Surplus Lines Insurance
Surplus Lines Insurance
Multistate Compliance Compact
Multistate Compliance Compact
(SLIMPACT)
(SLIMPACT)
The Excess and Surplus
The Excess and Surplus
Lines Industry……
Lines Industry……
A short overview
A short overview
As the economy evolved and became
As the economy evolved and became
more complex, the laws applying to
more complex, the laws applying to
surplus lines brokers did not keep
surplus lines brokers did not keep
pace….
pace….
Leaving a terrible inefficient system…
Leaving a terrible inefficient system…
Highlights
Highlights
PURPOSES OF SLIMPACT
PURPOSES OF SLIMPACT
The most fundamental provisions of SLIMPACT
The most fundamental provisions of SLIMPACT
are designed to:
are designed to:
Clarify the law and ease the regulatory burdens on E&S
Clarify the law and ease the regulatory burdens on E&S
brokers when placing
brokers when placing multistate
multistate
risks.
risks.
Allow each compacting state to collect taxes on all
Allow each compacting state to collect taxes on all
nonadmitted
nonadmitted
risks where risk exposures are present in the
risks where risk exposures are present in the
compacting
compacting state(s
state(s).
).
Save E&S brokers, over time, hundreds of millions of dollars
Save E&S brokers, over time, hundreds of millions of dollars
in frictional costs associated with current efforts to comply
in frictional costs associated with current efforts to comply
and pay taxes state by state on each
and pay taxes state by state on each multistate
multistate
risk the
risk the
broker places.
E&S brokers will be required to comply and file E&S
E&S brokers will be required to comply and file E&S
transactions and data only in the home state of the insured
transactions and data only in the home state of the insured
on any one
on any one
multistate
multistate
risk. An E&S broker needs to be
risk. An E&S broker needs to be
licensed only in the insured’s home state when placing a
licensed only in the insured’s home state when placing a
multistate
multistate
risk.
risk.
SLIMPACT also provides authority for compacting states to
SLIMPACT also provides authority for compacting states to
agree on Uniform Standards to make compliance
agree on Uniform Standards to make compliance
requirements more uniform among the compacting states
requirements more uniform among the compacting states
when two thirds of the compacting states agree on a
when two thirds of the compacting states agree on a
particular uniform standard.
particular uniform standard.
THE COMPACT COMMISSION
THE COMPACT COMMISSION
AND ITS AUTHORITY
AND ITS AUTHORITY
Each compacting state is entitled to have a "member" on the commEach compacting state is entitled to have a "member" on the commission. A ission. A "member" can consist of more than one representative but the "me
"member" can consist of more than one representative but the "member" gets mber" gets one single vote. Each compacting state, therefore, gets an equa
one single vote. Each compacting state, therefore, gets an equal vote.l vote.
The commission is empowered to accomplish a number of tasks. SoThe commission is empowered to accomplish a number of tasks. Some of the me of the most meaningful undertakings include
most meaningful undertakings include::
•
• Creating a Clearinghouse to receive transaction and tax data whiCreating a Clearinghouse to receive transaction and tax data which will be used to ch will be used to report, periodically, what each state is owed by each broker and
report, periodically, what each state is owed by each broker and what each broker owes what each broker owes each state.
each state.
•
• Adopting uniform tax allocation formulas to be used by each compAdopting uniform tax allocation formulas to be used by each compact state. Each state act state. Each state will be able to charge its own tax rate to the portion of the ri
will be able to charge its own tax rate to the portion of the risk located in such state.sk located in such state. •
• Adopting Uniform Standards to create more uniform regulation acrAdopting Uniform Standards to create more uniform regulation across participating oss participating
compact states when 2/3rds of the member states agree to such st
compact states when 2/3rds of the member states agree to such standards.andards. •
• Other general authority to budget, hire staff, charge fees necesOther general authority to budget, hire staff, charge fees necessary to operate the sary to operate the compact and clearinghouse.
compact and clearinghouse.
