3,000 Registered for Convention & Marriott Rooms Still Available

Registration for the annual convention has now reached 3,000, and hotel rooms are still available at the Marriott.

There is still a small quantity of hotel rooms remaining at the San Diego Marriott Hotel & Marina. Remember to register for the convention and book your hotel room as soon as possible to ensure your accommodations.

You can still register online at http://annual.napslo.org/ and choose the Register Online link along the left column. Here you will be able to register for the Convention and will be provided a hotel reservation link to reserve your hotel room.

You must be registered for the Convention to reserve a room and NAPSLO reserves the right to cancel any rooms registered under the NAPSLO hotel room block reserved by non-attendees.

New Healthcare Landscape for Businesses under the Affordable Care Act

Rachael Jeanfreau analyzes how the Patient Protection and Affordable Care Act, having recently survived the Supreme Court (mostly) intact, will affect employer-sponsored health plans and potentially increase healthcare costs.

Rachael Jeanfreau
rachael.jeanfreau@bswllp.com
504.584.5467

Rachael Jeanfreau is an associate in the New Orleans office, practicing in the areas of labor and employment law and commercial litigation. Ms. Jeanfreau received her Juris Doctor from Tulane University Law School, magna cum laude, in 2011 where she was a member of the Tulane Law Review. She received her Bachelor of Arts from Louisiana State University, summa cum laude, in 2007.

Rachael Jeanfreau's profile

On June 28, 2012, the Supreme Court upheld key provisions of the Patient Protection and Affordable Care Act (ACA), signed into law by President Obama in March 2010. Although the Court struck the Act’s Medicaid expansion provision, it upheld the individual mandate, the key feature of the Act. The Act includes several provisions that will affect employer-sponsored health plans and also mandates several new requirements for employer healthcare plans that will increase employers’ costs.

Certain provisions have already gone into effect as of September 23, 2010, such as the requirement that adult children may stay on their parents’ healthcare policies until the age of 26. For all plans created after the law was enacted in March of 2010, young adults are eligible for coverage regardless of: whether they reside with a parent, their financial dependency, their eligibility to enroll in their employer’s plan, and student and marital status. However, until 2014, certain employer plans that existed before the law’s enactment (“grandfathered plans”) are not required to provide young adults coverage until age 26 if they qualify for coverage under an employer-issued plan. Currently, the ACA also prohibits lifetime limits on the dollar amount of coverage and imposes restrictions on annual coverage limits, which limits will be prohibited beginning in 2014. Further, for plans issued after March 23, 2010, insurers cannot deny coverage to dependent children of plan participants because of pre-existing conditions. Beginning in 2014, this practice will be banned as to all insured individuals. The ACA also requires all new policies created post-March 2010 to cover the cost of most preventive without cost-sharing.

The Act will change the insurance environment.

The Act will also change the insurance environment through its creation of Health Benefit Exchanges. By January 1, 2014, the Act requires the States to establish “Health Benefit Exchanges,” one for individuals and one for small employers with 100 or fewer workers. In 2017, the States may choose whether to open the exchanges to large employers as well. Employees may opt out of the employer’s plan and choose to participate in the exchange. Those who opt out of the employer’s plan may receive a tax credit if the employer’s coverage is not affordable, i.e., (1) if the employee’s required contribution to the insurance premium is greater than 9.5% of his income or (2) if the employer plan pays less than 60% of the cost of covered care, the ACA’s standard of “qualified coverage.”

In addition, the ACA introduces other new regulations and reporting requirements that may increase costs on businesses. As of 2018, employers will be required to pay an excise tax of 40% on high cost health insurance that exceeds a certain cap. The cap has been set initially at $10,200 for individuals and at $27,500 for families. Effective 2013, contributions to flexible spending accounts will be capped at $2,500. As of 2014, employers with more than 200 full-time employees to automatically enroll all new full-time employees in the employer’s health insurance plan. The Act also contains new disclosure and reporting requirements. For example, for new plans, employers must offer an external appeals process for employee appeals of benefit decisions, and beginning in 2012, employers must report the cost of employer-sponsored health insurance on employees’ W-2 statements.

Other costs include an annual fee on health insurance providers effective 2014, an annual fee on manufacturers and importers of brand-name pharmaceuticals effective 2011, and an excise tax on manufacturers and importers of certain medical devices effective 2013.

Under the Act, employers with more than 50 full-time employees or their equivalent will be required to offer healthcare coverage to their full-time employees or pay a penalty.

Notably, as of 2014, “large” employers with more than 50 full-time employees or their equivalent will be required to offer healthcare coverage to their full-time employees or pay a penalty, and full-time employees are defined as those who work at least 30 hours per week. Two basic rules affect employers’ obligations under this system. First, if a large employer does not offer healthcare coverage that complies with certain standards to all full-time employees, and any employee obtains tax-subsidized coverage on an individual exchange, the employer must pay $2000 for every full-time employee, not counting the first 30 employees. Second, if an employer offers coverage but the plan is not affordable (i.e., it does not cover 60% of the cost of covered expenses or if the employee’s contribution for single coverage is greater than 9.5% of the employee’s income), the employee can receive tax-subsidized coverage on the exchange; if this occurs, the employer must pay a $3000 penalty for that employee.

Small employers with 25 or fewer employees and wages of $50,000 or less per employee are eligible for a tax credit if the employer offers health insurance and pays at least 50% of the premium cost. For firms of no more than 10 workers and wages of $25,000 or less per employee, the maximum credit is 35% of the employer’s contribution for tax years 2010 through 2013 and 50% for tax years 2014 and 2015. As employers increase in size and wages per employee, the credits decrease, and none are available after 2015.

Even so-called "grandfathered" plans are still subject to certain requirements under the ACA.

Some of the new rules will not apply to “grandfathered” plans, defined as individual or group health plans in effect before the Act was enacted on March 23, 2010. For example, employers with “grandfathered” plans may require employees to pay a share of preventive healthcare costs and are not required to establish the appeals procedure to review employee claims. They are also not subject to the Act’s new requirements regarding patients’ choice of health care providers and access to emergency care. Nevertheless, even grandfathered plans may not impose lifetime dollar limits on coverage or cancel coverage because of an “honest mistake” on an insurance application. In addition, grandfathered employer, but not individual, plans may not deny children coverage based on pre-existing conditions.

However, to maintain “grandfathered” status, an employer may not: change insurers, significantly reduce benefits, decrease employer contributions by more than 5%, raise copayment charges by more than $5 (adjusted each year for inflation), raise deductibles by a certain percent, increase co-insurance charges, or impose a new or harsher annual limit.

In light of these changes to the healthcare landscape, employers should consult with their insurance brokers to develop a plan for the future and with their legal counsel to ensure compliance with the Affordable Care Act.

NAPSLO internship program in the news

The NAPSLO internship program is featured in a recent story in Insurance Business America, where it is cited as an industry best. You can read the full story here.

NAPSLO summer internships are paid and awarded to college students interested in an insurance career. Interns spend nine weeks with NAPSLO member firms learning all aspects of the surplus lines insurance industry. Interns receive a competitive salary from their host firms and NAPSLO provides a stipend, covers travel, housing and various other related expenses. Interns also compete for additional internships in London and Bermuda that takes place the following summer.

The application deadline for the 2015 NAPSLO Internship Program will be October 15, 2014. A  brochure is available on-line for more information about the program.

Registration Underway for Advanced School

Registration for the NAPSLO Advanced School is now underway and materials are being mailed or are available to download from the NAPSLO website.

The 2009 Advanced School is set for November 7-10, 2009 in St. Louis, MO and offers a comprehensive look at surplus lines and provides the opportunity to meet with others in the industry. Up to 12 hours of continuing education credit, depending on course, will be available.

