2017 -- H 5934

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LC002053

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2017

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A N   A C T

RELATING TO INSURANCE - CASUALTY INSURANCE RATING

     

     Introduced By: Representatives Kennedy, Casey, Johnston, Messier, and Kazarian

     Date Introduced: March 16, 2017

     Referred To: House Corporations

     (Dept. of Business Regulation)

It is enacted by the General Assembly as follows:

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     SECTION 1. Section 27-9-51 of the General Laws in Chapter 27-9 entitled "Casualty

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Insurance Rating" is hereby repealed.

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     27-9-51. Excess profits for workers' compensation and employer's liability insurance

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prohibited.

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     (a) Each insurance group shall file with the department prior to July 1 of each year, on a

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form prescribed by the department, the following data for workers' compensation and employers'

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liability insurance:

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     (1) The calendar year earned premium;

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     (2) Accident year incurred losses and loss adjustment expenses;

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     (3) The administrative and selling expenses incurred in Rhode Island or allocated to

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Rhode Island for the calendar year; and

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     (4) Policyholder dividends applicable to the calendar year.

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     (b) (1) Excess profit has been realized if the underwriting gain is greater than the

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anticipated underwriting profit plus five percent (5%) of earned premiums for the three (3) most

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recent calendar years;

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     (2) As used in this section with respect to any three (3) year period, "anticipated

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underwriting profit" means the sum of the dollar amounts obtained by multiplying, for each rate

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filing of the insurance group in effect during that period, the earned premiums applicable to the

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rate filing during that period by the percentage factor included in the rate filing for profit and

 

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contingencies, the percentage factor having been determined with due recognition to investment

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income from funds generated by Rhode Island business. Separate calculations need not be made

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for consecutive rate filings containing the same percentage factor for profits and contingencies.

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     (c) Each insurance group shall also file a schedule of Rhode Island loss and loss

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adjustment experience for each of the three (3) most recent accident years. The incurred losses

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and loss adjustment expenses shall be valued as of December 31 of the accident year, developed

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to an ultimate basis, and two (2) twelve (12) month intervals after this, each developed to an

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ultimate basis so that a total of three (3) evaluations will be provided for each accident year. For

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reporting purposes unrelated to determining excessive profits, the loss and loss adjustment

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experience of each accident year shall continue to be reported until each accident year has been

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reported at eight (8) stages of development.

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     (d) Each insurance group's underwriting gain or loss for each calendar accident year shall

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be computed as follows: The sum of the accident-year incurred losses and loss adjustment

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expenses as of December 31 of the year, developed to an ultimate basis, plus the administrative

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and selling expenses incurred in the calendar year, plus policyholder dividends applicable to the

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calendar year, shall be subtracted from the calendar year earned premium to determine the

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underwriting gain or loss.

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     (e) For the three (3) most recent calendar-accident years, the underwriting gain or loss

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shall be compared to the anticipated underwriting profit.

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     (f) If the insurance group has realized an excess profit, the department shall order a return

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of the excess amounts after affording the insurance group an opportunity for a hearing and

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complying with the provisions of the Administrative Procedures Act, chapter 35 of title 42. The

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excess amounts shall be refunded in all instances unless the insurance group affirmatively

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demonstrates to the department that the refund of the excess amounts will render the insurance

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group insolvent under the provisions of this title.

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     (g) Any excess profit of an insurance group offering workers' compensation or

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employers' liability insurance shall be returned to policyholders in the form of a cash refund or be

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returned to policyholders in the form of a credit toward the future purchase of insurance. The

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excess amount shall be refunded on a pro rata basis in relation to the final compilation year

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earned premiums to the workers' compensation policyholders of record of the insurance group on

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December 31 of the final compilation year.

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     (h) (1) Cash refunds to policyholders may be rounded to the nearest dollar;

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     (2) Data in required reports to the department may be rounded to the nearest dollar;

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     (3) Rounding, if elected by the insurance group, shall be applied consistently.

 

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     (i) (1) Refunds shall be completed in one of the following ways:

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     (i) If the insurance group elects to make a cash refund, the refund shall be completed

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within sixty (60) days of the entry of a final order indicating that excess profits have been

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realized; or

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     (ii) If the insurance group elects to make refunds in the form of a credit to renewal

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policies, the credits shall be applied to policy renewal premium notices which are forwarded to

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insured more than sixty (60) calendar days after the entry of a final order indicating that excess

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profits have been realized. If an insurance group has made this election, but an insured after this

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cancels his or her policy or allows his or her policy to terminate, the insurance group shall make a

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cash refund not later than sixty (60) days after the termination of the coverage;

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     (2) Upon completion of the renewal credits or refund payments, the insurance group shall

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immediately certify to the department that the refunds have been made.

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     (j) Any refund or renewal credit made pursuant to this section, for the purposes of

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reporting under this section for subsequent years, shall be treated as a policyholder dividend

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applicable to the year in which it is incurred.

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     SECTION 2. Chapter 27-75 of the General Laws entitled "Surplus Lines Insurance Multi-

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State Compliance Compact" is hereby repealed in its entirety.

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CHAPTER 27-75

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Surplus Lines Insurance Multi-State Compliance Compact

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     27-75-1. Short title.

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     This chapter shall be known and cited as the "Surplus Lines Insurance Multi-State

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Compliance Compact."

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     27-75-2. Preamble.

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     WHEREAS, with regard to non-admitted insurance policies with risk exposures located

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in multiple states, the 111th United States Congress, has stipulated in Title V, Subtitle B the non-

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Admitted and Reinsurance Reform Act of 2010, of the Dodd-Frank Wall Street Reform and

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Consumer Protection Act, hereafter, the NRRA, that:

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     (1) The placement of non-admitted insurance shall be subject to the statutory and

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regulatory requirements solely of the insured's home state, and

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     (2) Any law, regulation, provision, or action of any state that applies or purports to apply

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to non-admitted insurance sold to, solicited by, or negotiated with an insured whose home state is

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another state shall be preempted with respect to such application; except that any state law, rule,

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or regulation that restricts the placement of workers' compensation insurance or excess insurance

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for self-funded workers' compensation plans with a non-admitted insurer shall not be preempted;

 

LC002053 - Page 3 of 27

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and

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     WHEREAS, in compliance with NRRA, no state other than the home state of an insured

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may require any premium tax payment for non-admitted insurance; and no state other than an

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insured's home state may require a surplus lines broker to be licensed in order to sell, solicit, or

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negotiate non-admitted insurance with respect to such insured; and

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     WHEREAS, the NRRA intends that the states may enter into a compact or otherwise

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establish procedures to allocate among the states the premium taxes paid to an insured's home

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state; and that each state adopt nationwide uniform requirements, forms, and procedures, such as

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an interstate compact, that provide for the reporting, payment, collection, and allocation of

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premium taxes for non-admitted insurance; and

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     WHEREAS, after the expiration of the two-year period beginning on the date of the

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enactment of the NRRA, a state may not collect any fees relating to licensing of an individual or

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entity as a surplus lines licensee in the state unless the state has in effect at such time laws or

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regulations that provide for participation by the state in the national insurance producer database

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of the NAIC, or any other equivalent uniform national database, for the licensure of surplus lines

