Florida Surplus Lines Office (FSLO) Ready to Implement Nonadmitted and Reinsurance Reform Act (NRRA)
The Florida legislature passed Senate Bill 1816 authorizing the Florida Surplus Lines Office to implement NRRA, a Federal law designed to simplify surplus lines regulation by delegating most of the responsibility to the “home state” of the insured. How much taxation is actually simplified remains to be seen as a myriad of state laws and implementation strategies promises to create confusion. Florida’s new law, Senate Bill 1816 permits the FSLO to collect premium taxes and fees for surplus lines policies on the basis of the “home state” as that term is defined in the NRRA. The bill also authorizes FSLO to enter into compacts to provide for fair distribution of those taxes between states. The FSLO has designed a tax calculator to assist agents in figuring out the multi-state taxes.
Among other things the bill will, if signed by the governor:
- Require surplus lines agents to confirm by affidavit on or before the 45th day following each calendar quarter that they have properly reported all surplus lines insurance transactions. Previously this was done at “the end of the month” following the calendar quarter.
- Require, for multi-state risks where Florida is the home state as defined in NRRA, the tax and service fee to be computed on the gross premium. However, the tax must not exceed the tax rate of each state where risk or exposure is located. Currently the tax is based on the premium allocated to Florida.
- Create section 626.9362, Florida Statutes, authorizing the Department of Financial Services and the Office of Insurance Regulation to enter into a cooperative reciprocal agreement with another state or group of states to collect and allocate taxes pursuant to NRRA. The law provides the agreement may include provisions to:
o Create a clearinghouse, including a service fee (not to exceed .3% of gross premium);
o Specify additional reporting requirements;
o Determine a method of collection and forwarding taxes between states; and
o Provide for audits and information exchanges.
- Grant OIR and DFS rulemaking authority to implement and administer cooperative agreements.
- Give the Florida legislature the right to direct the state to remove itself from any cooperative agreement the legislature determines “not in the best interest of the state.”
- Require the Department of Financial Services to provide a report to the legislature regarding the details of any agreement.
- Make similar tax allocation provisions for taxes and service fees for independently procured coverages.
The bill takes effect “upon becoming law,” i.e. when the governor signs the or allows it go into law without signature. The officers of the Senate and House signed the bill and presented it to the governor on May 17, 2011. He has 15 days to react.