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Nonadmitted and Reinsurance Reform Act FAQ

Effective July 21, 2011 the Nonadmitted and Reinsurance Reform Act of 2010 (NRRA) provides that only an insured’s “Home State” may require the payment of premium tax for surplus lines insurance.

The NRRA subjects the placement of surplus lines insurance solely to the statutory and regulatory requirements of the insured’s Home State. Therefore, the NRRA mandates that only the insured’s Home State may require a surplus lines broker to be licensed to sell, solicit, or negotiate surplus lines insurance with respect to such insured.

Updated 05/09/16

Frequently Asked Questions

  • The NRRA does not apply to Foreign Risk Retention and Purchasing Groups.  These entities fall under the Federal Liability Risk Retention Act of 1986 and Chapter 18 of the Michigan Insurance Code.  If a purchasing group buys a multi-state policy from a non-admitted insurance company, directly or through a surplus lines broker, the purchasing group is required to pay surplus lines taxes electronically via the NAIC OPTins system to the State of Michigan for the Michigan risks within 30 days of the policy effective date. 

    Foreign risk retention groups quarterly pay surplus lines tax electronically via the NAIC OPTins to the State of Michigan for business placed in Michigan, directly or through a surplus lines broker, within 30 days of the end of each quarter.

  • Michigan is the insured’s Home State if the insured maintains its principal place of business in Michigan; or

    An individual’s principal place of residence is located in Michigan.

    If 100% of the insured risk is located outside of Michigan, then the insured’s Home State is the State to which the greatest percentage of the insured’s taxable premium for that insurance contract is allocated.

    If more than one insured from an affiliate group are named insureds on a single nonadmitted insurance placement, Michigan will be considered the Home State for that placement if Michigan is the Home State of the member of the affiliated group that has the largest percentage of premium attributed to it under such insurance contract.

  • New and renewal policies as well as any modifications to the original policy e.g. endorsements, installment payments, premium audits with an effective date prior to July 21, 2011 will be subject to the laws and regulations of Michigan as of the policy effective date.

    New and renewal policies with an effective date on or after July 21, 2011 and any modifications to the original policy will be subject only to Michigan laws and regulations if Michigan is the Home State of the insured.

  • Only the insured’s Home State may require a surplus lines broker to be licensed to sell, solicit, or negotiate surplus lines insurance with respect to a particular placement.

    When Michigan is the insured's Home State 100% of the tax should be paid to Michigan. The combined tax and regulatory fee is 2.5% as stated in MCL 500.1905(3)(d).

    Currently, Michigan does not participate in any multistate clearinghouse or tax sharing arrangement.

    Effective July 1, 2015, DIFS no longer accepts paper filings for surplus lines tax reports and payments. All surplus lines producers, purchasing groups, and risk retention groups are required to utilize OPTins for tax filings. Registration with OPTins is required prior to utilization of the system; this may take up to two weeks. Registration assistance is available by calling 816-783-8787 or emailing optinsmktg@naic.org. For assistance with the OPTins system when filing a tax report, please contact the OPTins Help Desk at 816-783-8990 or optinshelp@naic.org. See more information on Surplus Lines Licensee Filing the Surplus Lines Taxes.

  • If Michigan is the insured’s Home State, the surplus lines broker must be licensed in Michigan.

    Michigan participates in the NAIC national producer database (PDB) for surplus lines brokers original licensure and renewals, and is therefore able to collect any associated fees.

  • All Michigan diligent search requirements remain in effect as required by MCL 500.1910 with the exception of placing insurance for an exempt commercial purchaser (ECP) as defined by the NRRA. Effective July 21, 2011 a surplus lines licensee seeking to procure or place surplus lines insurance on behalf of an ECP is not required to perform a diligent search if:

    • The licensee has disclosed to the ECP that insurance may or may not be available from the admitted market that may provide greater protection with more regulatory oversight.
    • The ECP has subsequently requested in writing that the licensee procure or place such insurance from a surplus lines insurer.
  • Surplus lines insurers domiciled in a U.S. jurisdiction - A surplus lines licensee is permitted to place insurance with such insurers provided that:

    • They are approved to write such business in their State of domicile.
    • They maintain a minimum capital and surplus of $15 million or the minimum capital and surplus amount required in a State.

    Surplus Lines insurers domiciled outside the U.S. jurisdiction - A surplus lines licensee is permitted to place insurance with such insurers provided that:

  • Please refer to the NRRA.

The answers provided are not meant to be a substitute for legal advice.