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licensees and the renewal of such licenses; and

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     WHEREAS, a need exists for a system of regulation that will provide for surplus lines

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insurance to be placed with reputable and financially sound non-admitted insurers, and that will

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permit orderly access to surplus lines insurance in this state and encourage insurers to make new

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and innovative types of insurance available to consumers in this state; and

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     WHEREAS, protecting the revenue of this state and other compacting states may be

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accomplished by facilitating the payment and collection of premium tax on non-admitted

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insurance and providing for allocation of premium tax for non-admitted insurance of multi-state

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risks among the states in accordance with uniform allocation formulas; and

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     WHEREAS, the efficiency of the surplus lines market may be improved by eliminating

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duplicative and inconsistent tax and regulatory requirements among the states, and by promoting

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and protecting the interests of surplus lines licensees who assist such insureds and non-admitted

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insurers, thereby ensuring the continued availability of non-admitted insurance to consumers; and

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     WHEREAS, regulatory compliance with respect to non-admitted insurance placements

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may be streamlined by providing for exclusive single-state regulatory compliance for non-

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admitted insurance of multi-state risks, thereby providing certainty regarding such compliance to

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all persons who have an interest in such transactions, including, but not limited to, insureds,

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regulators, surplus lines licensees, other insurance producers, and surplus lines insurers; and

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     WHEREAS, coordination of regulatory resources and expertise between state insurance

 

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departments and other state agencies, as well as state surplus lines stamping offices, with respect

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to non-admitted insurance will be improved; and

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     NOW, THEREFORE, in consideration of the foregoing, it is enacted by the general

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assembly as follows:

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     27-75-3. Enactment of compact.

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     The surplus lines insurance multi-state compliance compact is enacted into law and

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entered into by this state with all other states legally joining this compact in the form substantially

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as follows:

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     ARTICLE I PURPOSES

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     The purposes of this compact are:

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     (1) To implement the express provisions of the Non-Admitted and Reinsurance Reform

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Act (NRRA).

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     (2) To protect the premium tax revenues of the compacting states through facilitating the

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payment and collection of premium tax on non-admitted insurance; and to protect the interests of

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the compacting states by supporting the continued availability of such insurance to consumers;

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and to provide for allocation of premium tax for non-admitted insurance of multi-state risks

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among the states in accordance with uniform allocation formulas to be developed, adopted, and

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implemented by the commission.

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     (3) To streamline and improve the efficiency of the surplus lines market by eliminating

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duplicative and inconsistent tax and regulatory requirements among the states; and promote and

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protect the interest of surplus lines licensees who assist such insureds and surplus lines insurers,

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thereby ensuring the continued availability of surplus lines insurance to consumers.

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     (4) To streamline regulatory compliance with respect to non-admitted insurance

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placements by providing for exclusive single-state regulatory compliance for non-admitted

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insurance of multi-state risks, in accordance with rules to be adopted by the commission, thereby

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providing certainty regarding such compliance to all persons who have an interest in such

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transactions, including, but not limited to, insureds, regulators, surplus lines licensees, other

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insurance producers, and surplus lines insurers.

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     (5) To establish a clearinghouse for receipt and dissemination of premium tax and

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clearinghouse transaction data related to non-admitted insurance of multi-state risks, in

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accordance with rules to be adopted by the commission.

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     (6) To improve coordination of regulatory resources and expertise between state

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insurance departments and other state agencies, as well as State surplus lines stamping offices,

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with respect to non-admitted insurance.

 

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     (7) To adopt uniform rules to provide for premium tax payment, reporting, allocation,

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data collection and dissemination for non-admitted insurance of multi-state risks and single-state

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risks, in accordance with rules to be adopted by the commission, thereby promoting the overall

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efficiency of the non-admitted insurance market.

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     (8) To adopt uniform mandatory rules with respect to regulatory compliance

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requirements for:

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     (i) Foreign insurer eligibility requirements;

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     (ii) Surplus lines policyholder notices;

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     (9) To establish the surplus lines insurance multi-state compliance compact commission.

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     (10) To coordinate reporting of clearinghouse transaction data on non-admitted insurance

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of multi-state risks among compacting states and contracting states.

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     (11) To perform these and such other related functions as may be consistent with the

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purposes of the surplus lines insurance multi-state compliance compact.

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     ARTICLE II DEFINITIONS

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     For purposes of this Compact the following definitions shall apply:

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     (1) "Admitted insurer" means an insurer that is licensed, or authorized, to transact the

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business of insurance under the law of the home state; for purposes of this compact "admitted

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insurer" shall not include a domestic surplus lines insurer as may be defined by applicable state

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law.

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     (2) "Affiliate" means, with respect to an insured, any entity that controls, is controlled by,

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or is under common control with the insured.

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     (3) "Allocation formula" means the uniform methods promulgated by the commission by

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which insured risk exposures will be apportioned to each state for the purpose of calculating

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premium taxes due.

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     (4) "Bylaws" means those bylaws established by the commission for its governance, or

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for directing or controlling the commission's actions or conduct.

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     (5) "Clearinghouse" means the commission's operations involving the acceptance,

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processing, and dissemination, among the compacting states, contracting states, surplus lines

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licensees, insureds and other persons, of premium tax and clearinghouse transaction data for Non-

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admitted insurance of multi-state risks, in accordance with this compact and rules to be adopted

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by the commission.

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     (6) "Clearinghouse transaction data" means the information regarding non-admitted

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insurance of multi-state risks required to be reported, accepted, collected, processed, and

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disseminated by surplus lines licensees for surplus lines insurance and insureds for independently

 

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procured insurance under this compact and rules to be adopted by the commission. Clearinghouse

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transaction data includes information related to single-state risks if a state elects to have the

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clearinghouse collect taxes on single-state risks for such state.

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     (7) "Compacting State" means any state which has enacted this compact legislation and

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which has not withdrawn pursuant to Article XIV, Section 1, or been terminated pursuant to

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Article XIV, Section 2.

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     (8) "Commission" means the "surplus lines insurance multi-state compliance compact

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commission" established by this compact.

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     (9) "Commissioner" means the chief insurance regulatory official of a state including, but

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not limited to commissioner, superintendent, director or administrator or their designee(s).

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     (10) "Contracting state" means any state which has not enacted this compact legislation

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but has entered into a written contract with the commission to utilize the services of and fully

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participate in the clearinghouse.

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     (11) "Control" An entity has "control" over another entity if:

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     (i) The entity directly or indirectly or acting through one or more other persons own,

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controls, or has the power to vote twenty-five percent (25%) or more of any class of voting

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securities of the other entity; or

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     (ii) The entity controls, in any manner, the election of a majority of the directors or

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trustees of the other entity.

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     (12) "Home state"

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     (i) In general. Except as provided in subparagraph (ii), the term "home state" means, with

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respect to an insured:

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     (A) The state in which an insured maintains its principal place of business or, in the case

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of an individual, the individual's principal residence; or

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     (B) If one hundred percent (100%) of the insured risk is located out of the state referred

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to in subparagraph (i)(A), the state to which the greatest percentage of the insured's taxable

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premium for that insurance contract is allocated.

