CHAPTER 19. Delaware Nonadmitted Insurance Act
Subchapter I. Compliance with Federal Statutes
(a) It is determined and declared as a matter of legislative finding that it is in the public interest to cooperate on a reciprocal basis with other states in considering procedures which implement the provisions of the Nonadmitted and Reinsurance Reform Act of 2010 [15 U.S.C. § 8201 et seq.].
(b) It is further determined and declared that the purpose and policy of this chapter shall be to:
(1) Carry out the requirements of the Nonadmitted and Reinsurance Reform Act of 2010 [15 U.S.C. § 8201 et seq.] as such act existed on January 1, 2011;
(2) Provide authority for the Insurance Commissioner to enter into an interstate cooperative agreement, reciprocal agreement, or compact if doing so is in the best interests of this State; and
(3) Regulate the placement of insurance coverage with nonadmitted insurers when this State is the home state of the insured.78 Del. Laws, c. 176, § 1;
(a) The placement of nonadmitted insurance business shall be subject to the statutory and regulatory requirements solely of the insured’s home state as defined in this chapter.
(b) This section may not be construed to preempt any law, rule, or regulation that restricts the placement of workers’ compensation insurance or excess insurance for self-funded workers’ compensation plans with a nonadmitted insurer.78 Del. Laws, c. 176, § 1;
(a) The Commissioner is authorized to enter into an interstate cooperative agreement, reciprocal agreement, or compact, hereafter “Agreement,” for the purpose of carrying out the Nonadmitted and Reinsurance Reform Act of 2010 [15 U.S.C. § 8201 et seq.] (NRRA) and to facilitate the collection, allocation, and disbursement of premium taxes attributable to the placement of nonadmitted insurance, to provide for uniform methods of allocation and reporting among nonadmitted insurance risk classifications, and share information among states relating to nonadmitted insurance premium taxes.
(b) The Commissioner may also enter into other cooperative agreements with surplus lines stamping offices located in this state or other states for the reporting and capturing of related tax information. In addition, the Commissioner may enter into cooperative agreements with processing entities located in this State or other states related to the capturing and processing of insurance premium and tax data.
(c) The Commissioner may participate in a clearinghouse operation established for the purpose of collecting and disbursing to reciprocal states any premium tax funds collected applicable to properties, risks, or exposures located or to be performed outside of this State. The Commissioner may also participate in such clearinghouse for purposes of surplus lines policies applicable to risks located solely within this State.
(d) In order to assist in the performance of the Commissioner’s duties, under the NRRA, the Commissioner may contract with nongovernmental entities, including the NAIC or any affiliates or subsidiaries that the NAIC oversees, to perform any ministerial functions that the Commissioner and the nongovernmental entity may deem to be appropriate, including:
(1) The collection of fees related to producer licensing; and
(2) The collection of the premium tax under § 1925 of this title.
The NAIC or other entity with whom the Commissioner contracts may charge a reasonable fee to the insurer, insured, or other appropriate person for the functions performed.
(e) An Agreement entered into under this section prevails over an inconsistent rule of the Commissioner. Except as otherwise provided by this section, a statute of this State prevails over an inconsistent provision of an Agreement entered into under this section.
(f) The Commissioner may adopt rules as necessary to implement this chapter or the terms of an Agreement entered into under this section. In adopting rules under this chapter, the Commissioner may not adopt a rule that does not specifically implement this chapter or the Agreement.78 Del. Laws, c. 176, § 1;
(a) The Insurance Commissioner shall establish a Nonadmitted and Reinsurance Reform Act of 2010 [15 U.S.C. § 8201 et seq.] (NRRA) Implementation Revenue Study Committee to study the potential impact that would result from the State’s entrance into an Agreement pursuant to § 1903 of this title in order to prevent the State from losing revenue after July 21, 2011, the effective date of the NRRA. The Committee shall determine if entering into an Agreement would result in retention of out-of-state surplus lines tax revenue for the State and, if so, which Agreement would result in the most retention of surplus lines tax revenue for the State and the most cost-efficient method of administering the collection and distribution of tax revenues. Notwithstanding subsection (b) of this section, the Committee shall report its findings and recommendations, including any proposed legislation, to the chairs of the respective Senate and House committees, the Senate Pro-Tempore, the Speaker of the House and to the Controller General no later than January 2012.
