PRIA, Government Policy, Made Personal

Summary

Risk retention groups are mostly free from state insurance rules that would stop them from operating. The state that charters the group can still control how the group is formed and run. States where the group does business may require the group to follow unfair-claims laws; pay applicable premium and similar taxes on a nondiscriminatory basis; join any state loss‑apportionment systems on a nondiscriminatory basis; name the state insurance commissioner as the group’s agent only for receiving legal papers; allow state insurance examiners to check the group’s finances if the chartering state has not started or refused an exam; follow court orders in delinquency or voluntary dissolution cases; obey state laws against fraud (but injunctions must come from a court); obey court injunctions if the group is financially impaired; and include, in 10-point type, a notice in policies saying the policy is issued by a risk retention group, the group may not be subject to all of the state’s insurance laws, and state insolvency guaranty funds do not cover the group. States may not force a group to join state guaranty associations, require resident countersignature of policies, or otherwise discriminate against the group. These exemptions apply only to liability insurance the group provides for itself or its members, the sale of that liability insurance, and related services like management, investments, loss control, and claims handling. States may require agents or brokers to have a license, but they cannot impose rules that discriminate against nonresident agents. Before offering insurance, a group must give its chartering state a plan of operation or feasibility study showing coverages, deductibles, limits, rates, and rating systems, and must send copies and any revisions to each state where it will do business. Each group must also give each state where it operates a copy of its annual financial statement filed in its chartering state, certified by an independent public accountant and with a loss-reserve opinion by a member of the American Academy of Actuaries or a qualified loss reserve specialist. Courts can stop sales to people who are not eligible members or stop a group that is financially impaired. States keep the power to enforce laws that still apply, to seek injunctions in court, to sue, and to regulate or bar insurance-company ownership interests in a group (except when the group’s members are insurance companies).

Title 15, §3902

Commerce and Trade, Source: USLM XML via OLRC

(a)Exemptions from State laws, rules, regulations, or orders

Except as provided in this section, a risk retention group is exempt from any State law, rule, regulation, or order to the extent that such law, rule, regulation, or order would—

(1)make unlawful, or regulate, directly or indirectly, the operation of a risk retention group except that the jurisdiction in which it is chartered may regulate the formation and operation of such a group and any State may require such a group to—

(A)comply with the unfair claim settlement practices law of the State;

(B)pay, on a nondiscriminatory basis, applicable premium and other taxes which are levied on admitted insurers and surplus lines insurers, brokers, or policyholders under the laws of the State;

(C)participate, on a nondiscriminatory basis, in any mechanism established or authorized under the law of the State for the equitable apportionment among insurers of liability insurance losses and expenses incurred on policies written through such mechanism;

(D)register with and designate the State insurance commissioner as its agent solely for the purpose of receiving service of legal documents or process;

(E)submit to an examination by the State insurance commissioners in any State in which the group is doing business to determine the group’s financial condition, if—

(i)the commissioner of the jurisdiction in which the group is chartered has not begun or has refused to initiate an examination of the group; and

(ii)any such examination shall be coordinated to avoid unjustified duplication and unjustified repetition;

(F)comply with a lawful order issued—

(i)in a delinquency proceeding commenced by the State insurance commissioner if there has been a finding of financial impairment under subparagraph (E); or

(ii)in a voluntary dissolution proceeding;

(G)comply with any State law regarding deceptive, false, or fraudulent acts or practices, except that if the State seeks an injunction regarding the conduct described in this subparagraph, such injunction must be obtained from a court of competent jurisdiction;

(H)comply with an injunction issued by a court of competent jurisdiction, upon a petition by the State insurance commissioner alleging that the group is in hazardous financial condition or is financially impaired; and

(I)provide the following notice, in 10-point type, in any insurance policy issued by such group: “notice

“This policy is issued by your risk retention group. Your risk retention group may not be subject to all of the insurance laws and regulations of your State. State insurance insolvency guaranty funds are not available for your risk retention group.”

(2)require or permit a risk retention group to participate in any insurance insolvency guaranty association to which an insurer licensed in the State is required to belong;

(3)require any insurance policy issued to a risk retention group or any member of the group to be countersigned by an insurance agent or broker residing in that State; or

(4)otherwise, discriminate against a risk retention group or any of its members, except that nothing in this section shall be construed to affect the applicability of State laws generally applicable to persons or corporations.

(b)Scope of exemptions

The exemptions specified in subsection (a) apply to laws governing the insurance business pertaining to—

(1)liability insurance coverage provided by a risk retention group for—

(A)such group; or

(B)any person who is a member of such group;

(2)the sale of liability insurance coverage for a risk retention group; and

(3)the provision of—

(A)insurance related services;

(B)management, operations, and investment activities; or

(C)loss control and claims administration (including loss control and claims administration services for uninsured risks retained by any member of such group);

for a risk retention group or any member of such group with respect to liability for which the group provides insurance.

(c)Licensing of agents or brokers for risk retention groups

A State may require that a person acting, or offering to act, as an agent or broker for a risk retention group obtain a license from that State, except that a State may not impose any qualification or requirement which discriminates against a nonresident agent or broker.

