Federal Nonadmitted and Reinsurance Reform Act of 2010 (NRRA) and Oregon’s revised surplus lines laws
The federal Nonadmitted and Reinsurance Reform Act of 2010 (“NRRA”) became effective July 21, 2011. The NRRA (15 U.S.C. § 8201 et seq.) is included in the federal Dodd-Frank Wall Street Reform and Consumer Protection Act and affects the placement of nonadmitted insurance nationwide. The Oregon Legislature passed House Bill 2679 in the 2011 Legislative Session to conform Oregon law to the NRRA and makes other changes to Oregon's surplus lines law. This bill was effective Jan. 1, 2012.
Is Oregon expecting tax on Oregon home-state risks based on 100 percent of the premium to be charged at Oregon's tax rate? Is an allocation schedule of what percentage of premium would be allocated to which state also expected?
For policies with effective dates on or after Jan. 1, 2012, we will expect tax on 100 percent of the premium where Oregon is the home state of the policy. The tax rate is 2 percent for premium tax and 0.3 percent for the state fire marshal tax. We are collecting allocation data beginning now so that we can make a better decision regarding whether to join a compact or make agreements with other states to allocate premium taxes paid to an insured's home state.
Does the 0.3 percent state fire marshal tax apply to 100 percent of the Oregon premium?
Yes. Effective Jan. 1, 2012, the state fire marshal tax changed to 0.3 percent of 100 percent of the premium of a multistate policy.
Does the flat Surplus Line Association of Oregon fee amount remain unchanged regardless of the amount or percent of Oregon premium on a policy with multistate exposure?
Yes. The surplus line service charge will be calculated on 100 percent of the premium, not just the Oregon premium portion. When Oregon is the home state, it will remain unchanged regardless of the amount or percent of Oregon premium on a policy with
On policies with multi-state exposures where Oregon is determined to be the home state, should the appropriate tax rate for other states be applied to the portion of premium that represents their respective exposures and included in the payment to Oregon?
For policies with an effective date between July 21, 2011, and Dec. 31, 2011, you will pay taxes on only the Oregon premium portion. For policies with effective dates on or after Jan. 1, 2012, we will continue to ask for allocation data on these multistate policies; however, Oregon will collect tax on 100 percent of the premium at Oregon's new tax rates (2 percent for premium tax and 0.3 percent for the state fire marshal tax).
Are individual members of a risk purchasing group considered to be the same as the risk purchasing group entity itself, and, therefore, is coverage placed for the individual members of the risk purchasing group not subject to a required diligent search?
The division does not require a diligent search letter from risk purchasing groups.
How does the NRRA affect situations where the risk is located entirely outside of the Unites States?
Location of risk is no longer the primary determining factor for determining applicable law and tax obligation. The determining factor is now the insured's principal place of business or, if an individual, the individual's principal residence. A couple of examples may be helpful for illustration purposes:
Example 1. An employer purchases an Accidental Death & Dismemberment policy to cover employees working outside the United States, or perhaps an Oregon resident buys such a policy to cover himself or herself while outside the United States. The coverage is effective only when the covered individual is outside the United States and, therefore, the risk is only present outside the United States.
In deciding this question, the Insurance Division looks at where the purchaser/insured resides (Oregon in this instance) and, to some degree, where the transaction takes place (also Oregon in this instance). Therefore, the home state of the insured is Oregon and tax is to be paid on 100 percent of the premium at the Oregon tax rate.
Example 2. An employer purchases a policy that provides medical coverage and certain trip expenses (reimbursement for travel expense back to the United States in case of illness) to cover employees/volunteers working outside the United States. The coverage is effective only when the covered individual is outside the United States and, therefore, the risk is only present outside the United States.
Under Oregon law, health insurance is excluded, by definition, from surplus lines insurance (see Oregon Revised Statute 731.144). Therefore, this type of coverage would need to be acquired under the independent procurement provisions created in Oregon Laws 2011, chapter 660, Sections 2 and 5.
For Oregon home state risks, is non-United States allocated premium exempt from taxation?
Since the policy was determined to be an Oregon home state risk, we will tax on 100 percent of the premium (even though the premium contains a portion for a non-United States exposure).