(b) In the event that an interstate surplus lines tax allocation, reporting and payment system becomes operational and the Insurance Commissioner determines that the State of Delaware is likely to lose significant revenue by delaying the decision to enter into an Agreement pursuant to § 1903 of this title until after completion of the report by the NRRA Implementation Revenue Study Committee, then the Commissioner may enter into an Agreement after notice and hearing, which shall involve testimony regarding the Commissioner’s determination, and the burden the tax allocation, reporting and payment system selected would impose on brokers.78 Del. Laws, c. 176, § 1;
(a) For the purposes of this chapter the following definitions shall apply:
(1) Admitted insurer. — The term “admitted insurer” means an insurer authorized to engage in the business of insurance in this State.
(2) Affiliate. — The term “affiliate” means, with respect to an insured, any entity that controls, is controlled by, or is under common control with the insured.
(3) Affiliated group. — The term “affiliated group” means any group of entities that are all affiliated.
(4) Broker. — The term “broker,” as used in this chapter and unless context otherwise requires, means a surplus lines broker duly licensed as such under this chapter.
(5) Clearinghouse. — The term “clearinghouse” means a mechanism or entity established for the receipt and distribution of premium taxes and transaction data related to the sale of nonadmitted insurance.
(6) Control. — An entity has “control” over another entity if:
a. The entity directly or indirectly or acting through 1 or more other persons owns, controls, or has the power to vote 25 percent or more of any class of voting securities of the other entity; or
b. The entity controls in any manner the election of a majority of the directors or trustees of the other entity.
(7) Export. — The term “export” means to place insurance in a nonadmitted insurer under this surplus lines law.
(8) Gross premium. — The term “gross premium” means the amount charged by an insurer for consideration for insurance. Any assessment, or any membership, policy, survey, inspection, service or similar fee or other charge in consideration for an insurance contract is deemed part of the premium.
(9) Home state. — a. In general. — Except as provided in paragraph (a)(9)b. of this section, the term “home state” means, with respect to an insured
1. The state in which an insured maintains its principal place of business or, in the case of an individual, the individual’s principal residence; or
2. If 100 percent of the insured risk is located out of the state referred to in paragraph (a)(9)a.1. of this section, the state to which the greatest percentage of the insured’s taxable premium for that insurance contract is allocated.
b. Affiliated groups. — If more than 1 insured from an affiliated group are named insureds on a single nonadmitted insurance contract, the term “home state” means the home state, as determined pursuant to paragraph (a)(9)a. of this section, of the member of the affiliated group that has the largest percentage of premium attributed to it under such insurance contract.
(10) Home state insured. — The term “home state insured” means, unless the context indicates otherwise, an insured whose home state is Delaware.
(11) Independently procured insurance. — The term “independently procured insurance” means insurance procured directly by an insured from a nonadmitted insurer.
(12) Multi-state risk. — The term “multi-state risk” means a risk with exposures in more than 1 state.
(13) NAIC. — The term “NAIC” means the National Association of Insurance Commissioners or any successor entity.
(14) Net premium. — The term “net premium” means, for the purposes of this chapter, gross premium as defined herein, less any returned premiums.
(15) Nonadmitted insurance. — The term “nonadmitted insurance” means any property and casualty insurance permitted to be placed directly or through a surplus lines broker with a nonadmitted insurer eligible to accept such insurance. For purposes of this chapter, nonadmitted insurance includes independently procured insurance placed directly and surplus lines insurance.
(16) Nonadmitted insurer. — The term “nonadmitted insurer”
a. Means an insurer not authorized to engage in the business of insurance in this state; but
b. Does not include a risk retention group, as that term is defined in § 2(a)(4) of the Liability Risk Retention Act of 1986 (15 U.S.C. § 3901(a)(4)).
(17) Premium tax. — The term “premium tax” means, with respect to surplus lines or independently procured insurance coverage, any tax, fee, assessment, or other charge imposed by a government entity directly or indirectly based on any payment made as consideration for an insurance contract for such insurance, including premium deposits, assessments, registration fees, and any other compensation given in consideration for a contract of insurance.
