status in Florida put into question following the Florida Supreme Court's 2008 decision in Essex v. Zota.

A similar Senate bill (SB 1894) may be reviewed today by the Florida Senate.

E&S Joint Working Group to Offer Webinar on April 30 on Workflows & Standards

The E&S Joint Working Group (ESJWG) will present a live webinar for retail and general agents, wholesale brokers and E&S and specialty carriers titled "Best Practice Workflows in the E&S Industry and the Critical Role that Standards Play" on Tuesday, April 30.

The E&S Joint Working Group is an insurance industry coalition pushing standards-based electronic exchange of information in the E&S market by facilitating discussion and interaction among carriers, agents and vendors.

The webinar will feature best practice workflows that retail agents would like to see from their general agents and wholesalers within the next one to two years and review current efforts to standardize reporting that coverholders provide their London brokers. He said it will also look at how E&S carriers are developing ACORD standards for the E&S industry to automate general agent quoting with multiple carriers.

The April 30th webinar will run from 2:00 p.m-3:00 p.m. EDT; 1:00-2:00 p.m. CDT; 12:00-1:00 p.m. MDT; and 11:00 a.m-12:00 p.m. PDT. Participants must pre-register online at https://www1.gotomeeting.com/register/224393769.

The E&S Workgroup is an alliance of carriers, agents and vendors working with AAMGA, ACORD, ACT and NAPSLO. Its mission is to improve the efficiencies for retail agents, general agents, wholesale brokers and carriers by promoting use of ACORD standards, best-practice workflows and the electronic exchange of data among each of the business partners. The group comprises retail agent/general agent, carrier and Lloyd's subgroups.

Pennsylvania Considers Expanding Export List

The Insurance Commissioner of Pennsylvania is soliciting comments regarding expanding the export list. The Commissioner proposes to amend the May 24, 2008, list to add the following:

• Animal rides
• Crane and rigging contractors (liability and physical damage only)
• Crop dusters (aircraft liability and aircraft hull coverage only)
• Fuel and explosive haulers (excess auto liability and auto physical damage only)
• Hazardous waste haulers (excess auto liability and auto physical damage only)
• Hazardous waste storage and disposal (liability only)
• Products liability (monoline) for the manufacturing of: Pharmaceuticals, Aircraft and component parts, Automotive and component parts, Farm and industrial equipment, Petrochemicals, Firearms, Medical equipment
• Products recall (monoline) for the manufacturing of: Pharmaceuticals, Aircraft and component parts, Automotive and component parts, Farm and industrial equipment, Petrochemicals, Firearms, Medical equipment

Persons wishing to comment on the Commissioner's proposal may submit a written statement by May 3, 2009. Each written statement must include sufficient detail and relevant facts to inform the Insurance Department of the exact basis of the statement.

Written statements should be directed to Cressinda Bybee, Office of Corporate and Financial Regulation, Insurance Department, 1345 Strawberry Square, Harrisburg, PA 17120, fax (717) 787-8557, cbybee@state.pa.us.

Formal notification of any changes will be published in the Pennsylvania Bulletin after the 15-day comment period ends on May 1, or a notice will be published stating that the May 24, 2008, list remains in effect.

Nebraska Approves Legislation Allowing State to Enter into NIMA Tax Allocation Compact

Nebraska's Governor signed a bill on Tuesday which authorizes the Insurance Director to enter into the NIMA tax allocation compact to facilitate the collection, allocation and disbursement of premium taxes.

Nebraska is the 16th state to enact NonAdmitted and Reinsurance Reform Act (NRRA) implementation legislation. During the legislative session NAPSLO provided draft legislation and comments opposing the NIMA allocation approach, and Director of Government Relations Steve Stephan met with Insurance Department representatives.

The NRRA mandates that beginning July 21 the insured's home state will be the only state with jurisdiction over surplus lines transactions and the only state that can require a tax be paid by the broker. As a result states are working to bring their laws into compliance.

The bill would authorize the Director to enter into NIMA, participate in the clearinghouse, and adopt the allocation schedule established through NIMA. Nebraska law already provides for premium tax to be imposed on the total gross amount of surplus lines premiums.

The bill also provides for exclusive home state regulation of surplus lines placements and replaces the current definition of an industrial insured with the more narrow definition of an exempt commercial purchaser (ECP) from the NRRA.

The bill incorporates the NRRA eligibility requirements for U.S. domestic insurers, prohibits a surplus lines licensee from placing insurance with non-U.S. insurers unless the insurer is International Insurers Department (IID) listed, and removes the existing eligibility criteria for non-U.S. insurers so that there is no alternative to IID listing to become eligible.

The Washington Office of Insurance Commissioner Expands NIPR Applications to Surplus Lines Brokers

The Washington Office of Insurance Commissioner (OIC) announced the expansion of the online application process through the National Insurance Producer Registry (NIPR) in the state.  The OIC now permits new insurance license applications and renewals for resident surplus lines brokers and non-resident surplus lines brokers. You can access the NIPR service directly here. The expansion also applies to full lines for resident producers. 

With this announcement, Washington becomes the final state to accept surplus lines applications and renewals through NIPR. Now a broker applying for a new or renewal surplus lines license in multiple states may do so simultaneously for any and all states. When enacted, section 523 of the Nonadmitted and Reinsurance Reform Act (NRRA) of 2010 required all states to participate in a uniform national database for application and renewal of surplus lines broker licenses. NAPSLO is pleased all states are now participating in this national database, bringing our industry one step closer to the uniformity envisioned by the NRRA. 