(d)Documents for submission to State insurance commissioners

Each risk retention group shall submit—

(1)to the insurance commissioner of the State in which it is chartered—

(A)before it may offer insurance in any State, a plan of operation or a feasibility study which includes the coverages, deductibles, coverage limits, rates, and rating classification systems for each line of insurance the group intends to offer; and

(B)revisions of such plan or study if the group intends to offer any additional lines of liability insurance;

(2)to the insurance commissioner of each State in which it intends to do business, before it may offer insurance in such State—

(A)a copy of such plan or study (which shall include the name of the State in which it is chartered and its principal place of business); and

(B)a copy of any revisions to such plan or study, as provided in paragraph (1)(B) (which shall include any change in the designation of the State in which it is chartered); and

(3)to the insurance commissioner of each State in which it is doing business, a copy of the group’s annual financial statement submitted to the State in which the group is chartered as an insurance company, which statement shall be certified by an independent public accountant and contain a statement of opinion on loss and loss adjustment expense reserves made by—

(A)a member of the American Academy of Actuaries, or

(B)a qualified loss reserve specialist.

(e)Power of courts to enjoin conduct

Nothing in this section shall be construed to affect the authority of any Federal or State court to enjoin— (1)

(2)the solicitation or sale of insurance by, or operation of, a risk retention group that is in hazardous financial condition or is financially impaired.

(f)State powers to enforce State laws

(1)Subject to the provisions of subsection (a)(1)(G) (relating to injunctions) and paragraph (2), nothing in this chapter shall be construed to affect the authority of any State to make use of any of its powers to enforce the laws of such State with respect to which a risk retention group is not exempt under this chapter.

(2)If a State seeks an injunction regarding the conduct described in paragraphs (1) and (2) of subsection (e), such injunction must be obtained from a Federal or State court of competent jurisdiction.

(g)States’ authority to sue

Nothing in this chapter shall affect the authority of any State to bring an action in any Federal or State court.

(h)State authority to regulate or prohibit ownership interests in risk retention groups

Nothing in this chapter shall be construed to affect the authority of any State to regulate or prohibit the ownership interest in a risk retention group by an insurance company in that State, other than in the case of ownership interest in a risk retention group whose members are insurance companies.

Notes & Related Subsidiaries

Editorial Notes

Amendments

1986—Subsec. (a)(1)(C). Pub. L. 99–563, § 12(c), struck out “product liability or completed operations” before “liability insurance losses”. Subsec. (a)(1)(D). Pub. L. 99–563, § 5(b)(1), redesignated subpar. (E) as (D), substituted a semicolon for “, and, upon request, furnish such commissioner a copy of any financial report submitted by the risk retention group to the commissioners of the chartering or licensing jurisdiction;”, and struck out former subpar. (D) which read as follows: “submit to the appropriate authority reports and other information required of licensed insurers under the laws of a State relating solely to product liability or completed operations liability insurance losses and expenses;”. Subsec. (a)(1)(E). Pub. L. 99–563, § 5(b)(1)(A), (c), redesignated subpar. (F) as (E), further redesignated cl. (ii) as (i), added cl. (ii), and struck out former cl. (i) which read as follows: “the commissioner has reason to believe the risk retention group is in a financially impaired condition; and”. Former subpar. (E) redesignated (D). Subsec. (a)(1)(F). Pub. L. 99–563, § 5(b)(1)(A), (d), redesignated subpar. (G) as (F) and amended it generally. Prior to amendment, subpar. (F) read as follows: “comply with a lawful order issued in a delinquency proceeding commenced by the State insurance commissioner if the commissioner of the jurisdiction in which the group is chartered has failed to initiate such a proceeding after notice of a finding of financial impairment under subparagraph (F) of this paragraph;”. Former subpar. (F) redesignated (E). Subsec. (a)(1)(G) to (I). Pub. L. 99–563, § 5(b)(1)(A), (e), added subpars. (G) to (I). Former subpar. (G) redesignated (F). Subsec. (b). Pub. L. 99–563, § 5(a), amended subsec. (b) generally. Prior to amendment, subsec. (b) read as follows: “The exemptions specified in subsection (a) of this section apply to— “(1) product liability or completed operations liability insurance coverage provided by a risk retention group for— “(A) such group; or “(B) any person who is a member of such group; “(2) the sale of product liability or completed operations liability insurance coverage for a risk retention group; and “(3) the provision of insurance related services or management services for a risk retention group or any member of such group.” Subsecs. (d) to (h). Pub. L. 99–563, §§ 5(b)(2), 7, 8(a), added subsecs. (d) to (h).

Statutory Notes and Related Subsidiaries

Special Rule Regarding Feasibility StudyThe provisions of subsec. (d) of this section, relating to the submission of a feasibility study, not applicable with respect to any line or classification of liability insurance which was defined in this chapter before Oct. 27, 1986, and was offered before such date by any risk retention group chartered and operating for not less than 3 years before such date, see section 11(b) of Pub. L. 99–563, set out as an

Effective Date

of 1986 Amendment; Applicability note under section 3901 of this title.

§3902 Risk Retention Groups