•
• Electing a Management Committee to implement the policies adopteElecting a Management Committee to implement the policies adopted by the commission d by the commission and run the day to day affairs of the clearinghouse. The Manage
and run the day to day affairs of the clearinghouse. The Management Committee’s ment Committee’s selection criteria is weighted in favor of compacting states wit
selection criteria is weighted in favor of compacting states with large E&S premium h large E&S premium volume and favors the selection of stamping office executives wh
volume and favors the selection of stamping office executives who deal day to day with o deal day to day with
data collection and tax reporting laws
BROKER IMPLICATIONS
BROKER IMPLICATIONS
E&S brokers will only have to be licensed in the state which is E&S brokers will only have to be licensed in the state which is the Home State of the Home State of the insured when placing any given
the insured when placing any given multistatemultistate risk. [Ex: An E&S broker has 60 risk. [Ex: An E&S broker has 60 multistate
multistate risks but all are Texas home stated risks based on the compact risks but all are Texas home stated risks based on the compact definition of Home State. The E&S broker would need to be licen
definition of Home State. The E&S broker would need to be licensed only in sed only in Texas. If 4 of those 60
Texas. If 4 of those 60 multistatemultistate risks were home stated in California and the risks were home stated in California and the rest in Texas, the E&S broker would need an E&S license in Calif
rest in Texas, the E&S broker would need an E&S license in California for the four ornia for the four risks home stated there.
risks home stated there.
An E&S broker will report each transaction to the home state of An E&S broker will report each transaction to the home state of the insured. A the insured. A web based spreadsheet and calculator will be available by which
web based spreadsheet and calculator will be available by which the broker can the broker can report each state’s allocation (payroll by state for instance) a
report each state’s allocation (payroll by state for instance) and obtain a tax billing nd obtain a tax billing sheet by which it can bill the insured. The data is transferred
sheet by which it can bill the insured. The data is transferred through the state, through the state, stamping office or state agency to the clearinghouse.
stamping office or state agency to the clearinghouse.
Though the E&S broker needs to be licensed only in the home statThough the E&S broker needs to be licensed only in the home state of any given e of any given insured, the E&S brokers are legally responsible for paying the
insured, the E&S brokers are legally responsible for paying the surplus line taxes surplus line taxes due to each compacting state.
due to each compacting state.
Compacting states will be required to set tax payment dates annuCompacting states will be required to set tax payment dates annually, ally, semiannually or quarterly using only the following dates March 1
semiannually or quarterly using only the following dates March 1, June 1, , June 1, September 1 and December 1.
State Variables
State Variables
Tax Rates state to state vary from as low
Tax Rates state to state vary from as low
as 1.8% to as high as 9% ( with
as 1.8% to as high as 9% ( with
assessments)
assessments)
Due dates for state taxes vary from state
Due dates for state taxes vary from state
to state
to state
Surplus lines regulatory documentation
Surplus lines regulatory documentation
vary from state to state
vary from state to state
The importance of Surplus Lines is demonstrated by
much faster growth than for the overall P/C
insurance industry
$ Millions $ Billions $28.8 $33.2 $34.9 $38.7 $25 $27 $29 $31 $33 $35 $37 $39 $41 2003 2004 2005 2006Surplus Lines Premium
Surplus Lines Taxes Collected
Source: Business Insurance
Proponents of
SLIMPACT believe the
total tax collection will
increase as a result of
the compact.
$ Millions $983.0 $1,097.9 $1,148.5 $1,281.2 $900 $950 $1,000 $1,050 $1,100 $1,150 $1,200 $1,250 $1,300 $1,350 2003 2004 2005 2006How SLIMPACT benefits your state:
How SLIMPACT benefits your state:
Every state will get their fair share of tax
Every state will get their fair share of tax
revenue.
revenue.
States will continue to regulate the surplus line
States will continue to regulate the surplus line
business in their state.
business in their state.
State based solution and model for regulatory
State based solution and model for regulatory
reform and modernization.
reform and modernization.