The sessions will take place at the Eric P. Newman Education Center, which is located within walking distance of the Parkway Hotel, where attendees stay.

The Advanced School is designed for insurance professionals with more than five years experience in the surplus lines industry. Persons with less than five years surplus lines experience are encouraged to attend the NAPSLO E&S School, offered each Summer, however completion of the NAPSLO E&S School is not a prerequisite.

Registration deadline is October 1 and applicants must work for a NAPSLO or AAMGA member firm.

NAPSLO Visits Capitol Hill

NAPSLO Executive Director Richard Bouhan and Maria Berthoud, Vice President of B&D Sagamore, NAPSLO's new lobbying representative, were on Capitol Hill in late July to meet with a member of the House Financial Services Committee.

Mr. Bouhan and Ms. Berthoud met with Rep. Dennis Moore (D-KS) to discuss several issues and also interviewed Rep. Moore for a section of a new legislative video to be shown at the Legislative Breakfast at the NAPSLO Annual Convention in September.

The House Financial Services Committee will be reviewing the State Modernization and Regulatory Transparency Act (SMART Act) this year. In discussions with legislators, NAPSLO has outlined its preference for national standards, which would be implemented by the states, as opposed to federal regulation.

The Senate is considering a separate bill and B&D Sagamore provided a background paper on the proposed National Insurance Act (NIA), which contains the framework for an Optional Federal Charter, which would allow an insurer to write insurance in all 50 states without the burden of satisfying each state's licensing requirements, rate and form regulations, and other standards.

Copies of the background paper and a summary of the Act are available for download from the NAPSLO website.

Surplus Lines Stamping Offices Report Premiums Down 11.1% in First Half of 2010

Surplus lines premiums reported by the 14 stamping offices declined by more than $1 billion, or 11.1 percent, in the first half of 2010, however the number of items processed only dropped by 1.6 percent, according to a report by the Surplus Lines Stamping Office of Texas.

Overall the stamping offices reported approximately $9.16 billion in premium volume for the first six months of 2010, compared to $10.3 billion for the same time period in 2009.

Only four states (Idaho, Minnesota, Mississippi, and Oregon) reported increases while seven states reported decreases of more than 10 percent. Montana’s stamping office closed in 2009 so did not report any premium in 2010. Florida reported the most premium at $2.35 billion, followed by California at $2.25 billion.

Illinois, Minnesota, Mississippi, Nevada and Oregon reported increases in the number of items processed by the stamping offices. Texas and New York reported decreases in items of less than 1 percent.

A copy of the report is available to download.

Watch Live Now! State of the Insurance Industry: Examining the Current Regulatory and Oversight Structure

Click here to be directed to the link regarding the testimony of the State of the Insurance Industry: Examining the Current Regulatory and Oversight Structure. Then choose "watch the hearing live". You must have Real Player software to view this live web cast.

Witness Testimony

Panel 1

Honorable Steven M. Goldman , Commissioner, New Jersey Department of Banking and Insurance, on behalf of the National Association of Insurance Commissioners

Mr. Travis B. Plunkett , Legislative Director, Consumer Federation of America

Mr. Alessandro Iuppa , Senior Vice President, Zurich North America, on behalf of the American Insurance Association

Mr. John L. Pearson , Chairman, President, and Chief Executive Officer, The Baltimore Life Insurance Company, on behalf of the American Council of Life Insurers

Panel 2

Mr. George A. Steadman , President and Chief Operating Officer, Rutherfoord Inc., on behalf of the Council of Insurance Agents & Brokers

Mr. Thomas Minkler , President, Clark-Mortenson Agency, Inc., on behalf of the Independent Insurance Agents & Brokers of America

Mr. Franklin Nutter , President, Reinsurance Association of America

Mr. Richard Bouhan , Executive Director, National Association of Professional Surplus Lines Offices

NAPSLO Testifies Before House Subcommittee

Representatives of NAPSLO and other industry groups testified during a hearing of the Subcommittee on Insurance, Housing and Community Opportunity this morning on “Insurance Oversight: Policy Implications for Consumers, Businesses and Jobs” and a video copy of the testimony has been posted on the House Financial Services Committee website.

Special Limits in Your Homeowner Policy

Your homeowners insurance policy places limits on certain types of property. In your policy there is a section titled “Special Limits on Certain Property.” This section will list various items and place a dollar limit on each type of property- such as jewelry, fine arts, guns or money.

Why do insurance policies contain such provisions? The homeowners insurance policy is written to provide coverage for the average policy holder. Most of us do not own collections or keep large amounts of cash at our homes. While the policy provides some limited coverage for special types of property, it in no way serves the needs of the unique collector.

There is, however, a solution for the collector or owner of unusual property items. It is possible to amend your homeowners policy, by endorsement, to provide special coverage for unique collection items such as coins or stamps. By asking your agent to include a schedule property floater in your coverage, you can specifically insure items of special interest. The personal property floater also expands coverage for perils not included in the homeowner policy.

Prior Approval and Affiliate Examination Authority: NAIC Expands Regulatory Authority under the Model Insurance Holding Company System Regulatory Act

The NAIC has adopted amendments to its model Insurance Company System Regulatory Act that, if adopted by state legislatures, would expand state insurance regulatory authority to examine the affiliates within an insurance holding company system, require prior notice of divestiture of a controlling interest of an insurer in a insurance holding company system and require prior approval of reinsurance pooling agreements.

As noted in a previous article, the National Association of Insurance Commissioners ("NAIC") adopted substantial amendments to its model Insurance Holding Company System Regulatory Act and its Insurance Holding Company System Model Regulation (collectively, the "Model Law") in December of 2010. The amendments, if adopted by the individual state legislatures, would broaden the authority of state insurance regulatory authorities and impose additional requirements on insurers, controlling persons and affiliates within insurance holding company systems such as requiring the annual filing of a Form F "enterprise risk" report.[1]

The amendments authorize state insurance regulators to require annual filing of financial statements of all affiliates within an insurer's holding company system.

Additionally, the amendments to the Model Law authorize the state insurance regulator to require annual filing of the financial statements of all affiliates within an insurer's insurance holding company system. In the event that an insurer is ordered by the state regulatory authority to produce information not in the insurer's possession, the insurer can be penalized and fined under the amended Model Law if it cannot provide a valid reason why it is unable to produce such information. Further, the state insurance regulator may compel the production of information via subpoena or court order.[2]

Significantly, the amended Model Law expands a state insurance regulator's examination authority to include any or all of an insurer's affiliates within the insurance holding company system in order to ascertain the financial condition of the insurer. This includes an examination of any "enterprise risk" to the insurer by the ultimate controlling party, or by any entity or entities within the insurance holding company system, or by the insurance holding company system on a consolidated basis.

Prior notice to the state regulator is required before divestiture of a controlling interest in an insurer.

The amendments to the Model Law require that any controlling person of a domestic insurer, before it may divest itself of its controlling interest in the insurer, must file a notice of proposed divestiture with the state insurance regulatory authority. The acquiring party must also file a pre-acquisition notice. Upon receipt of the notice, the state insurance regulator has thirty (30) days in which it will determine whether the controlling person shall be required to file for and obtain approval for the proposed divestiture.[3]

The amended Model Law also requires the following:

• An annual statement that the insurer's board of directors oversees the corporate governance and internal controls of the insurer, and that the insurer's officers and senior management have approved and implemented, and continue to maintain and monitor, corporate governance and internal control procedures;


• Prior approval of amendments or modifications to any agreements with affiliates (previously approved under the Model Law) with an explanation of the reasons for the change and the financial impact on the insurer;


• Prior approval of all reinsurance pooling agreements; and


• Documents, materials or other information filed with the NAIC under the Model Law shall be confidential and privileged by law, and shall not be subject to public records requests, nor shall such be subject to subpoena or discovery, or admissible as evidence, in any private civil action.[4]

Finally, the amended Model Law includes provisions designed to allow cooperation between state insurance regulatory authorities and regulators outside of the United States with respect to insurance holding company systems that operate in other countries.

