2017 -- S 1003

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LC002933

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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: Senator Roger Picard

     Date Introduced: June 29, 2017

     Referred To: Placed on Senate Calendar

     It is enacted by the General Assembly as follows:

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

Insurance Rating" is hereby repealed.

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

prohibited.

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

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

liability insurance:

     (1) The calendar year earned premium;

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

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

Rhode Island for the calendar year; and

     (4) Policyholder dividends applicable to the calendar year.

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

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

recent calendar years;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

reported at eight (8) stages of development.

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

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

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

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

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

underwriting gain or loss.

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

shall be compared to the anticipated underwriting profit.

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

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

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

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

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

group insolvent under the provisions of this title.

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

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

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

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

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

December 31 of the final compilation year.

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

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

     (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:

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

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

realized; or

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

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

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

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

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

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

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

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

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

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

applicable to the year in which it is incurred.

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

State Compliance Compact" is hereby repealed in its entirety.

CHAPTER 27-75

Surplus Lines Insurance Multi-State Compliance Compact

     27-75-1. Short title.

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

Compliance Compact."

     27-75-2. Preamble.

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

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

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

Consumer Protection Act, hereafter, the NRRA, that:

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

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

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

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

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

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

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

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and

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

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

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

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

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

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

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

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

premium taxes for non-admitted insurance; and

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

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

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

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

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

licensees and the renewal of such licenses; and

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     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

to non-admitted insurance will be improved; and

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

assembly as follows:

     27-75-3. Enactment of compact.

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

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

as follows:

     ARTICLE I PURPOSES

     The purposes of this compact are:

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

Act (NRRA).

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

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

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

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

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

implemented by the commission.

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

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

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

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

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

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

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

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

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

insurance producers, and surplus lines insurers.

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

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

accordance with rules to be adopted by the commission.

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

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

with respect to non-admitted insurance.

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

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

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

efficiency of the non-admitted insurance market.

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

requirements for:

     (i) Foreign insurer eligibility requirements;

     (ii) Surplus lines policyholder notices;

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

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

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

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

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

     ARTICLE II DEFINITIONS

     For purposes of this Compact the following definitions shall apply:

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

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

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

law.

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

or is under common control with the insured.

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

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

premium taxes due.

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

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

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

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

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

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

by the commission.

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

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

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

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

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

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

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

Article XIV, Section 2.

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

commission" established by this compact.

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

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

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

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

participate in the clearinghouse.

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

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

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

securities of the other entity; or

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

trustees of the other entity.

     (12) "Home state"

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

respect to an insured:

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

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

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

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

premium for that insurance contract is allocated.

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

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

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

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

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

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

state.

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

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

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

after July 21, 2011.

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

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

limited to one vote.

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

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

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

insurance.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

state.

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

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

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.

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

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

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

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

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

procured insurance.

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

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

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

may be defined by applicable state law.

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

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

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

the laws of the state where such insurer is domiciled.

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

law of the home state to place surplus lines insurance.

     ARTICLE III ESTABLISHMENT OF THE COMMISSION AND VENUE

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

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

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

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

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

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

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

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

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

establishing foreign insurer eligibility requirements and a concise and objective policyholder

notice regarding the nature of a surplus lines placement.

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

compacting states.

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

provided in this compact.

     (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

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

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

     ARTICLE IV AUTHORITY TO ESTABLISH MANDATORY RULES

     The commission shall adopt mandatory rules which establish:

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

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

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

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

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

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

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

reported to the clearinghouse.

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

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

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

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

or entities.

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

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

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

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

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

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

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

commission. Home state regulatory compliance requirements applicable to independently

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

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

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

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

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

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

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

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

taxation.

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

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

compact commission.

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

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

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

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

political subdivision from requiring surplus lines licensees to provide clearinghouse transaction

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

the home state or one single designated agent thereof.

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

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

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

clearinghouse.

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

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

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

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

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

each insured for whom surplus lines insurance has been procured.

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

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

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

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

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

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

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

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

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

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

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

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

adopted by the commission.

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

     (14) A uniform policyholder notice.

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

     ARTICLE V POWERS OF THE COMMISSION

     The commission shall have the following powers:

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

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

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

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

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

law shall not be affected;

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

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

subpoena records or data from non-admitted insurers;

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

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

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

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

     (5) To purchase and maintain insurance and bonds;

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

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

competitive process and procedure adopted by the commission;

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

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

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

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

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

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

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

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

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

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

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

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

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

any property real, personal or mixed;

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

to the allocation of premium taxes including:

     (i) Minimum audit standards, including sampling methods;

     (ii) Review of internal controls;

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

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

premium taxes;

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

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

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

bylaws pursuant to the authority set forth in Article XIV;

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

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

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

compacting states, consistent with the purposes of this compact;

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

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

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

     (16) To establish a budget and make expenditures;

     (17) To borrow money;

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

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

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

compact and the bylaws;

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

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

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

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

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

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

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

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

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

other duties as provided herein and as deemed necessary.

