Page 41 - 2016 State of the Market from AmWINS

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FEATURED TREND:

REGULATORY

COMPLIANCE

Fewer regulatory changes seen in 2016, but
compliance remains an ongoing challenge for
carriers and brokers

With different insurance regulations across 50 states,
compliance is a complex activity for both brokers and carriers.
This complexity increases as regulations change. Fortunately for
the industry, significant regulatory activity has been minimal at
the state level in 2016 compared to prior years, perhaps because
state legislators are waiting to see what changes take place on
the national level after the presidential election.

One notable development is the rapid unraveling of the
Nonadmitted Insurance Multi-State Agreement (NIMA). This
agreement allowed member states to share taxes on placements
and created a central clearinghouse for reporting and collecting
surplus lines taxes. “This only added to the burden for the broker
requiring allocation and taxation between various states based
on the tax models of NIMA,” says Kathy McVaney, director
of regulatory compliance at AmWINS Group, Inc. However,
nationwide participation, especially among larger states, never
reached expected levels and NIMA has been dissolved as of
October 1, 2016 with a 12-month runoff period.

The Nonadmitted and Reinsurance Reform Act (NRRA), included
in the Dodd-Frank Wall Street Reform and Consumer Protection
Act of 2010, has successfully provided the industry with the
ability to streamline the processes involved with taxation of
surplus lines transactions. As of this year, the majority of states
have adopted the NRRA language, successfully providing
for uniformity countrywide. “The NRRA was a tremendous
advantage for surplus lines brokers as it eliminates, to a large
extent, the requirement to allocate and pay taxes to each state
where exposure exists,” McVaney states.

On an international level, concerns about regulatory changes
have been overshadowed by Brexit and its potential impact on
the London market. Lloyd’s, which generates 11 percent of its
premium from the European Union (EU), had actively campaigned
for a “remain” vote. However, despite the outcome of the vote
to withdraw from the EU, Lloyd’s chief executive Inga Beale
believes that the London insurance market will adapt to the new
environment. No existing policies will be affected and Lloyd’s is
in the process of implementing a contingency plan designed to
ensure its continued trade in key European markets.