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     (ii) Affiliated groups. If more than one insured from an affiliated group are named

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insureds on a single non-admitted insurance contract, the term "home state" means the home

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state, as determined pursuant to subparagraph (i), of the member of the affiliated group that has

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the largest percentage of premium attributed to it under such insurance contract.

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     (13) "Independently procured insurance" means insurance procured by an insured directly

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from a surplus lines insurer or other non-admitted insurer as permitted by the laws of the home

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state.

 

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     (14) "Insurer eligibility requirements" means the criteria, forms and procedures

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established to qualify as a surplus lines insurer under the law of the home state provided that such

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criteria, forms and procedures are consistent with the express provisions of the NRRA on and

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after July 21, 2011.

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     (15) "Member" means the person or persons chosen by a compacting state as its

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representative or representatives to the commission provided that each compacting state shall be

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limited to one vote.

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     (16) "Multi-state risk" means a risk with insured exposures in more than one state.

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     (17) "Non-compacting state" means any state which has not adopted this compact.

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     (18) "Non-admitted insurance" means surplus lines insurance and independently procured

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insurance.

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     (19) "Non-admitted insurer" means an insurer that is not authorized or admitted to

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transact the business of insurance under the law of the home state.

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     (20) "NRRA" means the non-admitted and reinsurance reform act which is Title V,

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Subtitle B of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

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     (21) "Policyholder notice" means the disclosure notice or stamp that is required to be

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furnished to the applicant or policyholder in connection with a surplus lines insurance placement.

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     (22) "Premium tax" means with respect to non-admitted insurance, any tax, fee,

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assessment, or other charge imposed by a government entity directly or indirectly based on any

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payment made as consideration for such insurance, including premium deposits, assessments,

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registration fees, and any other compensation given in consideration for a contract of insurance.

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     (23) "Principal place of business" means with respect to determining the home state of

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the insured, the state where the insured maintains its headquarters and where the insured's high-

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level officers direct, control and coordinate the business activities of the insured.

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     (24) "Purchasing group" means any group formed pursuant to the liability risk retention

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act which has as one of its purposes the purchase of liability insurance on a group basis,

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purchases such insurance only for its group members and only to cover their similar or related

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liability exposure and is composed of members whose businesses or activities are similar or

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related with respect to the liability to which members are exposed by virtue of any related, similar

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or common business, trade, product, services, premises or operations and is domiciled in any

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state.

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     (25) "Rule" means a statement of general or particular applicability and future effect

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promulgated by the commission designed to implement, interpret, or prescribe law or policy or

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describing the organization, procedure or practice requirements of the commission which shall

 

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have the force and effect of law in the compacting states.

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     (26) "Single-state risk" means a risk with insured exposures in only one state.

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     (27) "State" means any state, district or territory of the United States of America.

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     (28) "State transaction documentation" means the information required under the laws of

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the home state to be filed by surplus lines licensees in order to report surplus lines insurance and

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verify compliance with surplus lines laws, and by insureds in order to report independently

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procured insurance.

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     (29) "Surplus lines insurance" means insurance procured by a surplus lines licensee from

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a surplus lines insurer or other non-admitted insurer as permitted under the law of the home state;

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for purposes of this compact "surplus lines insurance" shall also mean excess lines insurance as

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may be defined by applicable state law.

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     (30) "Surplus lines insurer" means a non-admitted insurer eligible under the law of the

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home state to accept business from a surplus lines licensee; for purposes of this compact "surplus

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lines insurer" shall also mean an insurer which is permitted to write surplus lines insurance under

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the laws of the state where such insurer is domiciled.

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     (31) "Surplus lines licensee" means an individual, firm or corporation licensed under the

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law of the home state to place surplus lines insurance.

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     ARTICLE III ESTABLISHMENT OF THE COMMISSION AND VENUE

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     (a) The compacting states hereby create and establish a joint public agency known as the

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"surplus lines insurance multi-state compliance compact commission."

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     (b) Pursuant to Article IV, the commission shall have the power to adopt mandatory rules

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which establish exclusive home state authority regarding non-admitted insurance of multi- state

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risks, allocation formulas, clearinghouse transaction data, a clearinghouse for receipt and

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distribution of allocated premium tax and clearinghouse transaction data, and uniform rulemaking

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procedures and rules for the purpose of financing, administering, operating and enforcing

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compliance with the provisions of this compact, its bylaws and rules.

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     (c) Pursuant to Article IV, the commission shall have the power to adopt mandatory rules

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establishing foreign insurer eligibility requirements and a concise and objective policyholder

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notice regarding the nature of a surplus lines placement.

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     (d) The commission is a body corporate and politic, and an instrumentality of the

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compacting states.

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     (e) The commission is solely responsible for its liabilities except as otherwise specifically

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provided in this compact.

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     (f) Venue is proper and judicial proceedings by or against the commission shall be

 

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brought solely and exclusively in a court of competent jurisdiction where the principal office of

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the commission is located. The commission may waive venue and jurisdictional defenses to the

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extent it adopts or consents to participate in alternative dispute resolution proceedings.

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     ARTICLE IV AUTHORITY TO ESTABLISH MANDATORY RULES

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     The commission shall adopt mandatory rules which establish:

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     (1) Allocation formulas for each type of non-admitted insurance coverage, which

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allocation formulas must be used by each compacting state and contracting state in acquiring

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premium tax and clearinghouse transaction data from surplus lines licensees and insureds for

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reporting to the clearinghouse created by the compact commission. Such allocation formulas shall

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be established with input from surplus lines licensees and be based upon readily available data

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with simplicity and uniformity for the surplus line licensee as a material consideration.

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     (2) Uniform clearinghouse transaction data reporting requirements for all information

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reported to the clearinghouse.

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     (3) Methods by which compacting states and contracting states require surplus lines

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licensees and insureds to pay premium tax and to report clearinghouse transaction data to the

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clearinghouse, including, but not limited to, processing clearinghouse transaction data through

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state stamping and service offices, state insurance departments, or other state designated agencies

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or entities.

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     (4) That non-admitted insurance of multi-state risks shall be subject to all of the

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regulatory compliance requirements of the home state exclusively. Home state regulatory

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compliance requirements applicable to surplus lines insurance shall include, but not be limited to:

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(i) Person(s) required to be licensed to sell, solicit, or negotiate surplus lines insurance; (ii)

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Insurer eligibility requirements or other approved non-admitted insurer requirements; (iii)

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Diligent search; (iv) State transaction documentation and clearinghouse transaction data regarding

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the payment of premium tax as set forth in this compact and rules to be adopted by the

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commission. Home state regulatory compliance requirements applicable to independently

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procured insurance placements shall include, but not be limited to, providing state transaction

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documentation and clearinghouse transaction data regarding the payment of premium tax as set

29

forth in this compact and rules to be adopted by the commission.

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     (5) That each compacting state and contracting state may charge its own rate of taxation

31

on the premium allocated to such state based on the applicable allocation formula provided that

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the state establishes one single rate of taxation applicable to all non-admitted insurance

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transactions and no other tax, fee assessment or other charge by any governmental or quasi-

34

governmental agency be permitted. Notwithstanding the foregoing, stamping office fees may be

 

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charged as a separate, additional cost unless such fees are incorporated into a state's single rate of

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taxation.