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

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

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

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

mandatory rules to be adopted to be by the commission.

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

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

forth in such contracts;

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

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

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

     ARTICLE VI ORGANIZATION OF THE COMMISSION

     (1) Membership, Voting and Bylaws

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

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

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

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

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

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

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

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

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

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

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

powers of the compact including, but not limited to:

     (A) Establishing the fiscal year of the commission;

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

executive committee, and the operations committee;

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

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

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function of the commission;

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

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

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

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

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

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

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

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

and (II) Votes taken during such meeting;

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

of the officers of the commission;

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

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

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

of the commission;

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

commission members and employees;

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

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

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

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

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

compacting states.

     (2) Executive committee, personnel and chairperson

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

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

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

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

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

accordance with the bylaws.

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

the bylaws, including, but not limited to:

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

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purposes of the commission;

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

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

     (C) Overseeing the offices of the commission; and

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

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

commission.

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

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

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

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

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

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

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

     (3) Operations Committee

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

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

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

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

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

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

resolved by the majority vote of the commission.

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

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

be established as set forth in the bylaws.

     The operations committee shall have responsibility for:

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

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

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

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

clearinghouse.

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

determination of the clearinghouse technology requirements and compatibility with existing state

and state stamping office systems,

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

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

to report to the executive committee its determinations and recommendations.

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

executive committee or the commission.

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

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

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

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

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

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

operations committee.

     (4) Legislative and Advisory Committees

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

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

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

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

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

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

the legislative committee.

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

provide for the carrying out of its functions.

     (5) Corporate records of the commission

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

bylaws.

     (6) Qualified immunity, defense and indemnification

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

willful or wanton misconduct of that person.

     ARTICLE VII MEETINGS AND ACTS OF THE COMMISSION

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

of this compact and the bylaws.

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

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

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

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

communication.

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

meetings shall be held as set forth in the bylaws.

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

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

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

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

amended.

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

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

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

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

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

confidential;

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

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

unwarranted invasion of personal privacy;

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

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

civil action or other legal proceeding.

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

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

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

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

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

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

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

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

     ARTICLE VIII RULES AND OPERATING PROCEDURES: RULEMAKING

     Rulemaking Functions of the Commission:

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

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

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

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

commission shall be invalid and have no force or effect.

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

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

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

Commission.

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

date specified in each rule, operating procedure or amendment.

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

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

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

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

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

reasonable exercise of the commission's authority.

     ARTICLE IX COMMISSION RECORDS AND ENFORCEMENT

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

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

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

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

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

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

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

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

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

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

information or records subject to nondisclosure and confidentiality provisions.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     ARTICLE X DISPUTE RESOLUTION

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

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

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

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

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

resolution procedures for such disputes.

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

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

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

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

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

     ARTICLE XI REVIEW OF COMMISSION DECISIONS

     Regarding Commission decisions:

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

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

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

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

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

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

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

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

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

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

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

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

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

     ARTICLE XII FINANCE

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

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

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

compacting states and other sources.

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

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

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

to cover the commission's annual budget.

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

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

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

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

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

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

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

exchange.

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

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

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

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

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

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

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

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

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

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

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

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

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

information, including trade secrets, shall remain confidential.

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

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

compact.

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

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

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

     ARTICLE XIII COMPACTING STATES, EFFECTIVE DATE AND AMENDMENT

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

law.

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

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

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

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

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

State of Rhode Island or surplus lines licensee;

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

contract:

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

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

     ARTICLE XIV WITHDRAWAL, DEFAULT AND TERMINATION

     (a) Withdrawal

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

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

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

compact into law.

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

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

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

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

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

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

compact in the withdrawing state.

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

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

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

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

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

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

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

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

the commission.

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

effective date of the withdrawing state reenacting the compact.

     (b) Default

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

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

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

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

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

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

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

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

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

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

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

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

from the effective date of termination.

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

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

voluntarily pursuant to subsection (a) of this Article.

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

of the compact.

     (c) Dissolution of compact

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

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

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

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

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

     ARTICLE XV SEVERABILITY AND CONSTRUCTION

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

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

enforceable.

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

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

versa.

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

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

compact.

     ARTICLE XVI BINDING EFFECT OF COMPACT AND OTHER LAWS

     (a) Other laws

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

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

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

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

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

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

     (i) Clearinghouse transaction data reporting requirements;

     (ii) Allocation formula;

     (iii) Clearinghouse transaction data collection requirements;

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

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

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

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

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

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     (vii) Uniform foreign insurers eligibility requirements;

     (viii) Uniform policyholder notice; and

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

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

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

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

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

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

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

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

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

maintaining any actions or proceedings, as authorized by law.

     (b) Binding effect of this compact

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

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

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

accordance with their terms.

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

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

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

implemented by rule at the discretion of the commission.

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

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

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

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

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

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

     SECTION 3. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO INSURANCE - CASUALTY INSURANCE RATING

***

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

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

Compact").

     This act would take effect upon passage.

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