Dodd-Frank Act – Title V: Insurance

This title is also known as the Federal Insurance Office Act of 2010.

A Federal Insurance office will be established, which a director selected by the Secretary of Treasury will head. The authority and duties of this office include:

  • To monitor all aspects of the insurance industry, including identifying issues or gaps in the regulation of insurers that could contribute to a systemic crisis in the insurance industry or the United States financial system
  • To monitor the extent to which traditionally underserved communities and consumers, and low- and moderate-income persons have access to affordable insurance products regarding all lines of insurance, except health insurance
  • To recommend to the Financial Stability Oversight Council that it designate an insurer, including the affiliates of such insurer, as an entity subject to regulation as a nonbank financial company supervised by the Board of Governors pursuant to title I of the Dodd-Frank Wall Street Reform and Consumer Protection Act
  • To assist the Secretary in administering the Terrorism Insurance Program established in the Department of the Treasury under the Terrorism Risk Insurance Act
  • To coordinate Federal efforts and develop Federal policy on prudential aspects of international insurance matters, including representing the United States, as appropriate, in the International Association of Insurance Supervisors (or a successor entity) and assisting the Secretary in negotiating covered agreements
  • To determine whether State insurance measures are preempted by covered agreements to consult with the States (including State insurance regulators) regarding insurance matters of national importance and prudential insurance matters of international importance

State Based Insurance Reform or Non-admitted and Reinsurance Reform Act of 2010

Only home states are allowed to collect premium tax payment for non-admitted insurance from an insured. The Congress intends that each State adopt nationwide uniform requirements, forms, and procedures, such as an interstate compact that provide for the reporting, payment, collection, and allocation of premium taxes for non admitted insurance.

Regulation of Non-admitted Insurance by Insured’s Home State

Home state will have the sole authority to administer statutory and regulatory requirements for non-admitted insurance.

Broker licensing: No State other than an insured’s home State may require a surplus lines broker to be licensed in order to sell, solicit, or negotiate non-admitted insurance.

Participation in National Producer Database

After the 2-year period beginning on the date of the enactment of this subtitle, a State may not collect any fees relating to licensing of an individual or entity as a surplus lines broker in the State unless the State has in effect at such time laws or regulations that provide for participation by the State in the national insurance producer database of the NAIC or any other equivalent uniform national database.

GAO Study of Non-admitted Insurance Market

The Comptroller General of the United States shall conduct a study of the nonadmitted insurance market to determine:

  • The effect of the enactment of this part on the size and market share of the nonadmitted insurance market for providing coverage typically provided by the admitted insurance market. The study shall determine and analyze—(1) the change in the size and market share of the nonadmitted insurance market and (2) in the number of insurance companies and insurance holding companies.
  • The extent to which insurance coverage typically provided by the admitted insurance market has shifted to the nonadmitted insurance market;
  • The consequences of any change in the size and market share of the nonadmitted insurance market, including differences in the price and availability of coverage available in both the admitted and nonadmitted insurance markets;
  • The extent to which insurance companies and insurance holding companies that provide both admitted and nonadmitted insurance have experienced shifts in the volume of business between admitted and nonadmitted insurance.
  • The extent to which there has been a change in the number of individuals who have nonadmitted insurance policies, the type of coverage provided under such policies, and whether such coverage is available in the admitted insurance market.

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.

Reinsurance, Regulation of Credit for Reinsurance and Reinsurance Agreements

The term ‘‘reinsurance’’ means the assumption by an insurer of all or part of a risk undertaken originally by another insurer.

Credit for reinsurance: If the State of domicile of a ceding insurer is an NAIC-accredited State, or has financial solvency requirements substantially similar to the requirements necessary for NAIC accreditation, and recognizes credit for reinsurance for the insurer’s ceded risk, then no other State may deny such credit for reinsurance.

Regulation of reinsurer solvency: If the State of domicile of a reinsurer is an NAIC-accredited State or has financial solvency requirements substantially similar to the requirements necessary for NAIC accreditation, such State shall be solely responsible for regulating the financial solvency of the reinsurer.

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