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     (6) That any change in the rate of taxation by any compacting state or contracting state be

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restricted to changes made prospectively on not less than ninety (90) days advance notice to the

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compact commission.

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     (7) That each compacting state and contracting state shall require premium tax payments

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either annually, semi-annually, or quarterly utilizing one or more of the following dates only:

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March 1, June 1, September 1, and December 1.

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     (8) That each compacting state and contracting state prohibit any other state agency or

10

political subdivision from requiring surplus lines licensees to provide clearinghouse transaction

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data and state transaction documentation other than to the insurance department or tax officials of

12

the home state or one single designated agent thereof.

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     (9) The obligation of the home state by itself, through a designated agent, surplus lines

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stamping or service office, to collect clearinghouse transaction data from surplus line licensees

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and from insureds for independently procured insurance, where applicable, for reporting to the

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clearinghouse.

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     (10) A method for the clearinghouse to periodically report to compacting states,

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contracting states, surplus lines and insureds who independently procure insurance, all premium

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taxes owed to each of the compacting states and contracting states, the dates upon which payment

20

of such premium taxes are due and a method to pay them through the clearinghouse.

21

     (11) That each surplus line licensee is required to be licensed only in the home state of

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each insured for whom surplus lines insurance has been procured.

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     (12) That a policy considered to be surplus lines insurance in the insured's home state

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shall be considered surplus lines insurance in all compacting states and contracting states, and

25

taxed as a surplus lines transaction in all states to which a portion of the risk is allocated. Each

26

compacting state and contracting state shall require each surplus lines licensee to pay to every

27

other compacting state and contracting state premium taxes on each multi-state risk through the

28

clearinghouse at such tax rate charged on surplus lines transactions in such other compacting

29

states and contracting states on the portion of the risk in each such compacting state and

30

contracting state as determined by the applicable uniform allocation formula adopted by the

31

commission. A policy considered to be independently procured insurance in the insured's home

32

state shall be considered independently procured insurance in all compacting states and

33

contracting states. Each compacting state and contracting state shall require the insured to pay

34

every other compacting state and contracting state the independently procured insurance premium

 

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tax on each multi-state risk through the clearinghouse pursuant to the uniform allocation formula

2

adopted by the commission.

3

     (13) Uniform foreign insurer eligibility requirements as authorized by the NRRA.

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     (14) A uniform policyholder notice.

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     (15) Uniform treatment of purchasing group surplus lines insurance placements.

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     ARTICLE V POWERS OF THE COMMISSION

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     The commission shall have the following powers:

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     (1) To promulgate rules and operating procedures, pursuant to Article VIII of this

9

compact, which shall have the force and effect of law and shall be binding in the compacting

10

States to the extent and in the manner provided in this compact;

11

     (2) To bring and prosecute legal proceedings or actions in the name of the commission,

12

provided that the standing of any state insurance department to sue or be sued under applicable

13

law shall not be affected;

14

     (3) To issue subpoenas requiring the attendance and testimony of witnesses and the

15

production of evidence, provided however, the commission is not empowered to demand or

16

subpoena records or data from non-admitted insurers;

17

     (4) To establish and maintain offices including the creation of a clearinghouse for the

18

receipt of premium tax and clearinghouse transaction data regarding non-admitted insurance of

19

multi-state risks, single-state risks for states which elect to require surplus lines licensees to pay

20

premium tax on single state risks through the clearinghouse and tax reporting forms;

21

     (5) To purchase and maintain insurance and bonds;

22

     (6) To borrow, accept or contract for services of personnel, including, but not limited to,

23

employees of a compacting state or stamping office, pursuant to an open, transparent, objective

24

competitive process and procedure adopted by the commission;

25

     (7) To hire employees, professionals or specialists, and elect or appoint officers, and to

26

fix their compensation, define their duties and give them appropriate authority to carry out the

27

purposes of the compact, and determine their qualifications, pursuant to an open, transparent,

28

objective competitive process and procedure adopted by the commission; and to establish the

29

commission's personnel policies and programs relating to conflicts of interest, rates of

30

compensation and qualifications of personnel, and other related personnel matters;

31

     (8) To accept any and all appropriate donations and grants of money, equipment,

32

supplies, materials and services, and to receive, utilize and dispose of the same; provided that at

33

all times the commission shall avoid any appearance of impropriety and/or conflict of interest;

34

     (9) To lease, purchase, accept appropriate gifts or donations of, or otherwise to own,

 

LC002053 - Page 12 of 27

1

hold, improve or use, any property, real, personal or mixed; provided that, at all times the

2

commission shall avoid any appearance of impropriety and/or conflict of interest;

3

     (10) To sell convey, mortgage, pledge, lease, exchange, abandon or otherwise dispose of

4

any property real, personal or mixed;

5

     (11) To provide for tax audit rules and procedures for the compacting states with respect

6

to the allocation of premium taxes including:

7

     (i) Minimum audit standards, including sampling methods;

8

     (ii) Review of internal controls;

9

     (iii) Cooperation and sharing of audit responsibilities between compacting states;

10

     (iv) Handling of refunds or credits due to overpayments or improper allocation of

11

premium taxes;

12

     (v) Taxpayer records to be reviewed including a minimum retention period;

13

     (vi) Authority of compacting states to review, challenge, or re-audit taxpayer records.

14

     (12) To enforce compliance by compacting states and contracting states with rules and

15

bylaws pursuant to the authority set forth in Article XIV;

16

     (13) To provide for dispute resolution among compacting states and contracting states;

17

     (14) To advise compacting states and contracting states on tax-related issues relating to

18

insurers, insureds, surplus lines licensees, agents or brokers domiciled or doing business in non-

19

compacting states, consistent with the purposes of this compact;

20

     (15) To make available advice and training to those personnel in state stamping offices,

21

state insurance departments or other state departments for record keeping, tax compliance, and

22

tax allocations; and to be a resource for state insurance departments and other state departments;

23

     (16) To establish a budget and make expenditures;

24

     (17) To borrow money;

25

     (18) To appoint and oversee committees, including advisory committees comprised of

26

members, state insurance regulators, state legislators or their representatives, insurance industry

27

and consumer representatives, and such other interested persons as may be designated in this

28

compact and the bylaws;

29

     (19) To establish an executive committee of not less than seven (7) nor more than fifteen

30

(15) representatives, which shall include officers elected by the commission and such other

31

representatives as provided for herein and determined by the bylaws. Representatives of the

32

executive committee shall serve a one-year term. Representatives of the executive committee

33

shall be entitled to one vote each. The executive committee shall have the power to act on behalf

34

of the commission, with the exception of rulemaking, during periods when the commission is not

 

LC002053 - Page 13 of 27

1

in session. The executive committee shall oversee the day to day activities of the administration

2

of the compact, including the activities of the operations committee created under this Article and

3

compliance and enforcement of the provisions of the compact, its bylaws, and rules, and such

4

other duties as provided herein and as deemed necessary.

5

     (20) To establish an operations committee of not less than seven (7) and not more than

6

fifteen (15) representatives to provide analysis, advice, determinations and recommendations

7

regarding technology, software, and systems integration to be acquired by the commission and to

8

provide analysis, advice, determinations and recommendations regarding the establishment of

9

mandatory rules to be adopted to be by the commission.