1. Top Ten Items to Watch in Insurance Regulation in 2011, Dewey & LeBoeuf, LLP, January 14, 2011.
2. NAIC Adopts Revised Holding Company System Model Act Requiring Enterprise Risk Disclosure, Anthony Roehl, Morris, Manning & Martin, LLP, March 23, 2011.
3. The NAIC model Insurance Company System Regulatory Act.
4. NAIC Adopts Revised..., Id.

Cavalcade of Risk, No. 136 - Riskiest Sports Edition

The Cavalcade of Risk No. 136 is here. The Cavalcade of Risk is a biweekly rotating collection of articles and links (also known as a "blog carnival") from insurance and other-risk-related sources that provides some great information and insight about risk management.

The 136th edition of the Cavalcade of Risk is hosted at My Personal Finance Journey, and features the top 3 riskiest sports in the world.

Did you miss the Cavalcade of Risk No. 135? Check it out here.

Congressional Intent of NRRA is Threatened, NAPSLO Testifies to House Subcommittee

The Congressional mandate of making multistate surplus lines transactions and tax payments more uniform, efficient and streamlined for consumers, businesses and brokers is threatened by the Nonadmitted Insurance Multistate Agreement (NIMA), NAPSLO said in testimony submitted to the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity for a hearing on July 28 entitled “Insurance Oversight: Policy Implications for Consumers, Businesses and Jobs.”

“NAPSLO is increasingly concerned that the NRRA is being implemented in many states (even as promoted by NAIC) in such a way that they’ll make things worse – not better – for surplus lines stakeholders,” said NAPSLO’s testimony. “Unfortunately certain state interpretation and implementation of the NRRA has, in NAPSLO’s view, been inconsistent with Congress’s intent."

The House subcommittee hearing is set for 10:00 a.m. (Eastern) on Thursday and NAPSLO President Letha Heaton will be testifying before the subcommittee as part of an industry panel. A live webcast feed is scheduled to be available from the subcommittee website. Complete testimony and press release on testimony are available to download.

NAPSLO strongly opposes NIMA’s current tax allocation methodology as it is wholly unworkable for the vast majority of the industry, and if implemented will result in new costs and fees levied on surplus lines consumers. As part of its testimony, NAPSLO included comments from brokers on the difficulty they would have in operating under the NIMA allocation system.

NAPSLO urges parties to abandon the NIMA tax allocation methodology and instead adopt one based on state by state premium data from the “Schedule T” section of annual financial statement submitted to the NAIC by surplus lines carriers. Kentucky’s insurance commissioner has proposed a tax allocation formula to allocate taxes based on exposures. While NAPSLO favors a “Schedule T” approach, it also believes the approach proposed by Kentucky presents a workable compromise that would be a vast improvement over the NAIC-NIMA tax methodology.

NAPSLO, PLUS Working Together to Offer Educational Programs to Each Other's Members

The Professional Liability Underwriting Society (PLUS) and the NAPSLO are working together to offer unique opportunities for members of both organizations. PLUS is a nonprofit organization established to support and enrich the careers of people involved in the field of professional liability underwriting.

“PLUS and NAPSLO are two of the most highly respected associations in the insurance industry; both with unique missions and membership, and we have a common interest in providing education and information to our members. This new initiative is designed to enhance both organizations and the value we bring to our members. It once again demonstrates how our industry responds to challenges with the type of innovation that leads to a brighter, more successful future,” said PLUS President, David Bell, Chief Operating and Administrative Officer of Allied World Assurance Company, Ltd.

“NAPSLO is known as the authoritative voice of the surplus lines industry. We are always looking for relationships with other segments of the insurance industry, particularly when it comes to providing educational information, promoting the professionalism of our members and sharing information about the vital role of the excess and surplus lines insurance industry,” said NAPSLO President, John F. Wood, III, President of Specialty Risk Associates. “Our partnership with PLUS will allow for new ways to accomplish our mission and provide value to our members.”

Through this partnership, NAPSLO member companies and their employees will gain access to the PLUS Curriculum, a 23-module collection of professional liability training modules designed for adult learners, and other educational opportunities at its conference and seminars. Concurrently, PLUS will gain the benefit of NAPSLO’s surplus lines expertise through shared presentations, regulatory information, and access to NAPSLO’s educational schools.

The 2009 PLUS Annual International Conference, being held November 11-13 in Chicago, will host a panel presentation featuring a number of experts in the excess and surplus lines industry.
Visit www.plusweb.org or www.napslo.org for more information about efforts to better each organization’s sector of the insurance industry

Technology Group Conducting Survey on Next Steps

The Retail Agent - E&S joint industry technology initiative (led by ACT, NAPSLO, AAMGA and ACORD) is looking for assistance determine priorities for reviewing the next set of supplemental applications to be reviewed for the E&S/specialty/program markets.

Several applications have been reviewed and suggested changes have been forwarded to the ACORD working group charged with developing and modifying forms.

To assist with this effort, the initiative is asking retail agent and brokers, MGAs, wholesale brokers, and E&S or specialty carriers to take a very brief survey to help the working group determine priorities.

Please click the link below to access the survey and also review information on the Retail Agent - E&S joint industry initiative working group and supplemental forms that have been developed to-date - http://www.zoomerang.com/Survey/WEB22AUJRY8TMT.

You can sign up to become a participant in the Initiative through the survey.

NAPSLO to testify before Senate Banking Committee

NAPSLO will testify on Tuesday, July 29 before the Senate Committee on Banking, Housing and Urban Affairs as part of a hearing on “State of the Insurance Industry: Examining the Current Regulatory and Oversight Structure.”

Richard Bouhan, Executive Director, will be a part of a panel with George A. Steadman, President and Chief Operating Officer, Rutherfoord Inc., on behalf of the Council of Insurance Agents & Brokers; Thomas Minkler, President, Clark-Mortenson Agency, Inc., on behalf of the Independent Insurance Agents & Brokers of America; and Franklin W. Nutter, President, Reinsurance Association of America.

Also testifying will be the Honorable Steven M. Goldman, Commissioner, New Jersey Department of Banking and Insurance, on behalf of the National Association of Insurance Commissioners; Travis B. Plunkett, Legislative Director, Consumer Federation of America; Alessandro Iuppa, Senior Vice President, Zurich North America, on behalf of the American Insurance Association; and L. John Pearson, Chairman, President, and Chief Executive Officer, The Baltimore Life Insurance Company, on behalf of the American Council of Life Insurers.

The Banking Committee is reviewing S. 929, the Nonadmitted and Reinsurance Act of 2007 . While Tuesday’s testimony centered on the currently regulatory and oversight structure, NAPSLO has stated its support for S. 929 because it is aimed specifically at streamlining and reducing barriers in state regulation of surplus lines insurance and reinsurance. The bill would create a uniform system, while preserving the role of the state regulator. The House passed a similar version of the bill (HR 1065) in 2006.

NAPSLO Special Report & Legislative Update

NAPSLO issued a Special Report and Legislative Update to provide a special update to note the two-year anniversary of the Nonadmitted and Reinsurance Reform Act (NRRA) and also information on other recent legislative actions and activities.

In addition to the review of the NRRA, other legislative issues covered in the report include NAPSLO approving policy positions on Zero Reporting Requirements and Certificate of Insurance Requirements; its support of federal legislation to reform the National Association of Registered Agents and Brokers (NARAB); and comments on the Federal Insurance Office.

