Introduction Insurance is regulated by the states. This system of regulation stems from the McCarran-Ferguson Act of 1945, which describes state regulation and taxation of the industry as being in “the public interest” and clearly gives it preeminence over federal law. Each state has its own set of statutes and rules.
Insurance is regulated by the states. This system of regulation stems from the McCarran-Ferguson Act of 1945, which describes state regulation and taxation of the industry as being in “the public interest” and clearly gives it preeminence over federal law. Each state has its own set of statutes and rules.
State insurance departments oversee insurer solvency, market conduct and, to a greater or lesser degree, review and rule on requests for rate increases for coverage, among other things. In commercial insurance, workers compensation is the most highly regulated, largely because it is, with the exception of Texas, mandated by state law.
An insurance company must be licensed before it can do business. This too is regulated by the states. Insurance companies that are licensed and authorized to do business in a particular state are known as “admitted” insurers and are said to be “domiciled” in the state that issued the primary license; they are “domestic” in that state. Once licensed in one state, they may seek licenses in other states as a “foreign” insurer. Insurers incorporated in a foreign country are called “alien” insurers in the U.S. jurisdictions in which they are licensed. Surplus lines insurers are subject to different licensing agreements than standard companies; they only need to be licensed and admitted in their domiciliary state where they are an admitted company and do business as a standard lines company and are overseen for solvency by that state. Elsewhere they are “nonadmitted” and are free of rate and policy regulation. (See Surplus lines in the Players Section).
All insurance companies, including surplus lines insurers, are subject to capital and surplus requirements, which vary widely by state. Some states have requirements for individual lines of insurance. For example, New York has capital and surplus requirements for workers compensation. Insurers writing workers compensation in New York must have $500,000 in capital and $250,000 in surplus. In Wyoming, there are different requirements for surplus lines companies according to company ownership, stock and mutual companies for example.
It is the responsibility of the National A-sociation of Insurance Commissioners (NAIC) to develop model rules and regulations for the industry, many of which must be approved by state legislatures before they can be implemented. The NAIC moved to strengthen solvency regulation in the 1980s, developing an accreditation program that requires state insurance departments to meet certain prescribed standards. It also established minimum capital requirements for insurers, based on the riskiness of their business.
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GST taxpayers can't claim any pending input tax credit if this return is not filed by November 30, 2024 for FY 2023-24