10

     (21) To enter into contracts with contracting states so that contracting states can utilize

11

the services of and fully participate in the clearinghouse subject to the terms and conditions set

12

forth in such contracts;

13

     (22) To adopt and use a corporate seal; and

14

     (23) To perform such other functions as may be necessary or appropriate to achieve the

15

purposes of this compact consistent with the state regulation of the business of insurance.

16

     ARTICLE VI ORGANIZATION OF THE COMMISSION

17

     (1) Membership, Voting and Bylaws

18

     (i) Each compacting state shall have and be limited to one member. Each state shall

19

determine the qualifications and the method by which it selects a member and set forth the

20

selection process in the enabling provision of the legislation which enacts this compact. In the

21

absence of such a provision the member shall be appointed by the governor of such compacting

22

state. Any member may be removed or suspended from office as provided by the law of the state

23

from which he or she shall be appointed. Any vacancy occurring in the commission shall be filled

24

in accordance with the laws of the compacting state wherein the vacancy exists.

25

     (ii) Each member shall be entitled to one vote and shall otherwise have an opportunity to

26

participate in the governance of the commission in accordance with the bylaws.

27

     (iii) The commission shall, by a majority vote of the members, prescribe bylaws to

28

govern its conduct as may be necessary or appropriate to carry out the purposes and exercise the

29

powers of the compact including, but not limited to:

30

     (A) Establishing the fiscal year of the commission;

31

     (B) Providing reasonable procedures for holding meetings of the commission, the

32

executive committee, and the operations committee;

33

     (C) Providing reasonable standards and procedures: (I) For the establishment and

34

meetings of committees, and (II) Governing any general or specific delegation of any authority or

 

LC002053 - Page 14 of 27

1

function of the commission;

2

     (D) Providing reasonable procedures for calling and conducting meetings of the

3

commission that consist of a majority of commission members, ensuring reasonable advance

4

notice of each such meeting and providing for the right of citizens to attend each such meeting

5

with enumerated exceptions designed to protect the public's interest, the privacy of individuals,

6

and insurers' and surplus lines licensees' proprietary information, including trade secrets. The

7

commission may meet in camera only after a majority of the entire membership votes to close a

8

meeting in total or in part. As soon as practicable, the commission must make public: (I) A copy

9

of the vote to close the meeting revealing the vote of each member with no proxy votes allowed,

10

and (II) Votes taken during such meeting;

11

     (E) Establishing the titles, duties and authority and reasonable procedures for the election

12

of the officers of the commission;

13

     (F) Providing reasonable standards and procedures for the establishment of the personnel

14

policies and programs of the commission. Notwithstanding any civil service or other similar laws

15

of any compacting state, the bylaws shall exclusively govern the personnel policies and programs

16

of the commission;

17

     (G) Promulgating a code of ethics to address permissible and prohibited activities of

18

commission members and employees;

19

     (H) Providing a mechanism for winding up the operations of the commission and the

20

equitable disposition of any surplus funds that may exist after the termination of the compact after

21

the payment and/or reserving of all of its debts and obligations;

22

     (iv) The commission shall publish its bylaws in a convenient form and file a copy thereof

23

and a copy of any amendment thereto, with the appropriate agency or officer in each of the

24

compacting states.

25

     (2) Executive committee, personnel and chairperson

26

     (i) An executive committee of the commission ("executive committee") shall be

27

established. All actions of the executive committee, including compliance and enforcement are

28

subject to the review and ratification of the commission as provided in the bylaws. The executive

29

committee shall have no more than fifteen (15) representatives, or one for each state if there are

30

less than fifteen (15) compacting states, who shall serve for a term and be established in

31

accordance with the bylaws.

32

     (ii) The executive committee shall have such authority and duties as may be set forth in

33

the bylaws, including, but not limited to:

34

     (A) Managing the affairs of the commission in a manner consistent with the bylaws and

 

LC002053 - Page 15 of 27

1

purposes of the commission;

2

     (B) Establishing and overseeing an organizational structure within, and appropriate

3

procedures for the commission to provide for the creation of rules and operating procedures;

4

     (C) Overseeing the offices of the commission; and

5

     (D) Planning, implementing, and coordinating communications and activities with other

6

state, federal and local government organizations in order to advance the goals of the

7

commission.

8

     (iii) The commission shall annually elect officers from the executive committee, with

9

each having such authority and duties, as may be specified in the bylaws.

10

     (iv) The executive committee may, subject to the approval of the commission, appoint or

11

retain an executive director for such period, upon such terms and conditions and for such

12

compensation as the commission may deem appropriate. The executive director shall serve as

13

secretary to the commission, but shall not be a member of the commission. The executive director

14

shall hire and supervise such other persons as may be authorized by the commission.

15

     (3) Operations Committee

16

     (i) An operations committee shall be established. All actions of the operations committee

17

are subject to the review and oversight of the commission and the executive committee and must

18

be approved by the commission. The executive committee will accept the determinations and

19

recommendations of the operations committee unless good cause is shown why such

20

determinations and recommendations should not be approved. Any disputes as to whether good

21

cause exists to reject any determination or recommendation of the operations committee shall be

22

resolved by the majority vote of the commission.

23

     The operations committee shall have no more than fifteen (15) representatives or one for

24

each state if there are less than fifteen (15) compacting states, who shall serve for a term and shall

25

be established as set forth in the bylaws.

26

     The operations committee shall have responsibility for:

27

     (A) Evaluating technology requirements for the clearinghouse, assessing existing systems

28

used by state regulatory agencies and state stamping offices to maximize the efficiency and

29

successful integration of the clearinghouse technology systems with state and state stamping

30

office technology platforms and to minimize costs to the states, state stamping offices and the

31

clearinghouse.

32

     (B) Making recommendations to the executive committee based on its analysis and

33

determination of the clearinghouse technology requirements and compatibility with existing state

34

and state stamping office systems,

 

LC002053 - Page 16 of 27

1

     (C) Evaluating the most suitable proposals for adoption as mandatory rules, assessing

2

such proposals for ease of integration by states, and likelihood of successful implementation and

3

to report to the executive committee its determinations and recommendations.

4

     (D) Such other duties and responsibilities as are delegated to it by the bylaws, the

5

executive committee or the commission.

6

     (ii) All representatives of the operations committee shall be individuals who have

7

extensive experience and/or employment in the surplus lines insurance business including, but not

8

limited to, executives and attorneys employed by surplus line insurers, surplus line licensees, law

9

firms, state insurance departments and/or state stamping offices. Operations committee

10

representatives from compacting states which utilize the services of a state stamping office must

11

appoint the chief operating officer or a senior manager of the state stamping office to the

12

operations committee.

13

     (4) Legislative and Advisory Committees

14

     (i) A legislative committee comprised of state legislators or their designees shall be

15

established to monitor the operations of, and make recommendations to, the commission,

16

including the executive committee; provided, that the manner of selection and term of any

17

legislative committee member shall be as set forth in the bylaws. Prior to the adoption by the

18

commission of any uniform standard, revision to the bylaws, annual budget or other significant

19

matter as may be provided in the bylaws, the executive committee shall consult with and report to

20

the legislative committee.