Renting A Car

When you rent a car, you are liable for injuries and property damage you cause to others, and damage to the rental car whether it’s your fault or not. With some restrictions, your insurance policy will cover you in your policy territory (United States, its possessions and territories, and Canada) if you injure someone or their property. In most cases, your auto policy will also cover damage to the rental car, but you must carry comprehensive and collision coverage on at least one of your covered autos.

If you plan on your credit card covering damage to your rental car, read the fine print. Some only provide coverage after you prove there is no coverage under your personal policy. Some cards actually have dollar limitations and very restrictive coverage.

Your Duties in the Event of a Loss

As a condition of coverage, your property policy requires certain things of you in the event you have a loss. These are conditions that must be met by the policyholder in order for the insurance company to pay for the loss.

· Prompt notice of loss must be given to the company or their agent.
· In the event of a loss by theft, the policy must be notified.
· If the loss falls under the additional coverages section for the credit card or fund transfer card, the appropriate bank or credit card company must be notified.
· The property must be protected from further damage. If this requires the insured to make reasonable and temporary repairs to protect the property, accurate records must be kept of the repair expenses.
· The policyholder has a duty to cooperate with the insurer in the claim investigation.
· The policyholder must prepare an inventory of the damaged or lost personal property. The description, quantity and value must be listed in the inventory, and documentation such as receipts, bills or related documents should be included if available.
· The policyholder must make the damaged property available for inspection by the insurance company, provide the requested records and documents and permit the insurer to make copies.
· Following a loss, a policyholder must complete the Proof of Loss form. This proof of loss statement must be signed and sworn.

Of course, you are not left to your own devices to complete these duties. There will be help and guidance from the adjuster, and we are always available to help you with your claim.

Finished Basement? We should talk!

An unfortunate homeowner incident that has been occurring a lot over the past few years is water damage caused by either a sump pump failure or water backing up a basement drain. These claims can leave finished basements with damaged carpet and drywall as well as damaging the basement contents, not to mention clean up expenses for these situations which can cost hundreds or even several thousands of dollars.
A majority of homeowners’ insurance policies will include up to $5,000 for claims that fall into this category. However, if someone had a finished basement, this amount might not be sufficient. Insurance companies have options for higher limits ranging from $10,000 all the way up to $100,000. If you have a finished basement, this is a coverage that you and your Fey Insurance Services representative should discuss.
One thing to note, this coverage does not cover flood insurance (meaning surface water from outside the house that has come into your home). Floods are not covered by homeowners’ insurance policies. If you have a concern about this type of exposure to loss, please contact us and we can provide you with a Flood Insurance Quote.

Replay of NRRA Implementation Status Webinar Available to View

Information on the status of implementation of surplus lines reforms signed into law in 2010 and their impact on surplus lines brokers and carriers was the subject of a NAPSLO sponsored webinar on April 19 and a copy of the webinar is available to view online at http://webinar.napslo.org.

More than 1,000 people signed up to view the program, The NRRA and Surplus Lines Reforms - An Update: Will You and the States Be Ready on July 21, 2011? The webinar reviewed state's actions to implement the NonAdmitted & Reinsurance Reform Act and what agents, brokers, carriers should expect when the law goes into effect.

In addition to a copy of the webinar being posted on the NAPSLO website, the PowerPoint presentation is also available to download. Answers to questions submitted during webinar will be posted in the next few weeks.

The NRRA mandates that beginning July 21 the insured's home state will be the only state with jurisdiction over surplus lines transactions and the only state that can require a tax be paid by the broker. To comply, states are revising their laws. Many states are also considering forming a tax compact to handle allocation of surplus lines premium taxes. This may impose some additional reporting requirements for brokers and could impact companies.

The webinar included presentations from Richard Bouhan, NAPSLO Executive Director, Steve Stephan, NAPSLO Director of Government Relations, Libby Baney, B & D Consultants, NAPSLO Washington D.C. Lobbyist, Michael Byrne, Partner, Dewey & LeBoeuf LLP, and Dan Maher, Executive Director, Excess Line Association of New York.

Insurance Insider Reporting that the FIO Insurance Regulation Modernization Report Likely to be Delayed Post-Election

According to the Insurance Insider:

The Federal Insurance Office (FIO)'s report on modernising US insurance regulation - which is already three months late - could be delayed further until after the presidential election in November.

Sources with knowledge of the situation said the White House is unlikely to risk a confrontation with states and governors over state rights as well as a potential gridlock in Congress at a time when the US legislation process has ground to a halt for anything other than bi-partisan issues...

The rest of the article is restricted to subscribers only.

Registration Underway for NAPSLO's Executive Leadership School, April 23-26

Registration is underway for the NAPSLO Executive Leadership School, set for April 23-26 at the University of Virginia Darden School of Business in Charlottesville. The school is an intense three-day MBA Executive Level program at one of America’s leading universities.

The brochure and registration materials for the school are available to download from the NAPSLO Website. Tuition is $2,995.

This program is designed for senior-level members who wish to broaden their perspectives on important social, political, and economic issues influencing the insurance industry. Participants will enhance their leadership skills to more effectively manage change at the personal, team, and organizational levels, and will return to their organizations with the tools and mindsets to think and act more strategically. Those who attend will develop the enterprise perspective required to make winning choices about running their businesses in today’s complex environment.

Participants will crystallize their personal world views about how to compete successfully in their market spaces, develop a deeper understanding of social, political, and economic forces affecting their business environments and relate the broad issues in the world to NAPSLO’s industry and to the career experiences—and challenges—of peer participants.

John Edack Elected Chairman of the Surplus Line Association of California

The members of the Surplus Line Association of California (SLA) elected John Edack as their Chairman during the SLA 2009 Annual Meeting held January 29 in Beverly Hills. Mr. Edack is the Executive Vice President of Arch Specialty Insurance Agency, Inc., in San Francisco, California.