(18) Qualified risk manager. — The term “qualified risk manager” means, with respect to a policyholder of commercial insurance, a person who meets all of the following requirements:
a. The person is an employee of, or third-party consultant retained by, the commercial policyholder.
b. The person provides skilled services in loss prevention, loss reduction, or risk and insurance coverage analysis, and purchase of insurance.
c. The person:
1. A. Has a bachelor’s degree or higher from an accredited college or university in risk management, business administration, finance, economics, or any other field determined by a state insurance commissioner or other state regulatory official or entity to demonstrate minimum competence in risk management; and
B. I. Has 3 years of experience in risk financing, claims administration, loss prevention, risk and insurance analysis, or purchasing commercial lines of insurance; or
(A) A designation as a “chartered property and casualty underwriter” (in this subparagraph referred to as “CPCU”) issued by the American Institute for CPCU/Insurance Institute of America;
(B) A designation as an “associate in risk management” (“ARM”) issued by the American Institute for CPCU/Insurance Institute of America;
(C) A designation as “certified risk manager” (“CRM”) issued by the National Alliance for Insurance Education & Research;
(D) A designation as a “RIMS Fellow” (“RF”) issued by the Global Risk Management Institute; or
(E) Any other designation, certification, or license determined by a state insurance commissioner or other state insurance regulatory official or entity to demonstrate minimum competency in risk management;
2. A. Has at least 7 years of experience in risk financing, claims administration, loss prevention, risk and insurance coverage analysis, or purchasing commercial lines of insurance; and
B. Has any 1 of the designations specified in paragraphs (18)c.1.B.(II)(A) through (E) of this section;
3. Has at least 10 years of experience in risk financing, claims administration, loss prevention, risk and insurance coverage analysis, or purchasing commercial lines of insurance; or
4. Has a graduate degree from an accredited college or university in risk management, business administration, finance, economics, or any other field determined by a State insurance commissioner or other state regulatory official or entity to demonstrate minimum competence in risk management.
(19) Reciprocal state. — The term “reciprocal state” means a state that has:
a. Entered into a nonadmitted insurance compact or agreement; or
b. Otherwise adopted the allocation schedule and reporting forms prescribed by a multi-state agreement for nonadmitted insurance
(20) Single-state risk. — The term “single-state risk” means a risk with exposure in only 1 state.
(21) State. — The term “state” includes any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, Guam, the Northern Mariana Islands, the Virgin Islands, and American Samoa.
(22) Surplus lines broker. — The term “surplus lines broker” means an individual, firm, or corporation which is licensed in this State to sell, solicit, negotiate, or procure insurance in this state with nonadmitted insurers.
(23) Surplus lines insurance. — The term “surplus lines insurance” means insurance procured by a surplus lines licensee from a surplus lines insurer or other nonadmitted insurer as permitted under the law of the home state; for purposes of this chapter “surplus lines insurance” shall also mean excess lines insurance as may be defined by applicable state law.
(24) Surplus lines insurer. — The term “surplus lines insurer” means a nonadmitted insurer eligible under the law of the home state to accept business from a surplus lines licensee; for purposes of this chapter “surplus lines insurer” shall also mean an insurer that is permitted to write surplus lines insurance under the laws of the state where such insurer is domiciled.
(b) In this chapter, unless otherwise specified, words and expressions used have the same meaning as in the NRRA [Nonadmitted and Reinsurance Reform Act of 2010, 15 U.S.C. § 8201 et seq.].78 Del. Laws, c. 176, § 1; 80 Del. Laws, c. 386, § 1;
(a) Unless the Commissioner rules otherwise pursuant to § 1915 of this title, life insurance and health insurance shall not be considered surplus lines insurance and shall be placed with admitted insurers licensed to write those types of insurance.
(b) The provisions of this chapter shall not apply to reinsurance or to the following insurances when so placed by licensed producers or surplus lines brokers of this State:
(1) Wet marine and transportation insurance;
(2) Insurance on subjects located, resident or to be performed wholly outside this State or on vehicles or aircraft owned and principally garaged outside this State;
(3) Insurance on operations of railroads engaged in transportation in interstate commerce and their property used in such operations;
(4) Insurance of aircraft owned or operated by manufacturers of aircraft or of aircraft operated in commercial interstate flight or cargo of such aircraft or against liability, other than workers’ compensation and employer’s liability, arising out of the ownership, maintenance or use of such aircraft;
(5) Transactions for which a certificate of authority to do business is not required of an insurer under the insurance laws of this State.78 Del. Laws, c. 176, § 1; 80 Del. Laws, c. 47, § 1;