21

     (ii) The commission may establish additional advisory committees as its bylaws may

22

provide for the carrying out of its functions.

23

     (5) Corporate records of the commission

24

     The commission shall maintain its corporate books and records in accordance with the

25

bylaws.

26

     (6) Qualified immunity, defense and indemnification

27

     (i) The members, officers, executive director, employees and representatives of the

28

commission, the executive committee and any other committee of the commission shall be

29

immune from suit and liability, either personally or in their official capacity, for any claim for

30

damage to or loss of property or personal injury or other civil liability caused by or arising out of

31

any actual or alleged act, error or omission that occurred, or that the person against whom the

32

claim is made had a reasonable basis for believing occurred within the scope of commission

33

employment, duties or responsibilities; provided, that nothing in this paragraph shall be construed

34

to protect any such person from suit and/or liability for any damage, loss, injury or liability

 

LC002053 - Page 17 of 27

1

caused by the intentional or willful or wanton misconduct of that person.

2

     (ii) The commission shall defend any member, officer, executive director, employee or

3

representative of the commission, the executive committee or any other committee of the

4

commission in any civil action seeking to impose liability arising out of any actual or alleged act,

5

error or omission that occurred within the scope of commission employment, duties or

6

responsibilities, or that the person against whom the claim is made had a reasonable basis for

7

believing occurred within the scope of commission employment, duties or responsibilities;

8

provided, that nothing herein shall be construed to prohibit that person from retaining his or her

9

own counsel; and provided further, that the actual or alleged act, error or omission did not result

10

from that person's intentional or willful or wanton misconduct.

11

     (iii) The commission shall indemnify and hold harmless any member, officer, executive

12

director, employee or representative of the commission, executive committee or any other

13

committee of the commission for the amount of any settlement or judgment obtained against that

14

person arising out of any actual or alleged act, error or omission that occurred within the scope of

15

commission employment, duties or responsibilities, or that such person had a reasonable basis for

16

believing occurred within the scope of commission employment, duties or responsibilities,

17

provided that the actual or alleged act, error or omission did not result from the intentional or

18

willful or wanton misconduct of that person.

19

     ARTICLE VII MEETINGS AND ACTS OF THE COMMISSION

20

     (a) The commission shall meet and take such actions as are consistent with the provisions

21

of this compact and the bylaws.

22

     (b) Each member of the commission shall have the right and power to cast a vote to

23

which that compacting state is entitled and to participate in the business and affairs of the

24

commission. A member shall vote in person or by such other means as provided in the bylaws.

25

The bylaws may provide for members' participation in meetings by telephone or other means of

26

communication.

27

     (c) The commission shall meet at least once during each calendar year. Additional

28

meetings shall be held as set forth in the bylaws.

29

     (d) Public notice shall be given of all meetings and all meetings shall be open to the

30

public, except as set forth in the rules or otherwise provided in the compact.

31

     (e) The commission shall promulgate rules concerning its meetings consistent with the

32

principles contained in the "Government in the Sunshine Act," 5 U.S.C., Section 552b, as may be

33

amended.

34

     (f) The commission and its committees may close a meeting, or portion thereof, where it

 

LC002053 - Page 18 of 27

1

determines by majority vote that an open meeting would be likely to:

2

     (1) Relate solely to the commission's internal personnel practices and procedures;

3

     (2) Disclose matters specifically exempted from disclosure by federal and state statute;

4

     (3) Disclose trade secrets or commercial or financial information which is privileged or

5

confidential;

6

     (4) Involve accusing a person of a crime, or formally censuring a person;

7

     (5) Disclose information of a personal nature where disclosure would constitute a clearly

8

unwarranted invasion of personal privacy;

9

     (6) Disclose investigative records compiled for law enforcement purposes;

10

     (7) Specifically relate to the commission's issuance of a subpoena, or its participation in a

11

civil action or other legal proceeding.

12

     (g) For a meeting, or portion of a meeting, closed pursuant to this provision, the

13

commission's legal counsel or designee shall certify that the meeting may be closed and shall

14

reference each relevant exemptive provision. The commission shall keep minutes which shall

15

fully and clearly describe all matters discussed in a meeting and shall provide a full and accurate

16

summary of actions taken, and the reasons therefore, including a description of the views

17

expressed and the record of a roll call vote. All documents considered in connection with an

18

action shall be identified in such minutes. All minutes and documents of a closed meeting shall

19

remain under seal, subject to release by a majority vote of the commission.

20

     ARTICLE VIII RULES AND OPERATING PROCEDURES: RULEMAKING

21

     Rulemaking Functions of the Commission:

22

     1. Rulemaking Authority. The commission shall promulgate reasonable rules in order to

23

effectively and efficiently achieve the purposes of this compact. Notwithstanding the foregoing,

24

in the event the commission exercises its rulemaking authority in a manner that is beyond the

25

scope of the purposes of this chapter, or the powers granted hereunder, then such an action by the

26

commission shall be invalid and have no force or effect.

27

     2. Rulemaking Procedure. Rules shall be made pursuant to a rulemaking process that

28

substantially conforms to the "Model State Administrative Procedure Act," of 1981 Act, Uniform

29

Laws Annotated, Vol. 15, p.1 (2000) as amended, as may be appropriate to the operations of the

30

Commission.

31

     3. Effective Date. All rules and amendments, thereto, shall become effective as of the

32

date specified in each rule, operating procedure or amendment.

33

     4. Not later than thirty (30) days after a rule is promulgated, any person may file a

34

petition for judicial review of the rule; provided, that the filing of such a petition shall not stay or

 

LC002053 - Page 19 of 27

1

otherwise prevent the rule from becoming effective unless the court finds that the petitioner has a

2

substantial likelihood of success. The court shall give deference to the actions of the commission

3

consistent with applicable law and shall not find the rule to be unlawful if the rule represents a

4

reasonable exercise of the commission's authority.

5

     ARTICLE IX COMMISSION RECORDS AND ENFORCEMENT

6

     (a) The commission shall promulgate rules establishing conditions and procedures for

7

public inspection and copying of its information and official records, except such information and

8

records involving the privacy of individuals, insurers, insureds or surplus lines licensee trade

9

secrets. State transaction documentation and clearinghouse transaction data collected by the

10

clearinghouse shall be used for only those purposes expressed in or reasonably implied under the

11

provisions of this compact and the commission shall afford this data the broadest protections as

12

permitted by any applicable law for proprietary information, trade secrets or personal data. The

13

commission may promulgate additional rules under which it may make available to federal and

14

state agencies, including law enforcement agencies, records and information otherwise exempt

15

from disclosure, and may enter into agreements with such agencies to receive or exchange

16

information or records subject to nondisclosure and confidentiality provisions.

17

     (b) Except as to privileged records, data and information, the laws of any compacting

18

state pertaining to confidentiality or nondisclosure shall not relieve any compacting state member

19

of the duty to disclose any relevant records, data or information to the commission; provided that

20

disclosure to the commission shall not be deemed to waive or otherwise affect any confidentiality

21

requirement, and further provided that, except as otherwise expressly provided in this chapter, the

22

commission shall not be subject to the compacting state's laws pertaining to confidentiality and

23

nondisclosure with respect to records, data and information in its possession. Confidential

24

information of the commission shall remain confidential after such information is provided to any

25

member, and the commission shall maintain the confidentiality of any information provided by a

26

member that is confidential under that member's state law.