Elected Vice Chairman was Les Ross of Crump Insurance Services, Inc. Elected Secretary-Treasurer was Patrick Hanley of Socius Insurance Services.

In addition, the following 10 Executive Committee members were elected: Warren Stanley of Wholesale Connection Insurance Services, Pamela Quilici of Crouse & Associates, Frank Cravens of M.J. Hall & Company, Inc., Doris Barnett of Colemont Insurance Brokers, Anne McNally of ABD Insurance Services Financial, Gerald J. Sullivan of Gerald J. Sullivan & Associates, Inc., Davis Moore of Worldwide Facilities, Inc., Chris Brown of Brown & Riding Insurance Brokers, Kris Bauer of AmWINS Insurance, and Phil Mazur of Swett & Crawford.

E&S Firms Can List Business in Best's Review

Excess & Surplus Lines carriers, managing general agents and surplus lines brokers can list their business at no charge in the May 2011 edition of Best's Review magazine.

Excess & Surplus Lines carriers and wholesalers can list themselves online. Submissions will be published in the May edition of Best's Review, as space permits. The deadline for submitting a listing is March 18, 2011.

The listing will appear as part of a package on the excess & surplus lines businesses that will include the latest installment of an ongoing series profiling specialty producers and an Issues & Answers special section, Excess & Surplus Lines Showcase 2011.

California OLA rules settlement agreement are not precedential

NAPSLO officials say they support a decision by the State of California Office of Administrative Law that a settlement agreement involving the California Department of Insurance and an insurance company cannot be viewed as a precedential decision and thereby used as the basis for penalties in other cases.

“We believe this is a positive decision for the brokerage industry as it does not add another level of regulation,” said NAPSLO President William H. Newton [Mr. Newton is also President of Lemac Associates of Los Angeles]. “Allowing such settlement agreements to be used as a precedent that would result in underground regulation, which circumvents the rulemaking process, and the OLA agreed.”

The decision follows a suit filed by the Independent Brokers and Agents of the West, which NAPSLO supported with written objections, to the Department’s contention that a settlement in a 2006 case with American Reliable Insurance Company could be used as the basis for fines in other cases.

The settlement agreement included language concluding that a broker was a producer for a company and it included a fine for the company. The department apparently intended to fine other companies over the conduct of a broker, based on this settlement agreement with American Reliable.

In the review, the Office of Administrative Law agreed that a settlement agreement could not become a precedential decision because the decision had not been adjudicated and the state's Administrative Procedure Act (APA) had not been followed. State Agencies are prohibited from issuing rules unless the rules comply with the APA.

NAPSLO in the news

As part of our ongoing initiative to message the value of surplus lines and the wholesale distribution system in the insurance marketplace, NAPSLO proactively assists trade publications with editorial stories on the industry and the Association.

These stories have recently been published and focus on both the value of wholesale distribution and the importance of business succession planning and how NAPSLO’s career awareness initiatives can help members with that growing need.

• Business Insurance, "High capacity drives continued soft market in excess and surplus lines" - March 16, 2014

• National Underwriter, "Future Shock: Recruiting the Insurance Industry’s Next Generation" - April 20, 2014

• Best's Review - "Agent/Broker Success" -  March 2014

You can find a full list of NAPSLO in the News stories on the NAPSLO website here. 

NAPSLO visits Capitol Hill to promote S. 929

More than 20 NAPSLO representatives visited with members of the Senate Committee on Banking, Housing and Urban Affairs Tuesday regarding surplus lines issues and urged members to approve S. 929 (the Nonadmitted and Reinsurance Reform Act of 2007) and forward it to the full Senate.

The visits were part of NAPSLO’s annual “Day on the Hill” and members representing NAPSLO brokers and insurers met with Senators or staff from virtually all members of the Senate Banking Committee regarding surplus lines issues.

“Our meetings were very beneficial to NAPSLO and the Senators in reviewing current issues and we are hopeful that the discussions will lead to the approval of S. 929,” said NAPSLO Executive Director Richard Bouhan. “Passage of the bill would lead to improving the operation, efficiency, and regulation of the surplus lines market and also benefit consumers by making property/liability insurance more readily available and reduce the cost of compliance.”

Senators Mel Martinez (R-FL) and Bill Nelson (D-FL) introduced S. 929, the Nonadmitted and Reinsurance Act of 2007 in March 2007 and the bill was assigned to the Banking Committee. S. 929 is cosponsored by Sen. Mike Crapo (R-ID) of the Banking Committee and Sen. David Vitter (R-LA). The House of Representatives passed a similar bill (H.R. 1065) in 2007.

“Based on our discussions, we are hopeful that the Senate will hold hearings on surplus lines regulatory reform in the very near future,” said Mr. Bouhan.

The Nonadmitted and Reinsurance Act measure is aimed specifically at streamlining and reducing barriers in state regulation of surplus lines insurance and reinsurance. It would create a uniform system, while preserving the role of the state regulator.

Zota Fix Moves Forward in Florida

Legislation to clarify the surplus lines regulatory status in Florida appears headed toward a full vote in the Florida House this week and the Florida Senate next week.

House and Senate committees acted favorably on bills that would restore the industry's exemption from state regulation of its forms and policies that was put in questions following the 2008 Florida Supreme Court's decision in Essex v. Zota.

The House bill (HB 853) and Senate bill (SB 1894) are now expected to be voted on by next week. While the bills would restore the industry's regulatory exemption retroactive to Oct. 1, 1988 some new requirements would be imposed, according to the Insurance Journal.

Louisiana House passes bill exempting surpus lines from rates and forms

Louisiana House Bill 285 by Rep. J. Kevin Pearson, which exempts surplus lines from filing rates and forms, has passed the state's House of Representatives.