Cavalcade of RIsk No. 162 on Insurance Regulatory Law

Insurance Regulatory Law welcomes back the Cavalcade of Risk for episode 162. The Cavalcade of Risk is a biweekly rotating collection of articles and links (also known as a "blog carnival") from insurance and other risk-related sources that provides some great information and insight about risks and risk management.

Steve Jobs' Lessons on Risk: The Risk Management Monitor interviews Walter Isaacson, Steve Job's authorized biographer, to discuss what lessons that risk managers can take away from Jobs and his life.

5 Ways to Screw Up Your Life Insurance Purchase: Jeff Rose at Good Financial Cents discusses five things you should never do when applying for life insurance.

Why You Don’t Need Long Term Care Insurance: The Free Money Finance blog hosts a guest post from Neal Frankle who suggests one of the best ways to avoid screwing up a long term care insurance policy may be to not purchase one at all.

Life Insurance With Congestive Heart Failure: Newcomer Jeff Root weighs in with an interesting article on the availability of affordable insurance for people who've experienced Congestive Heart Failure.

Young Workers + Injuries + Labor Law Violations = Huge Penalties: Julie Ferguson of Workers' Comp Insider reminds employers who hire young, seasonal workers of a daunting equation: young workers + injuries + labor law violations = huge penalties. She offers tips to avoid this risk and ways to keep first-time workers safe.

Mandated Hearing Aid Benefit for Massachusetts Children: David E. Williams of the Health Business Blog explains why he would trade economic purity for a meaningful, long-term pay-off in a hearing aid benefit bill before the Massachusetts legislature.

Affordable Care Act Surtax on Selling Your Home?: Dennis Wall looks at how a tax buried in the Affordable Care Act could affect a small number of home sellers in 2013.

The next edition of the Cavalcade of Risk will be hosted by Julie Ferguson at Workers Comp Insider, so be sure to check it out.

Stamping Offices Report Drop in Premiums

Surplus lines premiums reported to the 14 U.S. stamping offices dropped by 7.6% in the first six months of 2008, according to statistics recently released by the Surplus Lines Stamping Office of Texas.

Overall premiums reported dropped from $12.307 billion in the first six months of 2007 to $11.373 billion in 2008, for a 7.6% decrease. The numbers of items processed also dropped, however not as much, going from 1,716,626 in the first six months of 2007 to 1,673,453 in 2008, or a 2.5% decrease.

Ten of the 14 states reported a decrease in premiums, lead by Montana at 34.1% and New York at 26%. Idaho, Arizona, Texas and Washington also reported double digit decreases while Florida, Mississippi, Nevada and Utah reported single digit decreases.

Oregon reported a 24.9% increase in premiums, Illinois a 12.6% increase and California and Pennsylvania reported single digit increases. While Pennsylvania saw a 9.5% increase in premiums, the number of items they processed increased by nearly 60%.

For all of 2007, the surplus lines stamping offices previously reported a fluctuation in business with an overall slight increase in premiums but a drop in number of items.

Nevada hopes to profit from insurance pact - NevadaAppeal.com

The Nevada Board of Examiners this week approved joining the Nonadmitted Insurance Multi-State Agreement (NIMA), however the Insurance Department said it would monitor the process and if the state loses money rather than gain, they'll advise the board immediately as the state can pull out of the pact on 60 days notice, according to an article in the Nevada Appeal.

Nevada hopes to profit from insurance pact | NevadaAppeal.com

Surplus Lines Reforms Sponsor Clarifies Intent of Law with Entry in Congressional Record

Rep. Dennis Moore, a main sponsor of the NonAdmitted Reinsurance and Reform Act, which was included in the financial services legislation recently signed into law, entered remarks into the Congressional Record on Thursday to clarify the provisions of the bill impacting surplus lines.

He noted that under the new bill surplus lines premium taxes are to be paid to the "Home State" (and to no other state); that the placement of all nonadmitted insurance, including surplus lines insurance, shall be subject solely to the statutory and regulatory requirements imposed directly by the insured’s ‘‘Home State;" and that States adopt uniform requirements and forms regarding payment and allocation of premium taxes.

The following is Rep. Moore's entry on Thursday in the Congressional Record.

"Madam Speaker, as a House conferee and the chief sponsor of H.R. 2571, the Nonadmitted and Reinsurance Reform Act, that was included in the conference report for H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act, I wanted to make one important clarification of intent on the final language. The President signed the Dodd-Frank Act into law yesterday.

Section 521(a) of the Dodd-Frank Act is intended to require the broker to pay or remit all tax in a surplus lines transaction to the ‘‘Home State’’ of the insured as defined in the Act and to no other state or political subdivision of any state. If other states are to receive a portion of the tax payment, the Act provides that the states may enter into a compact or otherwise establish procedures to allocate among the states the premium taxes paid to an insured’s‘ ‘Home State.’’

Further, it is the intention that as a result of this Act, each State adopt nationwide uniform requirements, forms, and procedures—such as an interstate compact—that provides for the reporting, payment, collection, and allocation of all premium taxes for surplus lines insurance as well as all nonadmitted insurance in the insured’s ‘‘home state’’. Uniformity in the taxation of surplus lines and nonadmitted insurance will be of great benefit to insurance consumers, brokers and the states.

In addition, under Section 522(a) of the Dodd-Frank Act, the placement of all nonadmitted insurance, including surplus lines insurance, shall be subject solely to the statutory and regulatory requirements imposed directly by the insured’s ‘‘Home State’’ and no other state. It is the intention that surplus lines and nonadmitted insurance transactions, particularly when the insurance covers risks in more than one state, be within the sole province of the insured’s ‘‘Home State.’’

Louisiana Changes Broker License Renewal to Biannualy

The Louisiana Legislature and Governor have approved a bill that changes the length of a license for a surplus lines broker from being renewed annually to biannually.

Senate Bill 669 goes into effect on August 15 and now reads that a "license shall remain in force until the biannual renewal date."

Remember to register for the 2008 Annual Convention!

Remember to register for the 2008 Annual Convention by July 25 to avoid the increase in registration costs. Fees are listed below.

Convention Fees

Delegate $795 ($895 after July 25)

Spouse $395 ($425 after July 25)

Spouse Programs $125 -150

You can still register online at http://annual.napslo.org and choose the Register Online link along the left column. Here you will be able to register for the Convention and will be provided a hotel reservation link to reserve your hotel room.

You must be registered for the Convention to reserve a room and NAPSLO reserves the right to cancel any rooms registered under the NAPSLO hotel room block reserved by non-attendees.

Director Candidate Suggestions Sought

Director candidate nominations are still being accepted by the NAPSLO Nominating Committee in order to assist the Committee in developing the slate of directors to be presented for a vote at the next Annual Business Meeting to be held in conjunction with the 2009 Annual Convention in Orlando, Florida on October 9.

NAPSLO members must submit the candidate names for consideration as director nominees no later than August 26, 2009, but members are encouraged to submit such names as soon as possible. Suggested candidate names may be submitted by NAPSLO members to the committee, in writing, by e-mail at nominations@napslo.org; by postal mail to the NAPSLO office; or directly to members of the Nominating Committee.

The Nominating Committee is chaired by former Past President Bill Newton of RPS Los Angeles (Lemac & Assoc.) and members of the committee are: Dave Leonard, RSUI Group; Hank Haldeman, The Sullivan Group; Tim Makowski, Specialty Lines Underwriters, and Steve Vaccaro, MAX Specialty Insurance Co.

As required by the Association's Bylaws, the Nominating Committee will prepare slates of nominees and submit them to the NAPSLO membership at least 30 days prior to the Annual Business Meeting.