27

     (c) The commission shall monitor compacting states for compliance with duly adopted

28

bylaws and rules. The commission shall notify any non-complying compacting state in writing of

29

its noncompliance with commission bylaws or rules. If a non-complying compacting state fails to

30

remedy its noncompliance within the time specified in the notice of noncompliance, the

31

compacting state shall be deemed to be in default as set forth in Article XIV.

32

     ARTICLE X DISPUTE RESOLUTION

33

     (a) Before a member may bring an action in a court of competent jurisdiction for

34

violation of any provision, standard or requirement of the compact, the commission shall attempt,

 

LC002053 - Page 20 of 27

1

upon the request of a member, to resolve any disputes or other issues that are subject to this

2

compact and which may arise between two (2) or more compacting states, contracting states or

3

non-compacting states, and the commission shall promulgate a rule providing alternative dispute

4

resolution procedures for such disputes.

5

     (b) The commission shall also provide alternative dispute resolution procedures to

6

resolve any disputes between insureds or surplus lines licensees concerning a tax calculation or

7

allocation or related issues which are the subject of this compact.

8

     (c) Any alternative dispute resolution procedures shall be utilized in circumstances where

9

a dispute arises as to which state constitutes the home state.

10

     ARTICLE XI REVIEW OF COMMISSION DECISIONS

11

     Regarding Commission decisions:

12

     (1) Except as necessary for promulgating Rules to fulfill the purposes of this compact, the

13

commission shall not have authority to otherwise regulate insurance in the compacting states.

14

     (2) Not later than thirty (30) days after the commission has given notice of any Rule or

15

allocation formula, any third-party filer or compacting state may appeal the determination to a

16

review panel appointed by the commission. The commission shall promulgate rules to establish

17

procedures for appointing such review panels and provide for notice and hearing. An allegation

18

that the commission, in making compliance or tax determinations acted arbitrarily, capriciously,

19

or in a manner that is an abuse of discretion or otherwise not in accordance with the law, is

20

subject to judicial review in accordance with Article III, subsection (f).

21

     (3) The commission shall have authority to monitor, review and reconsider commission

22

decisions upon a finding that the determinations or allocations do not meet the relevant rule.

23

Where appropriate, the commission may withdraw or modify its determination or allocation after

24

proper notice and hearing, subject to the appeal process in subsection (2) above.

25

     ARTICLE XII FINANCE

26

     (a) The commission shall pay or provide for the payment of the reasonable expenses of

27

its establishment and organization. To fund the cost of its initial operations the commission may

28

accept contributions, grants, and other forms of funding from the state stamping offices,

29

compacting states and other sources.

30

     (b) The commission shall collect a fee payable by the insured directly or through a

31

surplus lines licensee on each transaction processed through the compact clearinghouse, to cover

32

the cost of the operations and activities of the commission and its staff in a total amount sufficient

33

to cover the commission's annual budget.

34

     (c) The commission's budget for a fiscal year shall not be approved until it has been

 

LC002053 - Page 21 of 27

1

subject to notice and comment as set forth in Article VIII of this compact.

2

     (d) The commission shall be regarded as performing essential governmental functions in

3

exercising such powers and functions and in carrying out the provisions of this compact and of

4

any law relating thereto, and shall not be required to pay any taxes or assessments of any

5

character, levied by any state or political subdivision thereof, upon any of the property used by it

6

for such purposes, or any income or revenue therefrom, including any profit from a sale or

7

exchange.

8

     (e) The commission shall keep complete and accurate accounts of all its internal receipts,

9

including grants and donations, and disbursements for all funds under its control. The internal

10

financial accounts of the commission shall be subject to the accounting procedures established

11

under its bylaws. The financial accounts and reports including the system of internal controls and

12

procedures of the commission shall be audited annually by an independent certified public

13

accountant. Upon the determination of the commission, but not less frequently than every three

14

(3) years, the review of the independent auditor shall include a management and performance

15

audit of the commission. The commission shall make an annual report to the governor and

16

legislature of the compacting states, which shall include a report of the independent audit. The

17

commission's internal accounts shall not be confidential and such materials may be shared with

18

the commissioner, the controller, or the stamping office of any compacting state upon request

19

provided, however, that any work papers related to any internal or independent audit and any

20

information regarding the privacy of individuals, and licensees' and insurers' proprietary

21

information, including trade secrets, shall remain confidential.

22

     (f) No compacting state shall have any claim to or ownership of any property held by or

23

vested in the commission or to any commission funds held pursuant to the provisions of this

24

compact.

25

     (g) The commission shall not make any political contributions to candidates for elected

26

office, elected officials, political parties nor political action committees. The commission shall

27

not engage in lobbying except with respect to changes to this compact.

28

     ARTICLE XIII COMPACTING STATES, EFFECTIVE DATE AND AMENDMENT

29

     (a) Any state is eligible to become a compacting state.

30

     (b) The compact shall become effective and binding upon legislative enactment of the

31

compact into law by two (2) compacting states, provided the commission shall become effective

32

for purposes of adopting rules, and creating the clearinghouse when there are a total of ten (10)

33

compacting states and contracting states or, alternatively, when there are compacting states and

34

contracting states representing greater than forty percent (40%) of the surplus lines insurance

 

LC002053 - Page 22 of 27

1

premium volume based on records of the percentage of surplus lines insurance premium based on

2

records of the National Association of Insurance Commissioners for the prior year. Thereafter, it

3

shall become effective and binding as to any other compacting state upon enactment of the

4

compact into law by that state. Notwithstanding the foregoing, the clearinghouse operations and

5

the duty to report clearinghouse transaction data shall begin on the first January 1st or July 1st

6

following the first anniversary of the commission's effective date. For states which join the

7

compact subsequent to the effective date, a start date for reporting clearinghouse transaction data

8

shall be set by the commission provided Surplus Lines Licensees and all other interested parties

9

receive not less than ninety (90) days advance notice.

10

     (c) Amendments to the compact may be proposed by the commission for enactment by

11

the compacting states. No amendment shall become effective and binding upon the commission

12

and the compacting states unless and until all compacting states enact the amendment into law.

13

     (d) (1) If this commission does not take effect as set forth in subsection (b) or becomes

14

ineffective, the superintendent of insurance has the authority to enter into a different multi-state

15

agreement or contracts to implement the requirements of the "Nonadmitted and Reinsurance

16

Reform Act of 2010," 124 Stat. 1589, 15 U.S.C. 8201 et seq., or any successor or replacement

17

law.

18

     (2) The superintendent of insurance shall not enter into a multi-state agreement or

19

contract under subdivision (d)(1) unless the division of insurance has done all of the following:

20

     (i) Completed a fiscal analysis of the impact of the agreement or contract that examines

21

the expected effects on Rhode Island's gross receipt of premium tax;

22

     (ii) Reviewed whether the contract will create additional administrative burdens on the

23

State of Rhode Island or surplus lines licensee;

24

     (iii) Concluded, after conducting a public hearing, that entering into the agreement or

25

contract:

26

     (A) Is in Rhode Island's financial best interest; and

27

     (B) Is consistent with the requirements of the NRRA.