The bill passed the House 83-0 and was forwarded to the Senate. The bill would exempt surplus lines insurance delivered by approved unauthorized insurers from laws regarding form and rate filing and approval.

HB 285 attempts to clarify the role of surplus lines insurance as complimentary to the "admitted market," while at the same time conserving the full regulatory authority of the Commissioner of Insurance over the surplus lines industry as granted by the Louisiana Insurance Code.

Surplus lines companies must meet strict eligibility and financial requirements of the insurance department before they can be approved to write in Louisiana. Once approved, they are placed on a list known as the "white list." Companies may be removed from the white list at any time, if they fail to meet the eligibility requirements, or the department feels they are not acting in the best interest of the insured, according to the LSLA.

David Tatman, a representative for the Louisiana Surplus Lines Association that between 2004 and 2006, in response to withdrawal from the market by admitted insurers, the surplus lines industry increased writings in Louisiana by 40 percent, according to tax figures provided by the insurance department.

Scheduling Special Items

Back in July we posted an article about special limits on homeowner policies for things such as guns, jewelry, coins, cash, silver and furs.  In the wake of a string of burglaries in our area (burglaries that are only focused on taking cash, coins and jewelry), we felt it was important to remind people of the homeowner limitations on these items.  It differs per policy and per item but usually there is only about $1000 to $2500 of coverage given on the homeowners for things such as guns, jewelry, coins, cash, silver and furs.  If you own more than that limitation in any of the mentioned categories you should schedule the items on a special policy.  Feel free to contact Fey Insurance to make sure you have things appropriately covered.

On a side note, the current criminals who have been robbing homes in the area are first placing calls asking if you have a security alarm.  As soon as you answer no they hang up and then know your home is unprotected.  Be sure to never answer no to such questions over the phone to a random phone call.

More Than 500 Expected at NAPSLO's Mid-Year

More than 500 people are expected for the 2011 NAPSLO Mid-Year Leadership Forum which gets underway on Wednesday at the Naples Grande Beach Resort.

The meeting gets underway on Wednesday night with the Opening Reception and on Friday programs on leadership issues and an update on legislative actions regarding the implementation of the Non-Admitted and Reinsurance Reform Act are scheduled.

Certificates of Insurance

It is good risk management for customers to check and make sure their vendors have insurance. Because of this small business owners are often asked to prove to their customers they do indeed have insurance. When customers ask for proof of insurance what they are often asking for is a form called a certificate of insurance. A certificate of insurance gives the basic information of a business insurance policy. It tells things such as the insurance company's name, dates the policy covers, name of the insurance agency who handles the policy and highlights the different types of liability coverages the policy has and the limits or amount of insurance in each of those coverages.

Any type of business can be asked to provide a certificate of insurance. Three areas where you see certificates of insurance most commonly asked for are construction and maintenance contractors, businesses that lease space and consultants. The reason that construction and maintenance contractors are often asked to show certificates of insurance are because their customers want to be sure if they cause injury around their premises or damage around their premises that they are covered. Also, many contractors are acting as subcontractors to other construction and maintenance companies. If their subs cause damage or injury they want to be sure they have insurance because if they do not they will then be the responsible ones.

People that lease space are asked for certificates because the owner of the building wants to make sure that if they cause damage to the building they have insurance to put the building back as it was prior to incident that caused damage. They also want to make sure if the person leasing space is responsible for someones injuries while they are visiting the building that they have insurance in place to cover those injuries.

Consultants are asked to provide certificates of insurance in order to meet contract requirements. Often, consultants sign a contract with their customers and in the contract there is always an insurance section that outlines the required coverages they must have. The best way for that customer to make sure the consultant is meeting the requirements is to ask for a certificate of insurance.

So the next time you are asked by a customer to show proof of insurance you will understand that you are being asked for a certificate of insurance. Contact your agent and let them know you need a certificate of insurance. Make sure to provide them with the name and address of the company or individual that is asking you for the certificate.

Examination of Commercial Books and Records

In your commercial property policy you will find a section titled "Policy Conditions." This section of the policy spells out requirements of the policyholder and the insurance company. It covers information about each party's right to cancel the policy, the insurer's right to inspect the property and conditions about abandonment of the property. There are many more conditions though, and it is good idea that you make yourself aware of these provisions.

One of the conditions is the insurance company's right to audit your books and records as they relate to your policy. Depending on your type of operation, you may already be experienced with the audit process. It is mostly painless and the information can usually be found in your accounting and employment records. The examination may take place during the policy period or any time within three years after the policy periods end, however, an audit usually takes place within a few months of your policy renewal.

The insurer will not just randomly go through your records. You will be given a list of requested information to facilitate the process. This process is usually pretty painless as long as you have current and accurate records.

E&S Joint Working Group Conducting Tech Survey on Workflow, Deadline is Feb. 27

The Retail Agents Subgroup of the Joint E&S Workgroup is in the process of surveying managing general agents and wholesaler brokers to ascertain the extent to which they are addressing major workflow recommendations that retail agents would like to see when writing E&S and program business.

A brief survey developed by the subgroup is available at https://www.surveymonkey.com/s/GAandWholesaleBrokerSurvey  and the group is requesting firms complete it by February 27.

Lisa Parry Becker, Chair of the Retail Agents Subgroup, plans to report on the results of the survey during her report at the E&S Joint Working Group meeting on March 4 at the AAMGA Technology Conference in Atlanta.  The responses of individual organizations will not be reported, except to the extent the subgroup get the organization’s permission to publicize positive examples of implementations.

The E&S Joint Working Group was formed by ACT, AAMGA, and NAPSLO in 2008 to improve the efficiencies for retail agents interacting with managing general agents and wholesale brokers in the E&S market and to promote the electronic exchange of data between the parties.