A Social Media Risk Management Tip

My social media risk management tip is simple, think twice before you type a message, post a picture or join a group. Why, you may ask? Think back to the days when kids in grade school would pass notes back and forth during class. Often those notes could have damaging words written on them. They could be words that haunt the person that wrote them, the person who received them or a third party all together. However, the beautiful thing about those written scraps of paper is that they eventually got thrown away and are sitting in a dump far from anyone who could read them. Today those passed notes are now in the form of tweets, texts or Facebook posts. Today, those passed notes could be stored in the Library of Congress. Recently the Library of Congress announced that it would archive all public Twitter posts dating back to 2006.

Yesterday I read a New York Times article titled “The Web Means the End of Forgetting”, written by Jeffrey Rosen. It was a great article and sited a few examples of how those old Facebook or MySpace photo posts or text posts can come back to haunt individuals. The most famous example being Stacy Snyder who lost her teaching job because of a picture she had on MySpace. She even fought the situation in court and after two years of legal battle she lost in a federal district court. Rosen also talks about people who were fired from their jobs because of things they wrote on Twitter. This blog article could go on and on with examples of how things put on social media sites have come back to hurt individuals.

This Oxford and Cincinnati insurance office is not saying never to post on social media or that it is bad. We are just doing our job as risk managers and encouraging you to have fun but to be cautious in what you write or post.

Our 100th Blog Post!

We have now reached 100 posts on the Fey Insurance Services blog. Over the past few years we have posted about a variety of insurance and risk management topics. We have helped to educate businesses and individuals on how to best protect their hard earned assets such as their home, cars, and businesses. We have also give tips on how to stay safe in an ever changing world including tips on online identity safety and how to best prepare your home for the winter months.

Our hope is that you have enjoyed the 99 other posts and found some information that was helpful in each one. For the years to come we will continue to add helpful content so that our clients and readers can enjoy a safe and protected life.

NAPSLO Officials Note Goal of Reforming Surplus Lines Tax Payment Laws Realized; NAPSLO to Host Webinar on Reform Implementation

NAPSLO officials are pleased that the industry’s goal to reform and modernize surplus lines regulation and premium tax laws has been accomplished with the signing on Wednesday of the Restoring American Financial Stability Act of 2010 by President Obama.

"NAPSLO is pleased to see its efforts to establish a more rational and efficient method of paying surplus lines taxes and conducting multi-states surplus lines transactions become a reality. NAPSLO’s goal over the next year is to work with the states as they implement the reforms set forth in this legislation,” said NAPSLO Executive Director Richard Bouhan.

To assist members with the changes, NAPSLO is sponsoring a free webinar on the implementation of the surplus lines provisions of the NRRA on Thursday, August 19 at 1:00 p.m. CDT.

The webinar will review what the reforms mean for surplus lines brokers, carriers and exempt commercial purchasers; explain terms such as “principal place of business;” and discuss the possibility of an interstate tax compact.

Panelists will be Dick Bouhan, NAPSLO; Dan Maher, ELANY; Michael Byrne, Dewey and Leboeuf; Libby Baney, B&D Consulting, and Steve Stephan, NAPSLO. To register for the webinar, click on the following link.

Surplus Lines Industry Enters New Era on Multistate Risks Taxes with NRRA Now Effective

Surplus lines brokers entered a new era on handling multistate risks on Thursday when the Nonadmitted and Reinsurance Reform Act (NRRA) became effective, and representatives of NAPSLO said the change reflects a long campaign to simplify the tax payment process on multistate risks.

"With the NRRA becoming effective on July 21 surplus lines brokers will see a system where there is one state compliance, one state taxation, national standards for company eligibility and national exempt commercial purchaser rules," said NAPSLO Executive Director Richard Bouhan. "These are issues the industry has been working on for a number of years and are pleased to see this law take effect."

While July 21st is an important day for the industry, because of the need to quote policies in advance a number of brokers have already been working under the new law. To assist brokers with the changes, NAPSLO has been providing information on the new law on its website.

“Brokers have been working for quite some time on policies that will be effective on July 21 or after, and so have already been operating under the new NRRA rules," said Mr. Bouhan. "In addition, it has been estimated that up to 95% of all surplus lines risks are single state risks so the NRRA may only impact a limited number of risks"

The NRRA mandates that beginning July 21, 2011 the insured's home state will be the only state with jurisdiction over multistate surplus lines transactions and the only state that can require a tax be paid by the broker. As a result states are bringing their laws into compliance and California and Texas are the most recent states to enact NRRA compliance legislation.

"NAPSLO applauds California and Texas for enacting their bill as it conforms the states' codes to the NRRA," said NAPSLO Legislative Co-Chair Hank Haldeman. "It was important for the largest surplus lines states to bring its laws into compliance prior to the NRRA's effective date."

Overall 43 states passed legislation to bring their state laws into compliance with the NRRA; three states (Iowa, Illinois and Colorado) adjourned without taking action; and four states (Michigan, Wisconsin Massachusetts, and South Carolina) and the District of Columbia have not passed any legislation. Of the 43 states, three states (Delaware, Oregon, and New Jersey) have approved legislation but the governors have not taken action on the bills.

In addition, six states have signed an agreement to be part of the Nonadmitted Insurance Multistate Agreement (NIMA) and nine states passed Surplus Lines Insurance Multi-State Compliance Compact (SLIMPACT) legislation.

"While a number of states have indicated a willingness to take part in a tax sharing compact, no compact is in operation," said Legislative Co-Chair Dave Leonard. “As of July 21st taxes on all surplus lines policies will be paid to the home state of insured and the home state becomes the sole regulator of the transaction."

Annual Convention Registration Passes 2,000

More than 2,000 people have registered for the 2009 NAPSLO Annual Convention, October 7-10 at the Orlando World Center Marriott, and hotel rooms at the Marriott are nearly sold out. A number of rooms are available at the Caribe Royale Resort, located near the Marriott.

Representatives of NAPSLO member firms may registered for the convention, and reserve a hotel room, through using the link on the NAPSLO Convention site - http://annual.napslo.org.

Nearly 350 Signed up for Legislative Breakfast

Nearly 350 registered attendees of the NAPSLO Annual Convention have signed up for the special Legislative Breakfast on Saturday, September 17 from 8:30 -10:00 a.m. Overall nearly 2,800 people have registered for the convention, set for September 14-18 at the San Francisco Marriott.

Current legislative issues will be reviewed by NAPSLO's new lobbying representative during thel Legislative Breakfast. Maria L. Berthoud, Vice President of B&D Sagamore, which was recently hired by NAPSLO to assist with legislative matters in Washington, will review current legislative activities and NAPSLO's role in the upcoming action regarding the debate over federal standards or federal charters.

Convention attendees need to mark on their registration form that they will attend the breakfast. If convention attendees have already sent their registration forms but did not check that they would attend the breakfast, they can notify Vicky Fleming at vicky@napslo.org that they wish to attend the legislative breakfast.

Form F and Enterprise Risk: NAIC Expands Regulatory Authority under the Model Insurance Holding Company System Regulatory Act

The amended model Insurance Holding Company System Regulatory Act, if adopted by state legislatures, will significantly expand the scope of state insurance regulatory authority over insurance holding company systems, including controlling persons and affiliates.

In December of 2010, the National Association of Insurance Commissioners ("NAIC") adopted substantial amendments to its model Insurance Holding Company System Regulatory Act (the "Model Act"). The amendments significantly broaden the authority of state insurance regulatory authorities under the Model Act, and impose additional requirements on insurers, controlling persons and affiliates within insurance holding company systems.

The NAIC is seeking to add the provisions to its accreditation standards for state insurance departments.

The provisions of the Model Act are only effective if adopted by the individual state legislatures. However, the NAIC is moving to include the amendments as part of the national accreditation standards for state insurance departments, increasing the likelihood that state lawmakers will adopt the Model Act provisions.

