The Nonadmitted and Reinsurance Reform Act of 2010 (NRRA), part of the Dodd Frank Wall Street Reform and Consumer Protection Act, became effective July 21, 2011. The NRRA provides that the placement of nonadmitted insurance is subject solely to the requirements of the insured’s home state. No state other than the home state of an insured can require any premium tax payment for nonadmitted insurance.
Nonadmitted insurance includes both surplus lines and independently procured insurance, but does not include unauthorized insurance.
Affiliate (of the insured) – any person or entity that controls, is controlled by, or is under common control with the insured.
Affiliated Group – any group of entities whose members are all affiliated.
Control – an entity has "control" over another entity if the entity:
Home State – with respect to an insured, "home state" means:
*Without guidance in the NRRA to determine the principal place of business, the Comptroller’s office defines the principal place of business as the center of corporate "direction, control, and coordination," which is usually a corporation's headquarters.
Independently Procured – insurance procured directly by an insured from a nonadmitted insurer.
Nonadmitted Insurance – any property and casualty insurance permitted to be placed directly or through a surplus lines broker with a nonadmitted insurer eligible to accept such insurance.
Nonadmitted Insurer – an insurer not licensed to engage in the business of insurance in a state, but excluding a risk retention group as that term is defined in Section 2(a)(4) of the Liability Risk Retention Act of 1986 (15 U.S.C. 3901(a)(4)).
Premium Tax – for surplus lines or independently procured insurance coverage, any tax, fee, assessment or other charge imposed by a government entity directly or indirectly based on any payment made as consideration for an insurance contract for such insurance (including premium deposits, assessments, registration fees and any other compensation given in consideration for a contract of insurance).
When Texas is the insured’s home state, agents must file policy information with the Surplus Lines Stamping Office of Texas showing the entire policy premium as Texas premium.
For information purposes only, agents must report the portion of the premium that applies to risks in other states under the "Breakdown of States Summary" category. If an agent or broker is involved in the placement of an insurance policy in the surplus lines market, then the policy is surplus lines insurance. The surplus lines agent placing the coverage must report and pay taxes to the insured’s home state.
Under the NRRA, the same home state provisions apply to "independently procured" insurance, and the policyholder must report and remit the taxes on the premium to the insured’s home state. If Texas is the home state, the independently procured insurance policyholder must report and remit tax on the entire premium to Texas.