Deductible Basics

When a covered insurance claim happens the insured, in many cases, will be responsible for the first few dollars of most losses. The amount they are responsible for is called the deductible. More often than not, deductibles are only associated with property damage of the insured’s own possessions whether that is a vehicle that was damaged or damage to their contents, their buildings or even their loss of income. On some occasions you may see deductibles on liability claims but not in many.

Deductibles can come in many different forms on insurance policies. You can have a given dollar amount, say $500. Often times you see this type of deductible on home insurance or business property insurance. Some deductibles might be a percent of the loss like 1% or 10%. Sometimes you will see this type of deductible on a home or business but many times it will be associated specifically with earthquake coverage. Deductibles can be vanishing deductibles. As the insured racks up years of no losses, their deductible gradually drops each year until eventual it is $0.

In most cases the deductible is per claim. This means that each time you have a claim you pay a deductible. It isn’t like your typical health insurance policy where you have an out of pocket deductible for the year and once you meet that limit you are done with the deductible. In property and casualty, if you have a $500 flat per claim deductible you will pay $500 each time you have a claim no matter how many you have in a given year.

Deductibles can be a helpful cost savings tool. They can be raised to help drop premiums but the insured needs to understand that by raising deductibles they have taken on a bit more of the burden of possible claims.

It is important for insureds to understand what their deductible is so that they can be prepared to financially meet its requirement if a claim were to happen. I mention this more in connection with a percentage deductible. The insured should know if the percent is on the cost of the claim or on the coverage limit. For example, if a person had a $200,000 house and an insurance policy with a 5% deductible (on the coverage limit) it would be best to know that you have a $10,000 deductible before you have a claim. Someone that doesn’t know their policy might think that it is 5% per the cost of the claim.

Deductibles are just one of many facets to an insurance policy. Be sure to familiarize yourself with your policy and policy coverages and consult your independent insurance when ever you have any questions.

North Dakota Approves SLIMPACT-Lite Compact As Part of NRRA Compliance Legislation

North Dakota has approved legislation on Tuesday which would adopt the SLIMPACT-lite type of tax allocation compact.

North Dakota is the 15th state to pass NonAdmitted and Reinsurance Reform Act related implementation legislation and during the session NAPSLO provided draft legislation and comments on proposed legislation, met with legislators and department of insurance officials, and hired a lobbyist to work with legislators on the issue.

The NRRA mandates that beginning July 21 the insured's home state will be the only state with jurisdiction over surplus lines transactions and the only state that can require a tax be paid by the broker. As a result states are working to bring their laws into compliance.

North Dakota's bill would adopt the SLIMPACT-lite type of tax allocation compact and the bill adopts the NRRA eligibility requirements for U.S. domestic insurers and requires the surplus lines licensee to confirm a non-U.S. insurer is on the International Insurers Department list (the bill removes the existing eligibility criteria for non-U.S. insurers). It also provides for exclusive home state regulation and incorporates the NRRA's exempt commercial purchaser (ECP) exemption from the diligent search requirement.

Mid-Year Leadership Forum General Session to feature two inspiring speakers

If you’re attending the NAPSLO Mid-Year Leadership Forum, March 5-8 in Scottsdale, make plans now to hold time for the General Session on Friday, March 7. This year’s General Session will feature two speakers, both with messages you can apply in your business immediately.

Eric Siegel, Ph.D., is the president of Prediction Impact, Inc. and author of the acclaimed book, Predictive Analytics: The Power to Predict Who Will Click, Buy, Lie, or Die. Siegel is also Executive Editor of the Predictive Analytics Times, and the founder of Predictive Analytics World and Text Analytics World. Widely renowned as an expert in predictive analytics and data mining, he is also a former computer science professor at Columbia University, where he won the engineering school's award for teaching, including graduate-level courses in machine learning and intelligent systems - the academic terms for predictive analytics.

After Columbia, Dr. Siegel co-founded two software companies for customer profiling and data mining, and founded Prediction Impact in 2003, providing predictive analytics services and training to mid-tier through Fortune 100 companies.

Siegel will discuss Predictive Analytics and how it applies to our industry in his address at 9 a.m. on March 7. For more information about Dr. Siegel, visit his website.

After a brief NAPSLO Education and Career Development presentation, guests will be inspired by speaker Erik Weihenmayer at 10 a.m. Despite losing his vision at the age of 13, Erik Weihenmayer has become one of the most accomplished adventurers in the world. Re-defining what it means to be blind, he has opened the minds of people around the world. He is the only blind person who has reached the summit of Mount Everest and the tallest peak on each continent.

In his talk, “Leadership—Guess Who’s a Better Climber in the Dark?,”Weihenmayer describes the time he and his partner, a much better climber, were caught on a dangerous rock face at nightfall and without working headlamps. In spite of his fear, Weihenmayer knew this was his time to lead his friend down to safety. He believes the most important aspect of leadership is how we pass it on to others. “Leadership is contagious,” he says, “We pass it from body to body, from life to life, and we give all the people around us the courage to do great things.”  To learn more about Weihenmayer, visit  his website.

We look forward to seeing you in Scottsdale. 

Spots Remain in E&S School

There are still spots available in the NAPSLO E&S School, scheduled for June 23-26 in St. Louis. The cost of the school is $1,200 and the registration deadline is May 15. Forms are available to download from the website.

The curriculum focuses on five segments: Risk Takers-and various markets; Distribution System - purpose & variations; MGAs and Brokers - managing the business; Market Dynamics - changing environments; and Cops - regulatory agencies.

