NAC: CHAPTER 685A - NONADMITTED INSURANCE

[Rev. 5/25/2022 11:36:29 AM]

[NAC-685A Revised Date: 8-18]

CHAPTER 685A - NONADMITTED INSURANCE

GENERAL PROVISIONS

685A.115 Definitions.

685A.120 “Admitted insurer” defined.

685A.123 “Board of directors” defined.

685A.125 “Broker” defined.

685A.130 “Commissioner” defined.

685A.135 “Division” defined.

685A.140 “Eligible insurer” defined.

685A.145 “Ineligible insurer” defined.

685A.148 “Organization” defined.

685A.150 “Producing agent or broker” defined.

685A.155 “Qualified risk manager” interpreted.

BROKERS

685A.205 Duties of brokers.

685A.215 Conditions for placement.

685A.220 Acceptance of business from agents or brokers.

685A.230 Inspection fee and report.

685A.240 Broker’s report.

685A.250 Records; fiduciary account.

NONPROFIT ORGANIZATION OF BROKERS

685A.350 Duties of organization.

685A.360 General powers of organization.

685A.370 Fee for review of coverage.

685A.380 Board of directors: Duties; assistance with investigations of alleged violations.

685A.390 Books and financial records of organization open to general public; exception; records of Division.

685A.400 Deposit or investment of money; audit of accounts.

TAX ON SURPLUS LINES COVERAGES

685A.420 Allocation of premiums for risks or exposures; filing of premium taxes.

GENERAL PROVISIONS

NAC 685A.115 Definitions. (NRS 679B.130, 685A.210) As used in this chapter, unless the context otherwise requires, the words and terms defined in NAC 685A.120 to 685A.150, inclusive, have the meanings ascribed to them in those sections.

[Comm’r of Insurance, PC-22, § 3, eff. 7-18-80]—(NAC A 3-5-91; 3-20-96)

NAC 685A.120 “Admitted insurer” defined. (NRS 679B.130, 685A.210) “Admitted insurer” means an insurer which holds a certificate of authority to transact the business of insurance in this State pursuant to chapter 680A of NRS.

[Comm’r of Insurance, PC-22, § 3, eff. 7-18-80]—(NAC A 3-5-91)—(Substituted in revision for part of NAC 685A.115)

NAC 685A.123 “Board of directors” defined. (NRS 679B.130, 685A.210) “Board of directors” means the board of directors of an organization.

(Added to NAC by Comm’r of Insurance, eff. 3-20-96)

NAC 685A.125 “Broker” defined. (NRS 679B.130, 685A.210) “Broker” means a surplus lines broker who is licensed in accordance with chapter 685A of NRS.

[Comm’r of Insurance, PC-22, § 3, eff. 7-18-80]—(NAC A 3-5-91)—(Substituted in revision for part of NAC 685A.115)

NAC 685A.130 “Commissioner” defined. (NRS 679B.130, 685A.210) “Commissioner” means the Commissioner of Insurance.

(Supplied in codification)

NAC 685A.135 “Division” defined. (NRS 679B.130, 685A.210) “Division” means the Division of Insurance of the Department of Business and Industry.

(Supplied in codification)

NAC 685A.140 “Eligible insurer” defined. (NRS 679B.130, 685A.210) “Eligible insurer” means an insurer which does not hold a certificate of authority to transact the business of insurance in this State but has qualified to write nonadmitted insurance in this State pursuant to chapter 685A of NRS.

[Comm’r of Insurance, PC-22, § 3, eff. 7-18-80]—(NAC A 3-5-91; R034-12, 9-14-2012)—(Substituted in revision for part of NAC 685A.115)

NAC 685A.145 “Ineligible insurer” defined. (NRS 679B.130, 685A.210) “Ineligible insurer” means an insurer which does not hold a certificate of authority to transact the business of insurance in this State and has not qualified pursuant to chapter 685A of NRS to write nonadmitted insurance in this State.

[Comm’r of Insurance, PC-22, § 3, eff. 7-18-80]—(NAC A 3-5-91; R034-12, 9-14-2012)—(Substituted in revision for part of NAC 685A.115)

NAC 685A.148 “Organization” defined. (NRS 679B.130, 685A.210) “Organization” means a nonprofit organization of surplus lines brokers formed pursuant to NRS 685A.075.

