House Bill 1500
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What is the nonadmitted policy fee?
The policy fee is charged on nonadmitted premium collected on any and all risk on real property and contents. The fee is currently 5% of the subject premium.
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Where did this fee come from?
Subsequent to Hurricane Katrina the Mississippi
Legislature enacted H.B. 1500, Mississippi Economic Growth and Development Act
of 2007. This bill provides for a number of modifications with respect to how
the Mississippi Windstorm Underwriting Association was structured and operated.
Among those changes was a provision(s), which brought the surplus lines market
into the windstorm mix. Although the surplus lines carriers are not assessable,
as are the admitted carriers, the nonadmitted policyholder will be liable for a
policy fee on all policies effective January 1, 2008, and potential surcharges
in the event of excess storm losses.
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Who collects the fee?
Licensed surplus lines agents are responsible for collecting the fee.
Because the fee is added to the policy premium in the same way as the surplus lines tax and stamping fee, the method of billing and collection should be consistent with how agents are currently handling other similar fees.
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How is the fee paid to the Mississippi Windstorm Underwriting Association (MWUA)?
Currently the MWUA is working with the Mississippi Surplus Lines Association (MSLA) to assist in the collection of the fee. The process is anticipated to be similar to the current reporting and collection process used by agents and brokers for surplus lines tax and stamping fees. A new software interface is being designed to segregate the premium subject to the MWUA fee from the standard surplus lines reporting process. MSLA will collect the fee and remit to the MWUA.
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When is this new fee effective?
This process becomes effective for premiums collected
January 1, 2008, and thereafter on policies effective January 1, 2008 and
later.
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What is the fee used for?
The policy fee is used to help stabilize the cost of wind and hail coverage provided by the MWUA to coastal residents and businesses. These fees help by partially offsetting the impact of reinsurance and related costs that directly impact the premiums charged.
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Is this fee subject to premium tax and commissions?
The nonadmitted policy fee is not subject to premium
taxes, stamping fees or commissions.
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Will brokers already have this fee on their invoices?
It is the licensed surplus lines agent’s responsibility to
insure that this fee is included in the declarations page, invoice, or whatever
the policyholder is presented as a quote or request for payment. Information is
being sent to all licensed surplus lines agents and carriers relative to this
process.
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What types of coverage is considered “any and all risk on real estate and contents”?
A typical example of any and all risks on real property and contents includes, but is not limited to:
Protection against loss or damage to real or personal (contents) property from a variety of risks, i.e. fire, lighting, business interruption, loss of rents, glass breakage, tornado, windstorm, hail, water damage, explosion, riot, civil commotion, rain, or damage from aircraft or vehicles. Also, including earthquake and flood were applicable.
Typical types of coverage involving real estate and contents include, but are not limited to, the following:
Commercial Property
Commercial Property
Builders Risk
Business Income
Apartments (Commercial)
Commercial Package
Condominium Package
Differences of Conditions
Earthquake
Flood
Glass (Commercial)
Windstorm and/or Hail
Mold (Commercial)
Excess Flood (Commercial)
Homeowners and Other Residential Property
Homeowners (HO-1, 2, 3, etc)
Tenant Homeowners
Condo Unit-Owners
Dwelling Builders Risk
Dwelling Flood
Dwelling Property
Farmowners Multi-peril
Mobile Homeowners
Windstorm
Mold Coverage (Residential)
Excess Flood (Residential)
Inland Marine
Inland Marine – if involving real estate, i.e. builders risk, other real estate coverage written on IM form.
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How will endorsements and cancellations be handled on policies with effective dates prior to January 1, 2008?
The nonadmitted policy fee tracks with effective date. If an endorsement or cancellation occurs subsequent to January 1, 2008, on a policy with an effect date prior to January 1, 2008, the policy fee does not apply.
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What is meant by divisible and indivisible premium, and how is the fee calculated for each?
Divisible premium is that which is clearly identified with the coverage being sold, i.e. it is not a blend of property risk and liability such as the case with homeowners, farmowners and business owners, which are considered indivisible premium.
100% of divisible premium is subject to the nonadmitted policy fee. Examples are dwelling fire, commercial fire, dwelling allied lines, commercial allied lines, earthquake, flood, etc.
75% of indivisible premium is subject to the nonadmitted policy fee. Examples, as noted above are homeowners, farmowners, and business owners policy types. The 75% is designed to eliminate the estimated liability in each of the lines.
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How will endorsements and cancellations be handled on policies with effective dates prior to January 1, 2008?
The nonadmitted policy fee tracks with effective date. If an endorsement or cancellation occurs subsequent to January 1, 2008, on a policy with an effect date prior to January 1, 2008, the policy fee does not apply.
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What is a surcharge?
Section 12 of H.B. 1500 provides that surcharges may be implemented by the Commissioner of Insurance to repay assessments levied on assessable insurers for excess storm losses.
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What policies are subject to a surcharge?
The surcharge applies to all property and casualty premiums except for workers’ compensation, medical malpractice, and certain insurance pools and plans administered by or through the State of Mississippi.
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Are there any surcharges in effect currently?
No.
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