The Model Act amendments are a response to concerns that insurance regulators previously lacked the necessary authority to oversee and intervene with respect to activities within an insurer's holding company system that might pose material risks to the insurer. Many of these concerns were inflamed by the financial difficulties recently experienced by certain affiliates of the AIG insurance holding company system.[1]

The new Form F is one of the most significant amendments to the Model Act.

One of the most significant amendments to the Model Act is the addition of a new annual reporting requirement for insurance holding company systems: the Form F. The newly created Form F requires, among other things, that the ultimate controlling person of an insurance holding company system report any "enterprise risk" within the system, including:

...any activity, circumstance, event or series of events involving one or more affiliates of an insurer that, if not remedied promptly, is likely to have a material adverse effect upon the financial condition or liquidity of the insurer or its insurance holding company system as a whole, including, but not limited to, anything that would cause the insurer’s Risk-Based Capital to fall into company action level . . . or would cause the insurer to be in hazardous financial condition. . .[2]

The Model Act amendments also expand the examination authority of a state insurance regulator to examine the non-insurer affiliates within an insurance holding company system in order to determine what enterprise risks could ultimately impact the insurer. [3]

The amendments move beyond the "walls" that the Model Act originally created, introducing "windows" of reporting requirements and expansion authority.

While the amendments to the Model Act expand its authority beyond providing the "walls" of protection that it was originally designed to create, the amendments stop short of authorizing direct oversight and control of insurance holding company systems like Solvency II. Instead, the amendments add "windows" of reporting requirements and examination authority with respect to controlling persons and affiliates such that insurance regulators have increased oversight of activities that could pose enterprise risks to regulated insurers.[4]

Enterprise Risk Reports must contain detailed information, including: (i) a description of the holding company’s business plan and strategies; (ii) material developments concerning risk management and internal audit findings; and (iii) rating agency and other discussions that could reflect potential "negative movement" in an insurer’s ratings.[5]

However, the question remains as to exactly what remedies that state insurance regulators will bring to bear against the so-called enterprise risks.

Whether insurance regulators will try to use traditional remedies such as conservation or rehabilitation of the insurer itself to remedy these potential enterprise risks is a significant concern.

To what extent the judiciary will allow state insurance regulators to exercise authority over non-insurance company affiliates within insurance holding company systems remains to be seen. The alternative remedies are those tools traditionally available to state insurance regulators, such as exercising conservation or rehabilitation authority over the insurer itself. Just such an option was proposed by at least one state insurance regulator when questions arose as to how the AIG insurance subsidiaries might be "protected" from the financial difficulties within that system. The extent to which this "solution" might actually do more harm than good is certainly up for debate.[6]

West Virginia became the first state to adopt new laws substantially similar to the Model Act amendments in April of 2011.[7] Texas became one of the first large states to adopt principal provisions of the Model Act amendments in June of 2011.[8]

1. Top Ten Items to Watch in Insurance Regulation in 2011, Dewey & LeBoeuf, LLP, January 14, 2011.
2. The Model Act, §1(F).
3. Top Ten Items to Watch..., Id.
4. Top Ten Items to Watch..., Id.
5. NAIC Adopts Final Changes to Holding Company System Model Act and Regulation, Insurance and Financial Services Update, January 6, 2011, Jeff Liebmann and Mike Goldman, Sidley Austin LLP.
6. Top Ten Items to Watch..., Id.
7. West Virginia Becomes the First State to Adopt the Amendments to the NAIC's Insurance Holding Company System Regulatory Act, Dewey & LeBoeuf, April 7, 2011.
8. Texas Adopts Key Features of NAIC's Amended Model Insurance Holding Company Act; Chadbourne & Parke, LLP, June 28, 2011.

States Still Wary of Surplus Lines Compacts, Business Insurance Article Notes

Most states continue to be wary of participating in either of the competing surplus lines tax agreements, a new Business Insurance article reports.

The article, which includes comments from NAPSLO Executive Director Brady Kelley,  is available from Business Insurance at http://www.businessinsurance.com/article/20120715/NEWS07/307159973?tags=|311|73|303#full_story

NAPSLO Applauds Surplus Lines Reform Bill Approval

The National Association of Professional Surplus Lines Offices -- NAPSLO -- the nation's leading trade association for surplus lines brokers and companies, applauded the passage of the Non-Admitted and Reinsurance Reform Act of 2006 (H.R. 5637), by the House Financial Services Committee, Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises and NAPSLO hopes that the next step is swift floor action on the bill.

The Subcommittee passed the bill on Wednesday, sending it to the full committee for review. The bill, introduced by Reps. Ginny Brown-Waite (FL) and Dennis Moore (KS) on June 19, would improve and streamline the regulation of non-admitted insurance and reinsurance. In June, Richard Bouhan, Executive Director and General Counsel for NAPSLO, testified in support of the bill and on Wednesday said he was happy to see the bill moved out of the subcommittee.

“NAPSLO is pleased to see that the HR 5637 has been passed out of the subcommittee and hopes it will be passed by the full committee and Congress,” Mr. Bouhan said. “We believe it is the right bill at the right time. This legislation will bring much-needed relief to the complex and confusing surplus lines regulatory process, and we are grateful that many of NAPSLO's concerns are directly addressed in the bill.”

Many of the bill's provisions, including the creation of a uniform system of premium tax allocation and remittance, uniform standards for producer licenses, one-state compliance on multi-state surplus lines risks, and direct access to the surplus lines market for sophisticated purchasers are concepts long endorsed by NAPSLO.

"We believe that this legislation will significantly increase the level of efficiency for surplus lines insurance, particularly across multiple jurisdictions, for everyone involved in the non-admitted market, from the companies down to the consumers,” Mr. Bouhan said. We appreciate the efforts of Rep. Brown-Waite and Rep. Moore and also Chairman Richard Baker’s leadership on this issue, for making insurance regulatory reform a priority."

A complete copy of Mr. Bouhan’s testimony is available on the Legislation/Regulation section of the NAPSLO website (www.napslo.org), under the NEWS heading.

Cyber Liability Insurance

As absolute dependence on computers and computer stored information grows there are new ways companies can be sued by third parties for damages.  When private information such as dates of birth, social security numbers, credit card numbers, etc are stolen off of your business' computer systems, it is called a data breach, and they are very costly to manage.  The insurance industry has calculated this cost to be about $200 per individual whose information was taken.  Also, if a malicious virus is distributed from your computer to a customer’s computer system and causes damage, you could be held responsible for cost to repair their system.  Your basic general liability policies are not designed to pay for such claims so many times when businesses look to their business policies the coverage is not there to help with these expenses.  Because of that, insurance companies have developed a new product called cyber liability.  It is designed to step up and pay for the third party damages caused by your data breaches and damage by viruses to other’s computer system.

So what kinds of business should be looking into this new cyber liability products?  Any business with a computer, especially one that stores or interacts with any private information or distribute emails to others should look into this product.  Restaurants and retail stores that take credit cards, professional business that store dates of birth, driver’s license numbers and social security numbers, even doctors’ offices are at risk for the types of claims mentioned above.  Unfortunately, even if a business has the best firewalls and antivirus software, they still are at risk of data breaches and malicious viruses.  Cyber liability is something designed to help protect your business assets if an unpreventable claim strikes.

Texas Passes NRRA Legislation Focusing on Compliance, Tax Payment

The Texas Governor has signed into law Nonadmitted and Reinsurance Reform Act (NRRA) compliance legislation. Texas is among the latest state to enact NRRA related implementation legislation. During the session NAPSLO provided draft legislation, offered comments and spoke with representatives of the department of insurance.

The NRRA mandates that beginning July 21, 2011 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 bringing their laws into compliance.

