House Bill 1500 – Mississippi Economic Growth and
Development Act of 2007
Nonadmitted Policy Fees and Surcharges
Revised
12/21/07
What is the nonadmitted policy fee?
How is the fee paid to the Mississippi Windstorm Underwriting Association (MWUA)?
When is this new fee effective?
Is this fee subject to premium tax and
commissions?
Will brokers already have this fee on their
invoices?
What types of coverage is considered any and all risk on real estate and contents?
What is meant by divisible and indivisible premium, and how is the fee calculated for each?
What policies are subject to the surcharge?
Are there any surcharges in effect
currently?
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.
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.
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.
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. The fee will be paid
separately to the Mississippi Windstorm Underwriting Association, P.O. Box
22510 Jackson, Ms 39225-2510.
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.
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.
Is this fee subject to premium tax and commissions?
The nonadmitted policy fee is not subject to premium
taxes, stamping fees or commissions.
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.
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
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)
Terrorism (if applicable to real
property and contents)
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 – if involving
real estate, i.e. builders risk, other real estate coverage written on IM form
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.
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.
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.
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.
Are there any surcharges in effect currently?
No