(Added to NAC by Comm’r of Insurance, eff. 3-20-96)

NAC 685A.150 “Producing agent or broker” defined. (NRS 679B.130, 685A.210) “Producing agent or broker” means an agent or broker of a subject of insurance for an insured for which Nevada is the home state who is licensed by the Commissioner and acts on behalf of the insured in the placement of risks through a broker.

[Comm’r of Insurance, PC-22, § 3, eff. 7-18-80]—(NAC A 3-5-91; R034-12, 9-14-2012)—(Substituted in revision for part of NAC 685A.115)

NAC 685A.155 “Qualified risk manager” interpreted. (NRS 679B.130, 685A.210) The Commissioner will interpret the term “qualified risk manager,” as used in NRS 685A.032, to have the meaning ascribed to it in 15 U.S.C. § 8206(13).

(Added to NAC by Comm’r of Insurance by R034-12, eff. 9-14-2012)

BROKERS

NAC 685A.205 Duties of brokers. (NRS 679B.130, 685A.210)

1. A broker shall make a reasonable effort to determine the financial solvency of any foreign or alien insurer which is not an admitted insurer and is not an insurer listed on the Quarterly Listing of Alien Insurers maintained by the International Insurers Department of the National Association of Insurance Commissioners before placing any surplus lines insurance for an insured for which Nevada is the home state with that insurer.

2. Upon the Commissioner’s request, whether made before or after the placement of any surplus lines insurance for an insured for which Nevada is the home state with a foreign or alien insurer which is not an admitted insurer, the broker shall submit to the Commissioner the latest financial statement or any supplemental information concerning the insurer.

[Comm’r of Insurance, PC-22, § 4, eff. 7-18-80]—(NAC A 3-5-91; 5-27-92; R034-12, 9-14-2012)

NAC 685A.215 Conditions for placement. (NRS 679B.130, 685A.040, 685A.210)

1. Except as otherwise provided in subsection 3, for an insured for which Nevada is the home state, insurance which is not readily obtainable from admitted insurers after a diligent effort has been made to obtain the insurance may be obtained from eligible brokers or procured by the insured. For surplus lines insurance, upon filing the report required by NRS 685A.050, the broker shall affirm that the coverage is unavailable from admitted insurers and provide evidence that at least three insurers which are marketing that line or class of insurance in this State have declined to provide that coverage.

2. The refusal of admitted insurers to write a form of contract is not a basis for a contention that the insurance is not procurable from admitted insurers if the form of contract involves a combination of classes of insurance which cannot lawfully be combined in a single certificate of authority to one insurer. Separate forms of contracts, each incorporating a class or a lawful combination of classes, must be offered to and refused by admitted insurers in the manner set forth in subsection 1 before the insurance may be placed with eligible insurers.

3. The provisions of subsection 1 do not apply to an exempt commercial purchaser.

[Comm’r of Insurance, PC-22, § 5, eff. 7-18-80]—(NAC A 3-5-91; R034-12, 9-14-2012)

NAC 685A.220 Acceptance of business from agents or brokers. (NRS 679B.130, 685A.210)

1. In accepting business from producing agents or brokers, the broker assumes the same statutory responsibilities and obligations as would exist if there were no other producing agent or broker.

2. The broker shall maintain the records and files prescribed by NRS 685A.160 and NAC 685A.250 on coverage placed by him or her for any producing agent or broker.

[Comm’r of Insurance, PC-22, § 6, eff. 7-18-80]—(NAC A 3-5-91)

NAC 685A.230 Inspection fee and report. (NRS 679B.130, 685A.210)

1. For an insured for which Nevada is the home state, the broker may pass on an inspection fee to the insured and may collect the fee from him or her as a part of the premium if the fee is directly related to an independent inspection required by insurers for insurance. The broker shall maintain a copy of each inspection report and each invoice or statement related to the report in his or her files.

2. An inspection fee that is charged to the insured must be shown as a separate item on the broker’s certificate, the cover note, or both.

[Comm’r of Insurance, PC-22, § 7, eff. 7-18-80]—(NAC A 3-5-91; R090-03, 10-30-2003; R034-12, 9-14-2012)

NAC 685A.240 Broker’s report. (NRS 679B.130, 685A.050, 685A.210)

1. The following provisions apply to the broker’s report required by NRS 685A.050:

(a) The report constitutes the broker’s statement of compliance with NRS 685A.040, 685A.070, 685A.080 and 685A.090.