In addition to the above topics, Steven DeCarlo of AmWins will present Perspectives From the Top, and there will an Executive Panel featuring:

• Ron Helveston - CRC Alabama
• Letha E. Heaton - Markel
• Tim Makowski - Specialty Lines Underwriters
• Robert Lala - Liberty International Underwriters

Registration Requirements
The NAPSLO E&S School is designed for insurance professionals with less than five years experience in the surplus lines industry. Persons with more than five years surplus lines experience are encouraged to attend the NAPSLO Advanced School, offered each Fall.

Hotel Accommodations
Attendees will stay at The Parkway Hotel, 4550 Forest Park Blvd., located on the campus of Washington University Medical Center.

Session Location
The Eric P. Newman Education Center is within walking distance of the hotel. After hotel check-in, attendees should stop by the NAPSLO registration desk (in the hotel lobby) to pick up class materials. All sessions will take place at the Newman Education Center.

Oklahoma Enacts New Law to Clarify NRRA Rules

Oklahoma recently enacted new legislation to clarify a number of issues with the surplus lines code and require the state’s tax rate to be used for multi-state policies written after the July 21, 2011 effective date of the NRRA, clarifying legislation passed in 2011.

The new law, HB 2458, signed by the Governor on April 16, also contains a provision stating the Oklahoma Insurance Commissioner is not required to join a tax sharing system and that the Oklahoma tax rate shall apply unless the state decides to join a multi-state tax sharing system. The bill also made it clear that a number of provisions apply only when Oklahoma is the “home state” of the insured.

Oklahoma passed NRRA related legislation in 2011 that incorporated some NRRA terms, included some NIMA definitions and authorized the Commissioner to enter into NIMA or some other tax sharing system. The 2012 law adds some NRRA terms and definitions but fails to include the NRRA definitions of affiliate, affiliated group, control, premium tax, qualified risk manager, and state. This bill and the 2011 legislation incorporated the NIMA definitions of home state for group policyholder, principal place of business and principal residence. The 2012 bill contains a provision that indicates it “relates back to the effective date of the implementation of the Nonadmitted and Reinsurance Reform Act.”

HR 2458 retains the requirement that an Oklahoma surplus lines license is required only when Oklahoma is the home state of the “insurer” and that the procuring broker be licensed in the “insurer’s home state.” These requirements are inconsistent with the NRRA that limits any licensing requirement for surplus lines exclusively to the “insured’s” home state.

The legislation also imposes a direct premium tax on “domestic surplus lines insurers” (until Oklahoma joins a tax-sharing arrangement) while simultaneously requiring that surplus lines brokers “collect and pay” surplus lines tax “on any broker-procured surplus lines insurance.” This appears to create double taxation on surplus lines policies issued by Oklahoma domestic surplus lines insurers, for which NAPSLO will continue to seek clarification.

Comprehensive information on 2012 legislation in Oklahoma and other states is available on NAPSLO's website, in addition to a number of NRRA resources.

NAPSLO Notes Passing of Former Board Member David Anderson of Anderson & Murison

David F. Anderson, who founded NAPSLO member Anderson & Murison, Inc. in 1965 and served as chairman at the time of his death, passed away on February 12.

A visitation will be on Wednesday, February 22, from 3:00 p.m. - 7:00 p.m. at the Forest Lawn - Hollywood Hills location in Los Angeles. The funeral service will be in the "Church of the Hills" (white church) on Thursday, February 23 at 12:30 p.m.

In addition to building his own firm, Mr. Anderson made significant contributions to the insurance industry and served on the NAPSLO Board of Directors from 1990 through 1992.

He twice served as chairman of the Surplus Lines Association of California and was a past president of the American Association of Managing General Agents and served on AAMGA's executive committee from 1976 to 1982. He was also a founder and the first president of the California Insurance Wholesale Association and served on its Board from 1991 until 2010.

He was born on November 12, 1926 in Campbell, California. He graduated from UCLA and served in the Army during WW II with the rank of Captain. He is survived by, Marshalene, his wife of 63 years daughter Melissa and granddaughters Amanda and Megan. Melissa continues the business as a Vice President with Anderson & Murison.

Mr. Anderson participated in clinical trials at UCLA in his more than two year effort against melanoma and donations are suggested to the Community Support Center Pasadena at http://www.cscpasadena.org/donate/tribute-a-memorial-gifts/david-anderson-memorial in his memory.

Arizona Approves Legislation Allowing State to Enter Tax Allocation Compact

The Arizona Governor has signed House Bill 2112 on Monday which generally authorizes the Director of Insurance to enter into a compact or agreement such as SLIMPACT or NIMA. 

Arizona is the 14th state to pass NonAdmitted and Reinsurance Reform Act (NRRA) implementation legislation during this session. In connection with Arizona’s NRRA implementation efforts, NAPSLO provided draft legislation and Director of Government Relations, Steve Stephan, testified twice before the legislature.

The NRRA mandates that beginning July 21 the insured's home state will be the only state with jurisdiction over surplus lines transactions and the only state that can require a tax be paid by the broker. As a result states are working to bring their laws into compliance.

Arizona’s bill generally authorizes the Director to enter into a tax compact; however, prior to joining any compact, the Director must conduct an administrative hearing demonstrating that participation in a compact is in the best interests of Arizona.  In reaching this determination, the following factors must be considered (1) the impact on the state’s gross receipt of premium taxes, (2) the regulatory burden and costs placed on insurance companies, surplus lines brokers and agents; (3) the cost impact on insureds resulting from any regulatory requirements attributable to a compact; (4) any other factors raised by the director or any other interested party.

The bill also replaces the existing "industrial insured" exemptions from the diligent search and insurer licensing/"doing business" requirements with exemptions from such requirements for an exempt commercial purchaser (ECP) as defined by the NRRA.