28

     ARTICLE XIV WITHDRAWAL, DEFAULT AND TERMINATION

29

     (a) Withdrawal

30

     (1) Once effective, the compact shall continue in force and remain binding upon each and

31

every compacting state, provided that a compacting state may withdraw from the compact

32

("withdrawing state") by enacting a statute specifically repealing the statute which enacted the

33

compact into law.

34

     (2) The effective date of withdrawal is the effective date of the repealing statute.

 

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1

However, the withdrawal shall not apply to any tax or compliance determinations approved on

2

the date the repealing statute becomes effective, except by mutual agreement of the commission

3

and the withdrawing state unless the approval is rescinded by the commission.

4

     (3) The member of the withdrawing state shall immediately notify the executive

5

committee of the commission in writing upon the introduction of legislation repealing this

6

compact in the withdrawing state.

7

     (4) The commission shall notify the other compacting states of the introduction of such

8

legislation within ten (10) days after its receipt of notice thereof.

9

     (5) The withdrawing state is responsible for all obligations, duties and liabilities incurred

10

through the effective date of withdrawal, including any obligations, the performance of which

11

extend beyond the effective date of withdrawal. To the extent those obligations may have been

12

released or relinquished by mutual agreement of the commission and the Withdrawing State, the

13

commission's determinations prior to the effective date of withdrawal shall continue to be

14

effective and be given full force and effect in the withdrawing state, unless formally rescinded by

15

the commission.

16

     (6) Reinstatement following withdrawal of any compacting state shall occur upon the

17

effective date of the withdrawing state reenacting the compact.

18

     (b) Default

19

     (1) If the commission determines that any compacting state has at any time defaulted

20

("defaulting state") in the performance of any of its obligations or responsibilities under this

21

compact, the bylaws or duly promulgated rules then after notice and hearing as set forth in the

22

bylaws, all rights, privileges and benefits conferred by this compact on the defaulting state shall

23

be suspended from the effective date of default as fixed by the commission. The grounds for

24

default include, but are not limited to, failure of a compacting state to perform its obligations or

25

responsibilities, and any other grounds designated in commission rules. The commission shall

26

immediately notify the defaulting state in writing of the defaulting state's suspension pending a

27

cure of the default. The commission shall stipulate the conditions and the time period within

28

which the defaulting state must cure its default. If the defaulting state fails to cure the default

29

within the time period specified by the commission, the defaulting state shall be terminated from

30

the compact and all rights, privileges and benefits conferred by this compact shall be terminated

31

from the effective date of termination.

32

     (2) Decisions of the commission that are issued on the effective date of termination shall

33

remain in force in the defaulting state in the same manner as if the defaulting state had withdrawn

34

voluntarily pursuant to subsection (a) of this Article.

 

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1

     (3) Reinstatement following termination of any compacting state requires a reenactment

2

of the compact.

3

     (c) Dissolution of compact

4

     (1) The compact dissolves effective upon the date of the withdrawal or default of the

5

compacting state which reduces membership in the compact to one compacting state.

6

     (2) Upon the dissolution of this compact, the compact becomes null and void and shall

7

have no further force or effect, and the business and affairs of the commission shall be wound up

8

and any surplus funds shall be distributed in accordance with the rules and bylaws.

9

     ARTICLE XV SEVERABILITY AND CONSTRUCTION

10

     (a) The provisions of this compact shall be severable and if any phrase, clause, sentence

11

or provision is deemed unenforceable, the remaining provisions of the compact shall be

12

enforceable.

13

     (b) The provisions of this compact shall be liberally construed to effectuate its purposes.

14

     (c) Throughout this compact the use of the singular shall include the plural and vice-

15

versa.

16

     (d) The headings and captions of articles, sections and sub-sections used in this compact

17

are for convenience only and shall be ignored in construing the substantive provisions of this

18

compact.

19

     ARTICLE XVI BINDING EFFECT OF COMPACT AND OTHER LAWS

20

     (a) Other laws

21

     (1) Nothing herein prevents the enforcement of any other law of a compacting state

22

except as provided in subdivision (2) of this section.

23

     (2) Decisions of the commission, and any rules, and any other requirements of the

24

commission shall constitute the exclusive rule, or determination applicable to the compacting

25

states. Any law or regulation regarding non-admitted insurance of multi-state risks that is contrary

26

to rules of the commission is preempted with respect to the following:

27

     (i) Clearinghouse transaction data reporting requirements;

28

     (ii) Allocation formula;

29

     (iii) Clearinghouse transaction data collection requirements;

30

     (iv) Premium tax payment time frames and rules concerning dissemination of data among

31

the compacting states for non-admitted insurance of multi-state risks and single-state risks;

32

     (v) Exclusive compliance with surplus lines law of the home state of the insured;

33

     (vi) Rules for reporting to a clearinghouse for receipt and distribution of clearinghouse

34

transaction data related to non-admitted insurance of multi-state risks;

 

LC002053 - Page 25 of 27

1

     (vii) Uniform foreign insurers eligibility requirements;

2

     (viii) Uniform policyholder notice; and

3

     (ix) Uniform treatment of purchasing groups procuring non-admitted insurance.

4

     (3) Except as stated in subdivision (2), any rule, uniform standard or other requirement of

5

the commission shall constitute the exclusive provision that a commissioner may apply to

6

compliance or tax determinations. Notwithstanding the foregoing, no action taken by the

7

commission shall abrogate or restrict: (i) The access of any person to state courts; (ii) The

8

availability of alternative dispute resolution under Article X of this compact (iii) Remedies

9

available under state law related to breach of contract, tort, or other laws not specifically directed

10

to compliance or tax determinations; (iv) State law relating to the construction of insurance

11

contracts; or (v) The authority of the attorney general of the state, including but not limited to

12

maintaining any actions or proceedings, as authorized by law.

13

     (b) Binding effect of this compact

14

     (1) All lawful actions of the commission, including all Rules promulgated by the

15

commission, are binding upon the compacting states, except as provided herein.

16

     (2) All agreements between the commission and the compacting states are binding in

17

accordance with their terms.

18

     (3) Upon the request of a party to a conflict over the meaning or interpretation of

19

commission actions, and upon a majority vote of the compacting states, the commission may

20

issue advisory opinions regarding the meaning or interpretation in dispute. This provision may be

21

implemented by rule at the discretion of the commission.

22

     (4) In the event any provision of this compact exceeds the constitutional limits imposed

23

on the legislature of any compacting state, the obligations, duties, powers or jurisdiction sought to

24

be conferred by that provision upon the commission shall be ineffective as to that state and those

25

obligations duties, powers or jurisdiction shall remain in the compacting state and shall be

26

exercised by the agency thereof to which those obligations, duties, powers or jurisdiction are

27

delegated by law in effect at the time this compact becomes effective.

28

     SECTION 3. This act shall take effect upon passage.

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LC002053 - Page 26 of 27

EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO INSURANCE - CASUALTY INSURANCE RATING

***

1

     This act would repeal multiple sections of the general laws related to insurance, including

2

ยง27-9-57 and chapter 75 of title 27 ("Surplus Lines Insurance Multi-State Compliance

3

Compact").

4

     This act would take effect upon passage.

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