(b) A separate report must be filed with the broker’s organization upon any renewal or extension of coverage of a contract of insurance for an insured for which Nevada is the home state.

(c) For an insured for which Nevada is the home state, an amended report must be filed with the broker’s organization for each cancellation and each endorsement which changes the named insured, the description or location of the subject of insurance, or the coverage, conditions, terms, premium or participating insurers.

(d) The broker shall exercise due care in accounting for the premium, including any inspection fee charged as part of the premium, and for the premium tax on each report. The premium tax must be computed upon the total premium or deposit premium, plus the fee allowed by NRS 685A.155, minus any return premium. The premium must include policy, membership, and other fees and assessments charged by the insurer as considerations for the insurance.

(e) If a type of coverage is on the list of open lines eligible for export which is approved by the Commissioner, statements of declinations from admitted insurers pursuant to subsection 1 of NAC 685A.215 are not required on the report.

(f) The Commissioner may require a broker to file with the broker’s organization a complete copy of the policy, certificate or cover note to substantiate information which he or she has provided in a report.

2. If a broker’s report required by NRS 685A.050 is filed electronically, it must be signed with an electronic signature of the broker pursuant to the provisions of chapter 719 of NRS.

[Comm’r of Insurance, PC-2, § 8, eff. 7-18-80]—(NAC A 3-5-91; 3-20-96; R090-03, 10-30-2003; R161-06, 12-07-2006, eff. 1-1-2007; R034-12, 9-14-2012)

NAC 685A.250 Records; fiduciary account. (NRS 679B.130, 685A.160, 685A.210)

1. In addition to the records required by NRS 685A.160, the broker shall maintain complete copies of reports required by NRS 685A.050, including any amendment to a report, which have been filed with the Commissioner or the broker’s organization.

2. The broker’s files, accounts and other records of surplus lines transactions for an insured for which Nevada is the home state:

(a) Must be maintained in the office of the broker; and

(b) Must be open to examination by the Commissioner at any reasonable time.

3. The broker shall maintain the files, accounts and other records of surplus lines transactions for an insured for which Nevada is the home state.

4. Premium taxes collected by the broker for a policy for an insured for which Nevada is the home state must be deposited in a fiduciary account. The broker shall establish a fiduciary account for the conduct of his or her business of insurance and maintain the account in a commercial bank or other financial institution depository which is insured by an agency of the Federal Government.

[Comm’r of Insurance, PC-22, § 9, eff. 7-18-80]—(NAC A 3-5-91; 3-20-96; R090-03, 10-30-2003; R034-12, 9-14-2012)

NONPROFIT ORGANIZATION OF BROKERS

NAC 685A.350 Duties of organization. (NRS 679B.130, 685A.210) An organization shall:

1. Establish and maintain an office in this State to carry out the applicable provisions of this chapter and chapter 685A of NRS.

2. Maintain a plan of operation which ensures that the members of the organization and all associated nonadmitted insurance transactions comply with the provisions of title 57 of NRS and all other applicable rules and regulations adopted by the Commissioner.

3. Require each broker who is a member of the organization to file with the organization:

(a) The broker’s report required by NRS 685A.050 and NAC 685A.240;

(b) A copy of the broker’s cover note, declarations page or certificate; and

4. Maintain each document filed with the organization pursuant to subsection 3.

5. Distribute to the members of the organization the current list of open lines eligible for export.

6. Make available to the Commissioner a report summarizing the premiums written in this State as of December 31 of the previous year through eligible surplus lines insurers. The report must identify for each premium written:

(a) The name of the insurer, including the identification number issued to the insurer by the National Association of Insurance Commissioners;

(b) The broker; and

7. Cooperate with the Commissioner to resolve inquiries concerning the availability of coverage with admitted insurers and provide assistance in the placement of coverage with an eligible surplus lines insurer.

8. If requested by the Commissioner, perform a survey of insurance transacted in this State that reflects coverage placed in this State which involves major risks. The organization shall submit the results of the survey to the Commissioner with the report required by subsection 6.

