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Surplus Lines Reform is "Big Win" for Consumers and Industry NAPSLO Says

Source: NAPSLO

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Posted on 19 Jul 2010

Surplus lines insurance consumers and their broker representatives were big winners with the inclusion of surplus lines modernization provisions in the financial service reform legislation passed by the Senate, today. President Obama is expected to sign the legislation, shortly. For the full benefits of the law to be realized, however, the states must implement the surplus lines reforms in the way Congress has directed, officials of the National Association of Professional Surplus Lines Offices (NAPSLO) stated.

"These surplus lines reforms represent a nearly decade-long industry effort spearheaded by NAPSLO to modernize and reform surplus lines regulation.  With the legislation now approved by Congress, we look to the states to implement its provisions in the way Congress intends and bring about, on a nationwide basis, the anticipated efficiencies in surplus lines regulation and tax payment mechanisms the legislation promises," NAPSLO President Marshall Kath said.

To assist the industry, regulators and legislators with the implementation process, NAPSLO will host a webinar on Thursday, Aug. 19 at 1:00 p.m. Central to discuss the new legislation and the changes it will create in the payment and allocation of surplus lines premium taxes as well as compliance requirement for multistate risks. In addition the potential for an interstate compact and the role it would play under the law will be discussed.  To register for the webinar, go to

In addition, NAPSLO is establishing a special section on its web site ( to provide information on the NRRA and its implications.

The surplus lines modernization provisions will make access for insurance consumers to the surplus lines market quicker, more efficient and the payment of surplus lines premium taxes to the states less burdensome for the consumer and broker.  The legislation also establishes that only one state, the home state of the insured, can regulate a multistate surplus lines transaction.

"We are gratified that NAPSLO’s hard work has paid off with the enactment of these long overdue reforms. However, the full promise of this legislation will not be realized until the states have implemented through an interstate compact or similar mechanism uniform forms, processes and procedures for collection, payment and allocation of surplus lines premium tax,” stated NAPSLO Executive Director Richard Bouhan.

Currently, the majority of states require payment of an allocated portion of tax on a multistate risk, but several state statutes impose the tax on the entire gross premium of a multistate risk which can create a “double tax” on a portion of the premium in some transactions.

"When the reform language was developed, Congress envisioned the states creating an interstate compact or something like a compact to handle collection, allocation and distribution of surplus lines premium taxes.  However, the legislation also establishes that if an interstate compact or similar mechanism is not created and implemented among the states, the surplus lines transaction will be entirely taxed by the ‘home state’ of the insured,” said Maria Berthoud, NAPSLO’s Washington representative.  “There was no opposition to this view in either the House or the Senate."

 NAPSLO said it will make proper implementation of this legislation in the states its highest legislative priority.


NAPSLO is a national trade association representing the surplus lines insurance industry and has more than 1,600 member offices in the United States, Canada, Germany, and England. Risks are placed with the surplus lines market when they cannot be placed in the admitted/licensed market and more than $34 billion in premiums were written in 2008.


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