SB1, in part, amends the surplus lines premium tax and independently procured tax statutes (Sections 225 and 226, Texas Insurance Code) to conform with the provisions of the NRRA. The bill adds definitions for “affiliate,” “affiliated group,” “control,” “home state,” and “independently procured insurance.” It also provides that Texas may not impose a tax on nonadmitted insurance other than premiums paid for insurance in which Texas is the home state of the insured.

SB1 further enables Texas to tax 100% of multi-state risks, where it is the home state, in the event Texas does not join a tax compact. If Texas does join a tax compact, SB1 authorizes the state to allocate taxes in accordance with the terms of the agreement. SB1 refers to existing statutes for the authorization to enter a tax compact.

New Hampshire increases surplus lines tax from 2% to 3%

New Hampshire announced that an increase in the surplus lines tax from 2% to 3%, effective July 1, 2010.

In addition in May the New Hampshire Insurance Commissioner transferred the electronic Surplus Lines submissions of forms and payment processing operations to OPTins (Online Premium Tax for Insurance), a product of the National Association of Insurance Commissioners ("NAIC").

South Carolina Gov. Signs NRRA Legislation

On June 29, Governor Nikki Haley of South Carolina signed Senate Bill 1419  into effect, bringing the number of states to implement NRRA legislation up to 49. The new law incorporates most NRRA terms and authorizes the Director of the Department of Insurance to collect and retain surplus lines tax on 100 percent of the premium of risks in which South Carolina is the home state. While NAPSLO recommended South Carolina more clearly utilize the home state definition throughout the legislation, it does include the home state definition consistent with the NRRA. It also authorizes the Director to participate in a clearinghouse arrangement with other states, subject to approval by South Carolina’s General Assembly; however, we are not aware of any specific plans for South Carolina at this time.

In the event a state for whom South Carolina has potentially collected premium taxes is not a member of the Compact, South Carolina will retain its tax at a 6% rate. Therefore, South Carolina becomes the 35th state to implement the home state tax approach now representing near 75% of nationwide premium.

Taxes due shall be remitted to the Department no later than thirty days after March 31st, June 30th, September 30th and December 31st of each year.  The 6% tax rate is a blended rate accounting for state and municipal taxes. The Department will continue to be responsible for submitting a portion of the collected tax to the appropriate municipality on an annual basis.

South Carolina did not accept NAPSLO’s recommendation to fully incorporate the insurer eligibility provisions of the NRRA. Instead, the bill provides that, at the request of a licensed resident broker, the Director may approve certain nonadmitted insurers as eligible surplus lines insurers to write business on risks located in South Carolina that one or more South Carolina licensed insurers have declined to write. It also allows the Director to require additional documents to maintain the insurers' status as an eligible surplus lines insurer.

With South Carolina’s law,  Michigan and Washington, D.C. are the only jurisdictions who have not  yet introduced NRRA legislation to clarify the national NRRA landscape. We have no word yet on when we might see legislative action in those states, but the continued growth in home-state taxation continues to be positive and beneficial for surplus lines brokers.

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

California Enacts NRRA Legislation; Law Doesn't Address Compact, Sharing Premium Taxes

California has enacted Nonadmitted and Reinsurance Reform Act (NRRA) compliance legislation that authorizes the imposition of surplus lines premium tax and independent procurement tax on 100% of premium, however the bill does not addresses compacts or sharing  premium taxes with other states.

California is among the latest states to enact NRRA related implementation legislation. During the session NAPSLO provided draft legislation, offered comments and met with legislators and representatives of the department of insurance.

The NRRA mandates that beginning July 21, 2011 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 bringing their laws into compliance.

California's bill, A315, authorizes the imposition of surplus lines premium tax and independent procurement tax on 100% of the premium, however, as amended, the bill does not addresses sharing premium taxes with other states.

The bill proposes what is essentially an "A" list/"B" list approach to eligible surplus lines insurers. The "B" list appears to follow the NRRA mandated standards, however requires B list insurers to file a number of documents with the Department (e.g., certificate of capital and surplus issued by the insurer's domiciliary jurisdiction, certified copy of the insurer's license, etc.). Obtaining "A" listed status would entail all of the burdens of current eligibility in California.

The bill does include the NRRA definition of exempt commercial purchaser (ECP) concept and allows free export of ECP business subject to the conditions set forth in the NRRA. The bill further requires brokers to undertake additional record keeping requirements related to NRRA. Brokers will now need to record the insured's home state, if an ECP, verify that the insured qualifies as an ECP, determine whether the risk is single state or multistate and if multistate, allocate premium taxes even though there are no provisions for sharing of taxes with other states.

The amended version notes that "if a new or renewal policy has an effective date between January 1, 2011, to July 20, 2011, inclusive, and is placed on or before July 20, 2011, then the policy shall be considered to be business done by the surplus line broker as of the effective date. If a new or renewal policy has an effective date between January 1, 2011, to July 20, 2011, inclusive, then the policy shall be considered to be business done by the home state insured who directly procures policies as of the effective date."

Louisiana Governor Seeks to Privatize State Worker Health Insurance Program

Louisiana Governor Bobby Jindal is seeking a financial advisor to aid his administration in determining whether privatizing one of the insurance plans of the Louisiana Office of Group Benefits would lower the state's costs of running the program.

Barclays Capital, Goldman Sachs and Morgan Keegan are all vying to advise Governor Bobby Jindal in his efforts to privatize one of the insurance plans of the Louisiana Office of Group Benefits, according to an article from the Associated Press.

Governor Jindal's Division of Administration is seeking a financial advisor to determine the market value of the insurance plan as part of its efforts to engage a private company to manage a health insurance program under the Office of Group Benefits.

About 255,000 state workers, retirees and dependents have health and life coverage through the Office of Group Benefits.

About 255,000 state workers, retirees and their dependents have health and life insurance coverage through the Office of Group Benefits, and some of the insurance plans are already administered by private companies. The Jindal administration's proposal would result in privatizing the management of the insurance coverage of about 62,000 of those employees, retirees and their dependents.

The possible privatization is spurring fears of increased premiums and decreased benefits for thousands of state workers, retirees and dependents. Jindal contends the change could save the state money without negative repercussions to health plan enrollees.[1]

Notably, the privatization proposal is opposed by the Group Benefits Policy and Planning Board, a 16-member panel that advises the Office of Group Benefits. The Board is made up of professionals from the private and public sector, representing the state’s active and retired employees from higher education to local school boards, the insurance sector, the governor and the Louisiana Legislature.

According to the Associated Press article, the Board's Chairman James Lee suggested that Jindal's proposal was raising fears that benefits will diminish and worker costs would increase.

Jindal maintains that the possible benefits of privatization are "worth at least doing the analysis" to determine whether privatization makes sense. The financial advisor will assist the Jindal administration in that analysis.

Read the full article:

La. gov to choose adviser on insurance management
Associated Press | Bloomberg | BusinessWeek.com
July 7, 2011

1. La. gov to choose adviser on insurance management, Associated Press, July 7, 2011.

Washington Changes Surplus Lines Code

The state of Washington has made changes to the states surplus lines codes, effective July 1, 2009. EHB 1568—Producer Licensing, which was signed into law by the governor, addresses surplus lines brokers in the context of on-going producer licensing reforms that have been approved in recent years. The bill makes the following changes:

• The measure prohibits certain practices for surplus line brokers.
• It applies a number of statutes to surplus line brokers, and makes a number of language and grammatical changes the provisions relating to surplus lines brokers.
• Minimum bonding amounts in the name of the state or a named insured for liability are modified.
• A surplus line broker must have bonds in the amount of $2,500, or 5 percent of premiums in the previous year—whichever is greater. This amount is capped at a maximum of $100,000.
  
