NAIC Considers Potential Amendments to the Nonadmitted Insurance Model Act

  • Legal Development 21 December 2020 21 December 2020
  • North America

  • Insurance

At the Fall 2020 National Meeting of the National Association of Insurance Commissioners (“NAIC”), which was held virtually, the Surplus Lines (C) Task Force and its parent committee, the Property & Casualty (C) Committee, adopted a request for NAIC model law development related to the Nonadmitted Insurance Model Act (#870) (the “Model Act”). As a result, the Surplus Lines Task Force will proceed with considering potential amendments to the Model Act.

NAIC Considers Potential Amendments to the Nonadmitted Insurance Model Act

The focus of the potential amendments will be to update the Model Act and bring it into conformity with the federal Nonadmitted and Reinsurance Reform Act of 2010 (“NRRA”).  The Model Act was initially adopted by the NAIC in 1994 and was last updated in 2002. 

The potential updates to the Model Act will likely include the following: 

  • conforming definitions to the NRRA;
  • examining the issue of self-procurement regarding in-state, out-of-state, and out-of-US jurisdiction for placement and taxation;
  • integrating the NRRA “exempt commercial purchaser” rules into the Model Act;
  • adding a subsection on “eligibility criteria or requirements”;
  • addressing the “diligent search” requirement among the admitted market considering that some states no longer require it; and
  • updating financial requirements.

In addition, the Surplus Lines (C) Working Group will over the coming year consider potential revisions to the NAIC Trust Agreement for Alien Excess or Surplus Lines Insurers (the “Trust Agreement”). Alien surplus lines insurers that wish to be eligible to assume US surplus lines business by being included in the NAIC’s Quarterly Listing of Alien Insurers must post a trust fund using the form Trust Agreement as security for US policyholders. The potential revisions to the Trust Agreement would aim to allow for flexibility for the termination of a Trust Agreement in those cases where there are no present or future liabilities expected to the trust. Other potential revisions may include updating the definitions section, improving language around the use of letters of credit as a trust asset, reviewing the amount of the trustee’s fees and expenses to determine if they are still considered reasonable, and the use of electronic means of delivery in place of certified mail.


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