Industry Issues | Surplus Lines Reform

North Carolina Enacts Insurance Omnibus Bill, HB382, Includes DSLI Provisions

In a late and surprising move, the North Carolina Department of Insurance successfully lobbied for an amendment to its insurance omnibus bill, House Bill 382, to include provisions that would allow the Department to designate an insurer domiciled in NC as a "nonadmitted domestic surplus lines insurer", authorized to write surplus lines insurance in the state.

The original HB 382 passed the House and was referred to the Senate on April 13. No further action occurred on the bill until June 5. Two days later, a complete withdraw-and-replace substitute bill was introduced that included the DSLI provisions. The revised HB 383 was fast tracked, passed the Senate, and then returned to the House where it received a unanimous vote of concurrence on June 13.

Based on initial review, the DSLI section generally addresses the various aspects that PCI seeks in such legislation - namely related to eligibility requirements, certificate of authority, the applicable scope of regulation, and clarity and confirmation of the taxation of premiums written by the DSLI.

Of note, under enacted HB 382, a "Nonadmitted domestic surplus lines insurer" means an insurer that is domiciled in and authorized pursuant to G.S. 58-21-21 to transact surplus lines insurance in this State.

PCI will seek clarification from the NCDOI on why the term "nonadmitted domestic surplus lines insurer" was used rather than simply "domestic surplus lines insurer" that is used elsewhere.  Further, the drafting inserts this term as an additional entity-type throughout the insurance code wherever "nonadmitted insurer" is referenced. It is not clear how this distinction will/may impact the regulation of business placed with the nonadmitted-DSLI versus any other nonadmitted insurer, as well as for other matters.

Additionally, the nonadmitted-DSLI definition states that the insurance company is authorized to "transact" insurance in the state. Again, PCI will seek confirmation that the transaction for placement of surplus lines insurance is handled by the licensed surplus lines broker, who is responsible for the collection, remittance and reporting of the surplus lines tax.

MEMBER FEEDBACK REQUESTED: Please email any further comment or questions to david.kodama@pciaa.net.


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Of additional note, HB 382 addresses a long outstanding issue that was created by the enactment of NC HB 262 back in June, 2015. The Department agreed with concern raised by PCI at that time and withheld enforcement of a provision that would have required the Department to return any unearned premium directly to the policyholder, rather than the licensee. The provision is now (finally) amended to read as follows:

SECTION 2.1.(l) G.S. 58-21-85(a) reads as rewritten:

"(a)     Gross premiums charged, less any return premiums, for surplus lines insurance on insureds for whom North Carolina is the home state are subject to a premium receipts tax of five percent (5%), which shall be collected in a manner approved by the Commissioner, in addition to the full amount of the gross premium charged by the insurer for the insurance. The tax on any portion of the premium unearned at termination of insurance having been credited by the State to the licensee shall be returned by the licensee directly to the policyholder directly.policyholder. The surplus lines licensee is prohibited from absorbing such tax and from rebating for any reason, any part of such tax. To the extent that other states in which portions of the properties, risks, or exposures reside have failed to enter into a compact or reciprocal allocation procedure with this State, the premium tax collected shall be retained by this State."


North Carolina DOI Issues Surplus Lines Insurers Data Call

FYI -
PCI received confirmation from members that certain surplus lines insurers have received a request for premium data from the North Carolina Department of Insurance. This data will be used by the Department to compare the amounts reported by the insurers to the amounts coming through the Department's internal system which are reported by surplus lines producers.    
 
Notified companies are requested to send a report to the Department showing the agents or brokers producing business in North Carolina for the surplus lines company (or companies) for the five calendar years 2013 through 2017. Company data submitted in previous data calls for the 2013 to 2016 calendar years do not have to be re-submitted.  
 
According to the notice email, the report should show the Direct Premiums Written by each producer, with the total by year matching the total reported on the company's Annual Statement's "State page" for North Carolina for that year (or with an explanation on why there is a difference). The report should include any business written for a RRG (risk retention group), PG (purchasing group), or "independently procured" (where the insured contracted directly with your company). If the policy is "independently procured" then please highlight that data, perhaps in a different color or different font.
 
For each premium received, the report should provide: the name of the agent or broker's name; a contact person's name; their phone number or email address at that producer; a policy number; a policy effective date; and the premium amount.   
 
The DUE DATE for the report is Wednesday, August 1, 2018.  
 
Specific questions on the data call are to be directed to Arthur J. Schwartz, Associate P&C Actuary, NCDOI, 919-807-6646, Arthur.Schwartz@ncdoi.gov.


North Carolina DOI Updates Business Insurance Consumer Guide

State Regulatory Update - North Carolina

Over the past year, PCI has pursued changes to the introduction section of the North Carolina Consumer's Guide to Insurance for Your Business, published by the Department of Insurance. PCI identified numerous instances of misused terms and phrases that could cause confusion about the surplus lines market. 

The DOI has agreed to revise language to reference the surplus lines insurer as a "nonadmitted" rather than an "authorized" insurer. Wording was updated to more accurately reflect that the consumer purchases surplus lines insurance through a licensed surplus lines broker. Additionally, the revised section refers to a nonadmitted insurer that is able to write surplus lines insurance in the state as an "eligible surplus lines insurer."

Guide to Insurance for Your Business

Additional NCDOI resource:
Consumer Guide to Surplus Lines Insurance


PCI Contacts DOI Regarding Request for Surplus Lines Data

PCI contacted the head of the North Carolina Department of Insurance's Property & Casualty Division to raise concerns about the surplus lines insurer data request, the filing time frame and the burden to pull the required data detail.

The Department stated this request was considered an update to an insurer survey conducted previously by the Division's actuary. But if a company needs additional time beyond the April 30 deadline, the Department is willing to grant a filing extension at the company's request.

No statutory citation has been provided for the data call.


North Carolina DOI Requests Surplus Lines Insurer Producer-Policy Detail Report

In a broadcast email that went out on March 18, 2013, to surplus lines insurers writing in North Carolina, the Department of Insurance announced that it is researching premium data for surplus lines insurers supplied to the Department by the NAIC.

Recipients of the email are requested to send in "a report showing the agents or brokers producing business in North Carolina for your surplus lines company (or companies) for the five calendar years 2008 through 2012. The report should show the Direct Premiums Written by each producer, with the total by year matching the total reported on the Annual Statement’s “state page” for North Carolina for that year. The report should include any business written for a RRG (risk retention group), PG (purchasing group), or “independently procured” (where the insured contracted directly with your company). "

The request further requires that for each premium received, the following should be provided: "the name of the producer; a contact person’s name; their phone number or email address at that producer; a policy number; a policy effective date; and the premium amount; again with all premiums matching the total reported to the NAIC on the Annual Statement for that year for North Carolina."

The deadline for filing the report is Tuesday, April 30, 2013.