• Additional methods to satisfy the bonding requirements are created.
• Provisions regarding the renewal of a license and the impact of late renewal or of renewing a lapsed license are added.
• A number of sections that currently apply to producers are also specifically applied to surplus line brokers.
  

Driving Drowsy

A 2008 study, taken from the Annals of Internal Medicine, suggest that some antihistamines may impair driving ability, even more than alcohol. The driver doesn’t even have to feel drowsy.

Forty study participants, when given diphenhydramine and an amount of alcohol to boost their blood alcohol level to .10 (legally impaired in most states), tested worse in a driving simulator when under the influence of antihistamine than under the influence of alcohol. A newer non-sedating antihistamine, Allegra, did not affect driving any more than the placebo given in a blind test screen.

The Asthma and Allergy Foundation of America estimates there are 50 million allergy sufferers in the United States. Allergies account for more than 17 million outpatient physician visits each year. Since the 1940s, antihistamines have been among the most widely prescribed medications. It is estimated that currently there are 30 million patients in the United State taking regular antihistamine medications in this $8 billion drug market.

If you have taken antihistamines, ask your doctor if a non-sedative prescription will work for you.

Washington drops non-resident surplus lines exam requirement

Under a "Rule Making Order" dated July 2, 2008, non-residents are no longer required to pass an examination to obtain a surplus lines license from the state of Washington. The new rule becomes effective on Aug. 2, 2008. Washington was one of the last states to continue to require an exam for non-resident surplus lines broker licensing.

According to the order the change was necessary to align the states requirements for holding a surplus lines brokers license with national standards.

Surplus Lines Stamping Offices Report 9.4% Premium Drop in First Half of 2009

Surplus lines premiums dropped more than 9 percent in the first half of 2009 among states with stamping offices, according to a new report by the Surplus Lines Stamping Office of Texas.

The report showed that premiums dropped from $11.3 billion in 2008 to $10.3 billion in 2009, with California reporting the largest drop, going from $3.1 billion in 2008 to $2.25 in 2009. As a result Florida, which only saw a 9.1% decline to $2.35 billion, took over as the largest premium volume state.

In additional to California's 27.7% decline, other states reporting double digit declines were Arizona (-17.7%), Idaho (-24.9%), Illinois (-13.5%), Nevada (-27.2%), Oregon (-29.2%), and Pennsylvania (-10.1%).

On the positive side, property increases helped Texas reported a 12.2% increase. Other states with positive numbers were: Montana (44.2%), Mississippi (9.1%), and Utah (2.7%). Montana's increase reflects the closing of the stamping office as of July 1 2,009 when the state took over collection responsibilities.

New York reported a small decline of 1.6%, dropping from $1,811 billion from $1,841 billion and Washington reported a decline of 2.5%. Minnesota's stamping office opened Jan. 1, 2009 and reported $114 million in premium.

While there was a large decline in premiums, the number of policies processed dropped only 2.9% in the first half of the year.

Surplus Lines Reforms Passed by Senate; NAPSLO to Offer Webinar, Website to Explain New Law

Surplus lines insurance consumers and their broker representatives were big winners with the inclusion of surplus lines modernization provisions in the financial service reform legislation passed by the Senate, today. President Obama is expected to sign the legislation, shortly.

For the full benefits of the law to be realized, however, the states must implement the surplus lines reforms in the way Congress has directed, officials of NAPSLO stated.

"These surplus lines reforms represent a nearly decade-long industry effort spearheaded by NAPSLO to modernize and reform surplus lines regulation. With the legislation now approved by Congress, we look to the states to implement its provisions in the way Congress intends and bring about, on a nationwide basis, the anticipated efficiencies in surplus lines regulation and tax payment mechanisms the legislation promises," NAPSLO President Marshall Kath said.

To assist the industry, regulators and legislators with the implementation process, NAPSLO will host a webinar on Thursday, Aug. 19 at 1 p.m. Central to discuss the new legislation and the changes it will create in the payment and allocation of surplus lines premium taxes as well as compliance requirement for multistate risks. In addition the potential for an interstate compact and the role it would play under the law will be discussed. To register for the webinar, go to https://www1.gotomeeting.com/register/366020064.

In addition, NAPSLO has established a special section on its web site to provide information on the NRRA and its implications.

The surplus lines modernization provisions will make access for insurance consumers to the surplus lines market quicker, more efficient and the payment of surplus lines premium taxes to the states less burdensome for the consumer and broker. The legislation also establishes that only one state, the home state of the insured, can regulate a multistate surplus lines transaction.

"We are gratified that NAPSLO’s hard work has paid off with the enactment of these long overdue reforms. However, the full promise of this legislation will not be realized until the states have implemented through an interstate compact or similar mechanism uniform forms, processes and procedures for collection, payment and allocation of surplus lines premium tax,” stated NAPSLO Executive Director Richard Bouhan.

Currently, the majority of states require payment of an allocated portion of tax on a multistate risk, but several state statutes impose the tax on the entire gross premium of a multistate risk which can create a “double tax” on a portion of the premium in some transactions.

"When the reform language was developed, Congress envisioned the states creating an interstate compact or something like a compact to handle collection, allocation and distribution of surplus lines premium taxes. However, the legislation also establishes that if an interstate compact or similar mechanism is not created and implemented among the states, the surplus lines transaction will be entirely taxed by the ‘home state’ of the insured,” said Maria Berthoud, NAPSLO’s Washington representative. “There was no opposition to this view in either the House or the Senate."

NAPSLO said it will make proper implementation of this legislation in the states its highest legislative priority.

Business Income

Calculating the appropriate business income limit does not have to be a mind-numbing process. To understand business income coverage limits, you must simply understand that the coverage is almost entirely based on time. The amount of coverage and the correct coinsurance amount can be calculated once a reasonable estimation of the time necessary to return to full operational capability is determined.

Four Key Objectives must be accomplished as quickly as reasonably possible:

1) Rebuild the building, or find a move to an alternate permanent location.
2) Find, purchase, and have operational, replacement machinery and equipment.
3) Replace and/or replenish stock (raw materials for manufacturing operations).
4) Return operations to the same level existing just prior to the loss.

Business Income’s Necessity

According to the Federal Emergency Management Agency (FEMA), there is a structure fire ever 4.5 minutes. Approximately 25 percent of businesses never reopen after a shutdown of just 30 or more days, according to the insurance industry. When you include the number of business failures within five years that are directly traceable to the same kind of claim, the number could approach 40 percent.

Business closings as a result of natural disasters also reach 25percent. The U.S. Small Business Administration reports that more than 90 percent of small businesses fail within two years after being struck by a disaster. Combining these two pieces of statistical data, losses can lead to the closure of thousands of business in any given year due to an interruption in operations.

The Calculation

Once total revenues and the total amount of non-continuing expenses (production-related expenses that do not continue during the interruption) is known and applied to an honest worst-case scenario estimate of the time necessary to resume operations, the correct coinsurance percentage can be calculated. Coinsurance percentages, in 10 percent increments, can be from 50 percent to 100 percent- each representing a proportion of one year (50 percent equals six months; 60 percent equals 7.2 months; 100 percent equals 12 months). It is also sometimes possible to obtain a 15-month business-interruption period at a corresponding coinsurance limit of 125 percent.

The Reality

Most businesses that close and never reopen after a catastrophic closure (30 days or more), don’t close because of the lack of building and business personal property coverage. They close because there is no money coming in the door. Few businesses can remain viable without a source of income. Many business expenses continue even during the period of temporary closing.

Obviously, the optimal goal is to have the building, contents and business income all properly insured. Ultimately, only the business can provide these figures, but this simple approach can make this exercise much easier. Once you accept the reality that loss of income is as important to the insure as insuring your property, we can help guide you to the proper coverage to further protect your business.