The bill also incorporates the U.S. domestic insurer eligibility requirements from the NRRA, as well as automatic eligibility for non-U.S. insurers upon International Insurers Department listing and provides for exclusive "home state" regulation as required by the NRRA. 

The bill would subject surplus lines brokers to quarterly reporting with the clearinghouse of transactions involving the multistate risks of an Arizona home state insured.

Update on New York Regulation 194

In a March 8, 2012 decision, the State of New York Supreme Court, Appellate Division, Third Judicial Department ruled that New York’s Regulation 194 is a reasonable exercise of the New York Insurance Superintendent’s broad power to implement New York insurance law. The purpose of this notification is to ensure NAPSLO members are aware of the court's ruling and the available resources regarding Regulation 194.

Since 2005, several states have adopted laws requiring all producers to disclose the amount of compensation they receive from an insurer and to obtain the customer’s acknowledgement concerning such compensation. New York Regulation 194 goes further in requiring all producers to disclose their role in the transaction as well as the factors that determine or may alter their compensation.

During its development, NAPSLO and other associations representing wholesale brokers and MGAs suggested that Regulation 194 should not apply to wholesalers. As a result, New York agreed to exempt certain producers, such that Regulation 194 would not apply to a producer who does not have direct sales or solicitation contact with the purchaser. This exemption has been maintained throughout the debate of Regulation 194, which became effective January 1, 2011.

Answers to Frequently Asked Questions regarding Regulation 194 can be found on the New York Department of Insurance website. Circular letter No. 18, released on November 5, 2010, sets forth the Department's expectations regarding compliance by insurance producers, and authorized insurers with Regulation 194. While the FAQs state that Regulation 194 applies to excess lines brokers, the FAQ material subsequently states that regulation’s disclosure requirements do not apply to “a wholesaler or managing general agent, whose primary contact is with the selling agent or broker, and who has no contact with the purchaser that involves sales or solicitation.”   However, if the wholesale producer or MGA has direct sales or solicitation contact with the buyer, then the wholesaler or MGA must provide the disclosures required by the Regulation.

Further, the regulation does not apply to (1) the placement of reinsurance; (2) the placement of insurance with a captive insurance company pursuant to Article 70 of the New York Insurance Law; or (3) renewals, except that if the purchaser requests more information about the producer's compensation less than 30 days prior to a renewal or less than 30 days after a renewal, the insurance producer must disclose to the purchaser in a prominent writing the required disclosures within five business days.

Colorado Passes NRRA Compliance Legislation

Colorado became the third state in 2012 to pass Nonadmitted and Reinsurance Reform Act enabling legislation among states that did not act in 2011. Colorado H 1215 contains many of the NRRA provisions, taxes the gross premium instead of an allocated share, and authorizes the Commissioner to enter into a tax sharing agreement with other states.

The bill, signed by the Governor on April 13, does not mention key NRRA reforms such as single-state compliance, single-state broker licensing or specifically mention single-state tax payments. However, it taxes at the Colorado rate unless the Commissioner elects to join a tax sharing compact or agreement, in which case the compact or agreement will establish the allocation methodology.

The bill authorizes the Commissioner to enter into a tax sharing agreement if its purposes are limited to facilitating the allocation of premium taxes, adopting uniform requirements for the collection and allocation of premium taxes and coordinating the reporting of premium taxes.

The bill defines affiliate, affiliated group, control, home state and nonadmitted insurance consistent with the NRRA, but does not contain definitions from the NRRA regarding  exempt commercial purchasers and qualified risk managers. It does provide that an insurer must meet NRRA eligibility requirements or separately apply for and be placed on the states list of eligible insurers.

Colorado did not implement NRRA legislation in 2011, such that it has taxed only the in-state portions of a risk after the effective date of the NRRA. Comprehensive information on 2012 legislation in Colorado and other states is available on NAPSLO's website, in addition to a number of NRRA resources.

Kentucky Updates NRRA Related Legislation

Kentucky has enacted SB 295 to update its surplus lines code to add provisions to conform to the  Nonadmitted and Reinsurance Reform Act (NRRA). Specifically, H 295 adds NRRA definitions of  admitted insurer, affiliate, exempt commercial purchaser and home state to Kentucky's surplus lines code.

H 295 also uses NRRA criteria for surplus lines insurer eligibility but did not include NRRA definitions of affiliated group, control, premium tax, qualified risk manager or state.  Kentucky passed SLIMPACT in 2011 and H295 was necessary to update the surplus lines code to be consistent with the NRRA.

In addition to the NRRA terms, the law, signed by the Governor on April 11, has additional reforms in that it eliminates the underlying license requirement for a nonresident surplus lines broker. It also limits the bond requirement to be applicable only to resident surplus lines brokers.

The new law does not mention tax sharing but the 2011 legislation adopted SLIMPACT, which authorized tax sharing should SLIMPACT becomes operational. SLIMPACT is not yet operational because it requires a minimum of 10 states and only 9 have passed SLIMPACT at this time. This bill also does not address the use of the other state's tax rates for a multi-state risk but the SLIMPACT Commission has indicated it intends to use the other states rates, at least for property insurance.

Kentucky law previously allowed the Commissioner to declare a surplus lines insurer ineligible, but an amendment in H 295 indicated the Commissioner shall mail notice of ineligibility if the Commissioner believes that a surplus lines insurer no longer meets the standards.  It is not clear if the bill limits the Commissioner's ability to declare an insurer ineligible for any reason other than failure to comply with NRRA eligibility standards.

Comprehensive information on 2012 legislation in Kentucky and other states is available on NAPSLO's website, in addition to a number of NRRA resources.

