NAPSLO: No NRRA Tax-Sharing Plan Is
Better Than Two Competing Approaches
NRRA’s intent was to streamline and
provide consistency within the industry;
having two entirely different approaches,
with different rules and regulations, clearly
accomplishes neither goal, in NAPSLO’s view.
Therefore, the organization asserts,
no arrangement is superior to two
And indeed, the most popular “allocation”
option among the states right now: not to
participate in any tax-sharing agreement.
Currently, 24 states representing 63
percent of nationwide premium volume
have no plans to participate in tax-sharing agreements.
And this “100-percent approach”—in
which each home state collects 100
percent of the tax on every surplus-lines policy—finds plenty of favor
among surplus-lines executives.
“It is the clear, simple
approach for our industry,” says
James Drinkwater, president
of the brokerage division of
Kelly also points out that “the cost/
benefit of tax sharing is not clear. Most
surplus-lines transactions represent single-state transactions, and based on recent
data…any ultimate amount of tax sharing
will likely be insignificant in relation to the
cost of tax sharing.” NU
The 100-percent approach—in which each
home state collects 100 percent of the
tax on every surplus lines policy—is the
“clear, simple approach for our industry.”
James Drinkwater, President of the Brokerage
Division of Am WINS and Co-chair of the NAPSLO
BY CHAD HEMENWAY
ALTHOUGH THE Nonadmitted and Reinsurance Reform Act (NRRA) went into effect in July of last year, states
are continuing to debate which, if any, tax-sharing option to adopt.
As a result, neither of the two competing
compacts—NIMA (the Nonadmitted
Insurance Multistate Agreement)
and SLIMPACT (the Surplus Lines
Insurance Multistate Compliance
Compact)—has been implemented.
And that inaction is just fine
for the surplus-lines industry—or at
least better than the alternative, say
legislative committee leaders of the
National Association of Professional Surplus
Lines Offices (NAPSLO).
At NAPSLO’s Mid-year Leadership Forum
in Scottsdale, Ariz., industry executives
on the association’s legislative committee
updated membership on the NRRA.
And their message: No tax-sharing
agreement is better than the compliance
nightmare of two competing systems.
“That is not workable,” says Brady R.
Catastrophes, Reserves Halve Liberty Mutual’s Q4 Earnings
Kelley, NAPSLO’s executive director. “That is
anything but uniform.”
While NRRA is meant to encourage
nationwide adoption of uniform
requirements, forms and procedures for the
reporting, payment, collection and allocation
of surplus-lines premiums taxes, it does not
require the states to standardize procedures.
BY CHAD HEMENWAY
NET INCOME at Liberty Mutual In- surance fell nearly 51 percent in 2011’s fourth quarter
and about 78 percent for the
year on catastrophe losses
and reserve strengthening.
Liberty Mutual profited
$284 million during Q4 2011,
down from $576 during Q4
2010. The combined ratio for the period was
104.2, up 5 points from 2010.
“Another quarter, another catastrophe,”
David H. Long, president and CEO of Liberty
Mutual, said during a conference call.
During the last three months of 2011
the company suffered $90 million in losses
related to the flooding in Thailand. Most of
the loss is attributable to a Lloyd’s syndicate.
Local companies took about $20 million in
losses, Long said during the call.
Liberty Mutual recorded a total of $234
million in cat losses during the fourth
quarter, compared to $198 million during
the same time the prior year.
The company posted net
income of $365 million for
2011, down drastically from
$1.68 billion in 2010.
Results included hundreds
of millions in reserve
strengthening. After a “ground-up reserve
study,” Liberty Mutual strengthened asbestos-related reserves $294 million in 2011.
Additionally, a re-estimation of current
accident-year loss reserves resulted in a Q4
2011 net-incurred loss of $121 million.
“I’m pretty happy it’s no longer 2011,”
Long said. “At least, I thought so until
last weekend,” when severe storms and
tornadoes ravaged a dozen states.
David H. Long, President
and CEO, Liberty Mutual
included increases of 10.6 percent and 6.8
percent in net-written premium during the
fourth quarter and year, respectively.
Long said Liberty Mutual continues to
see favorable growth trends in domestic
personal lines, with rate increases of more
than 3 percent in auto and 5. 5 percent in
In commercial lines there is also a general
trend in rate increases, led by double-digit
jumps in workers’ comp, he added. NU
NUMBER OF THE WEEK:
Premium volume reported by
agency-cluster group Combined
Agents of America for 2011, a 21%
increase year over year. See p. 10