9. Hold a meeting of its board of directors at least annually.

(Added to NAC by Comm’r of Insurance, eff. 3-20-96; A by R161-06, 12-7-2006, eff. 1-1-2007; R034-12, 9-14-2012)

NAC 685A.360 General powers of organization. (NRS 679B.130, 685A.210) An organization may:

1. Examine and evaluate the business of insurance to identify changes in coverage, premiums and volume that affect the business of insurance in this State, and make reports of such examinations to the Commissioner or the general public, or both.

2. Develop and maintain projects and programs dedicated to the continuing education and the technical and managerial skills of the members of the organization.

(Added to NAC by Comm’r of Insurance, eff. 3-20-96)

NAC 685A.370 Fee for review of coverage. (NRS 679B.130, 685A.075, 685A.210) Each broker who is a member of an organization shall pay to the organization a fee for the review of surplus lines coverage. The fee must be paid within 30 days after the broker receives an invoice from the organization. The fee for each policy is 0.4 percent of the amount subject to tax pursuant to NRS 685A.180.

(Added to NAC by Comm’r of Insurance, eff. 3-20-96; A by R090-03, 10-30-2003; R161-06, 12-7-2006, eff. 1-1-2007)

NAC 685A.380 Board of directors: Duties; assistance with investigations of alleged violations. (NRS 679B.130, 685A.210)

1. The board of directors shall:

(a) Promptly report alleged violations of this chapter and chapters 685A and 685B of NRS to the Commissioner;

(b) Report to the Commissioner:

(1) Delinquent, inaccurate, incomplete or improper reports required by NRS 685A.050 or tax reports filed by brokers with the organization pursuant to NAC 685A.350; and

(2) Insurance fraud or illegal insurance activity;

(c) Recommend to the Commissioner the class or classes of insurance to be included within the open lines eligible for export; and

(d) Maintain a current list of open lines eligible for export.

2. The board of directors may contract with accountants, experts, investigators and attorneys to assist, in cooperation with the Commissioner, with investigations of alleged violations of this chapter and chapters 685A and 685B of NRS.

(Added to NAC by Comm’r of Insurance, eff. 3-20-96; A by R034-12, 9-14-2012)

NAC 685A.390 Books and financial records of organization open to general public; exception; records of Division. (NRS 679B.130, 685A.077, 685A.210)

1. The books and financial records of an organization must be open to inspection by members of the general public upon written request, excluding records of investigations that are confidential pursuant to NRS 679B.190.

2. All forms and other documents that a broker files with his or her organization shall be deemed the records of the Division.

(Added to NAC by Comm’r of Insurance, eff. 3-20-96; A by R090-03, 10-30-2003)

NAC 685A.400 Deposit or investment of money; audit of accounts. (NRS 679B.130, 685A.075, 685A.210)

1. The money maintained by an organization must be:

(a) Deposited in a bank chartered by this State;

(b) Deposited in a bank that is a member of the United States Federal Reserve System; or

2. The board of directors shall engage a certified public accountant to audit the accounts of the organization and prepare an audit report before the annual meeting of the board, or more often if necessary or required by the Commissioner.

(Added to NAC by Comm’r of Insurance, eff. 3-20-96; A by R090-03, 10-30-2003; R089-17, 5-16-2018)

TAX ON SURPLUS LINES COVERAGES

NAC 685A.420 Allocation of premiums for risks or exposures; filing of premium taxes. (NRS 679B.130, 685A.180, 685A.210) For the purpose of determining the tax payable to the Commissioner pursuant to NRS 685A.180:

1. For a multi-state risk:

(a) If the Commissioner has entered into a multi-state agreement pursuant to NRS 685A.185, a broker shall use the allocation formulas and filing procedures established pursuant to the multi-state agreement to determine the allocation to this State of premiums as to persons, property, subjects or risks in this State insured under policies and contracts covering persons, property, subjects or risks located or resident in more than one state.

(b) If the Commissioner has not entered into a multi-state agreement pursuant to NRS 685A.185, a broker shall file premium taxes through the Surplus Lines Information Portal, or a successor system, of the nonprofit organization of surplus lines brokers formed pursuant to NRS 685A.075 for all risks for which Nevada is the home state of the insured.

2. For a risk with exposure located solely in Nevada, a broker shall file premium taxes through the Surplus Lines Information Portal, or a successor system, of the nonprofit organization of surplus lines brokers formed pursuant to NRS 685A.075.

(Added to NAC by Comm’r of Insurance, eff. 12-13-96; A by R034-12, 9-14-2012)