Tenant’s Improvements to the Premises

A common circumstance surrounding commercial leases involves the tenant making alterations, or improvementsto the rented premises. A strip mall retail location could be used for many different types of tenants. It is unreasonable to assume that the premises is already set up to handle any type of tenant from a clothing store to a restaurant. For example, a new tenant might have to build partitions, add refrigeration or install a kitchen.

The commercial property policy defines improvements and betterments as “fixtures, alterations, installations or additions that are made a part of the building that is occupied but not owned by the named insured, and that the named insured acquires or makes at his expense but cannot legally remove.” Since business personal property coverage insures the tenant’s “use interest” in improvements and betterments located at the rented premises, the amount of these improvements should be calculated into the limit you choose for your business personal property.

Surplus Lines Law Group Meeting Set for March 26-27 in San Francisco.

The 2009 Winter Meeting of the Surplus Lines Law Group will take place on March 26-27, 2009 in San Francisco.

A welcome reception and dinner will take place on Thursday evening, March 26th and the meeting begins on the morning of Friday, March 27th at the Stanford Court Marriott, 905 California Street. The meeting will conclude after a buffet lunch at noon.

Online registration is available for the meeting through Lewis Brisbois Bisgaard & Smith LLP and an invoice will be sent out to the address provided after the event is complete. Invoice amounts will vary depending on which activities selected.

A limited number of rooms at the Stanford Court are available at a daily rate of $199 and reservations can be made through the hotel’s central reservations department at 415-989-3500. Mention the “Surplus Lines Law Group” to get the discounted rate. You can obtain additional information about the hotel is available through the hotel's website.

New ATV Registration Law in Ohio

Golf cart, ATV, and off-road vehicles are now subject to Ohio’s new mandatory registration which became effective 7/1/2009.

Please be aware of the new law and the need to have proof of registration with the Ohio Bureau of Motor Vehicle (BMV) for your recreational vehicle(s) before operating them on an Ohio roadway and now, thanks to the new law, Off-Road on Public and Private lands. (Note: Certain exemptions are still in place for usage on your own property or operations relating to agricultural use.) This new law and proof of registration will probably now also impact on how these vehicles are covered under standard ISO Homeowner insurance policies.

Most Homeowner policies do not cover usage on the roadways for these types of vehicles and this new law will probably change the way limited coverage has been offered off-road for these previously classified “unregistered” vehicles.

If you own an ATV, Golf Cart or Off-Road Motorcycle, please contact us to review the benefits of specialized Motorcycle and Off-Road Vehicle coverage.

Link to LAWriter Ohio Laws and Rules for new law 4519.02 Registration required - exceptions wording @ http://codes.ohio.gov/orc/4519.02

We Are Hiring! NAPSLO Has Director of Government Relations Opening in Kansas City

The National Association of Professional Surplus Lines Offices, Ltd. (NAPSLO) currently has an opening for a Director of Government Relations in its Kansas City, Missouri headquarters office.

The primary goals of this open position are to: (1) implement an effective government relations and legislative advocacy program to achieve the Association’s federal and state legislative and regulatory goals as directed by the Board of Directors, Executive Committee, Legislative Committee and management; (2) provide high-quality support of all NAPSLO member inquiries and assist NAPSLO members in their regulatory compliance efforts at the state and national level by disseminating relevant information and developing a comprehensive network of compliance contacts from within the NAPSLO membership, establishing NAPSLO as a premier regulatory compliance resource; (3) enhance the level of support to the NAPSLO PAC and raise awareness of its benefits to the membership; (4) augment the effectiveness and teamwork of the NAPSLO staff by providing strong leadership, membership service, strategic planning and project management skills; and (5) enrich the quality and quantity of NAPSLO’s work product, information and services to members.

A more complete description of the Director of Government Relations position is available for download.

 To apply for this position, please submit your resume to cheryl@napslo.org.

Auto Liability Basics

Auto insurance liability limits come in a few different forms as well as in many different levels. The two main forms of auto insurance liability are “Split Limits” and “Combined Single Limit”. One main thing to first understand about auto insurance liability limits is that these limits are what’s used by the insurance company to pay out on your behalf the damages that you cause to someone’s body and or property. Auto insurance liability limits are not used to pay money toward your injuries or property damage. Those coverages are auto insurance medical payments coverage, comprehensive coverage, collision coverage and uninsured/underinsured motorist coverage. We will not be addressing those items in this blog post.

Split Limits have three different ceilings or maxes that the insurance policy will pay out. Those three different maxes are “bodily injury per person”, “bodily injury per accident” and “property damage”. Often you will see insurance policies with split limits of $250,000 bodily injury per person and $500,000 bodily injury per accident and $100,000 in property damage. What this means is that if you cause an auto accident the most that one individual will get for their bodily injuries is $250,000 from your insurance policy. If there are multiple people in the other party’s vehicle then the most the policy will pay out is $500,000 in bodily injury to all involved. Accidents that you cause will usually result in property damage to others and $100,000 is the max that the above example limits will pay for someone else vehicle or property.

Combined Single Limit still covers bodily injury and property damage but there is only one lumped together limit for the policy. For example if you have a $500,000 combined single limit policy than the most the other party will receive for their bodily injuries (no matter how many people are in the vehicle) and property damage that you cause is $500,000. There is not a per person limit sublimit nor a property damage sublimit.

There are many different levels of auto insurance liability limits you can have. Each state has a minimum which means you at least have to have the amount they require in order to legally operate a vehicle. This limit is usually very low and in order to best protect your assets and help restore people that you cause injury and damage to we recommend much higher limits of insurance. Obviously the higher the limits of insurance you purchase the more money the insurance policy will cost but extra money you spend could be the difference in protecting your assets after a large claim or have the possibility of losing some of your assets.