Florida Exits Multi-State Surplus Lines Clearinghouse NIMA

The Florida Surplus Lines Service Office (FSLSO) has announced that Florida will withdraw from the Nonadmitted Insurance Multi-State Agreement (NIMA), effective June 1, 2016. The decision marks the second state to leave NIMA, with Louisiana exiting last October.

FSLSO made the announcement via a bulletin dated April 13 to provide guidance regarding the filing of multistate surplus lines policies where Florida is the home state of the insured. All multistate policies issued or renewed on or after June 1, 2016, and any subsequent endorsements to those policies, for which Florida is the home state will now be filed with FSLSO and not through the Surplus Lines Clearinghouse.

All Florida home state new and renewal policies with an effective date prior to June 1, 2016, as well as any endorsements to new and renewal policies effective prior to June 1, 2016, will be filed with the Surplus Lines Clearinghouse through May 31, 2017.

Pursuant to Florida statute, the state will continue to tax premium exposures for multistate policies at the rate of the state in which the risk or exposure is located. Business rules for calculating the correct fees are programmed into FSLSO’s management systems.

However, FSLSO is still contracted with NIMA to serve as the Surplus Lines Clearinghouse provider, so other state’s filings are not affected by Florida’s withdrawal from NIMA.

In a statement to Insurance Journal on April 15, the Florida Office of Insurance Regulation (OIR) said as a member since 2011, Florida was fully committed along with the other member states to the benefits envisioned by the multistate agreement, to include the reporting, payment, collection and allocation of premium taxes for non-admitted insurance.

“However, despite the achievement of these benefits, nationwide participation in NIMA, especially among large states, did not occur as expected and lead to the decision to withdraw. Florida will continue to use the Clearinghouse services on a single-state only basis via an independent contract separate from the NIMA arrangement. We appreciate the efforts and participation of all the other NIMA member states in this joint venture and look forward to the continued relationship with the FSLSO,” OIR said.

The Nonadmitted Insurance Multi-State Association, Inc. (NIMA, Inc.) was established in 2011 and is governed by NIMA. Members now just include South Dakota, Utah, Wyoming and Puerto Rico. Tennessee is an Associate Member of NIMA, Inc. Louisiana also withdrew in October of 2015.

The agreement provides a mechanism to report, collect, allocate and distribute surplus lines tax revenues consistent with the Non-admitted and Reinsurance Reform Act of 2010 (NRRA). The NRRA is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act and allows only the home state of the insured to require premium tax payments for non-admitted insurance in the absence of an agreement among states.

Florida Insurance Commissioner Kevin McCarty, who served as an officer for NIMA, told Insurance Journal last fall that he was disappointed there hadn’t been more participation in NIMA, especially since the agreement had been successful in generating additional revenue for the states participating.

“The detractors of NIMA have been successful at making the case that you just make more money if you keep it at home,” McCarty said. “I think many of the facts and statements they have made have been misleading.”

The National Association of Professional Surplus Lines Offices (NAPSLO) praised Florida’s decision, saying a top state legislative priority for the group remains achieving uniformity among all states on the regulation and taxation of surplus lines premium.

“NAPSLO continues to advocate that home state taxation, where surplus lines taxes are calculated at the home state’s tax rate on 100 percent of the premium and retained 100 percent by the home state, is the only viable and uniform national solution,” NAPSLO said in a statement. “With Florida’s withdrawal from NIMA, the reality of this uniformity envisioned by, and made possible with [NRRA] is one huge step closer. We applaud Florida’s decision to effectuate this change.”