The Vermont Statutes Online

Title 8: Banking and Insurance

Chapter 142: RISK RETENTION GROUPS AND PURCHASING GROUPS

§ 6050. Purpose

The purpose of this chapter is to regulate the formation and operation of risk retention groups and purchasing groups in this state formed pursuant to the provisions of the federal Liability Risk Retention Act of 1986 ("RRA 1986"), to the extent permitted by such law. (Added 1991, No. 249 (Adj. Sess.), § 23, eff. Dec. 31, 1992.)

§ 6051. Definitions

As used in this chapter:

(1) "Commissioner" means the Commissioner of Financial Regulation of this state, or the commissioner, director, or superintendent of insurance in any other state.

(2) "Domicile," for purposes of determining the state in which a purchasing group is domiciled, means:

(A) for a corporation, the state in which the purchasing group is incorporated; and

(B) for an unincorporated entity, the state of its principal place of business.

(3) "Hazardous financial condition" shall have the same meaning as in 15 U.S.C. § 3901(a)(7).

(4) "Insurance" shall have the same meaning as in 15 U.S.C. § 3901(a)(1).

(5) "Liability" shall have the same meaning as in 15 U.S.C. § 3901(a)(2).

(6) "Personal risk liability" shall have the same meaning as in 15 U.S.C. § 3901(a)(3).

(7) "Plan of operation and feasibility study" means an analysis which presents the expected activities and results of a risk retention group as required by chapter 141 of this title.

(8) "Product liability" means liability for damages because of any personal injury, death, emotional harm, consequential economic damage, or property damage, including damages resulting from the loss of use of property, arising out of the manufacture, design, importation, distribution, packaging, labeling, lease, or sale of a product, but does not include the liability of any person for those damages if the product involved was in the possession of such a person when the incident giving rise to the claim occurred.

(9) "Purchasing group" has the same meaning as in 15 U.S.C. § 3901(a)(5).

(10) "Risk retention group" shall have the same meaning as in 15 U.S.C. § 3901(a)(4).

(11) "State" means any state of the United States or the District of Columbia. (Added 1991, No. 249 (Adj. Sess.), § 23, eff. Dec. 31, 1992; amended 1995, No. 180 (Adj. Sess.), § 38; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012.)

§ 6052. Risk retention groups chartered in this State

(a) Pursuant to the provisions of chapter 141 of this title, a risk retention group shall be chartered and licensed to write only liability insurance pursuant to this chapter, must comply with all of the laws, rules, regulations, and requirements applicable to such insurers chartered and licensed in this State under chapter 141 of this title, and with subdivisions 6053(4), (5), (7), and (8) of this title. A risk retention group chartered in this State may provide coverage for payment of punitive damages, the multiplied portion of multiple damages, or other penalties in the nature of compensatory damages, and any such coverage shall be enforceable against such risk retention group in accordance with its terms.

(b) Before it may offer insurance in any state, each risk retention group shall also submit for approval to the Insurance Commissioner of this State a plan of operation and feasibility study which includes a description of the coverages, deductibles, coverage limits, rates, and rating classification systems for each line of insurance the group intends to offer, together with such additional information as the Commissioner may reasonably require. In considering and approving the risk retention group's plan of operation and any subsequent amendments thereto, the Commissioner may limit the net amount of risk retained by a risk retention group. The risk retention group shall submit for approval by the Commissioner an appropriate revision in the event of any subsequent material change in any item of the plan of operation or feasibility study, including any material change in the information called for in subsection (c) of this section, but excluding the identity of policyholders and any changes in rates or rating classification systems. The group shall not offer any additional kinds of liability insurance, in this State or in any other state, until a revision of such plan or study is approved by the Commissioner. The risk retention group shall inform the Commissioner of any material changes in rates or rating classification systems, within 30 days of the adoption of such change.

(c)(1) At the time of filing its application for charter, the risk retention group shall provide to the Commissioner in summary form the following information:

(A) the identity of the initial policyholders or members of the group or if the identity is not known or cannot be determined, a description of who is eligible to be a policyholder or a member;

(B) the identity of the persons that organized the group;

(C) the identity of any persons that will act as a managing general agent or reinsurance intermediary for, provide other significant administrative services to, or otherwise influence or control the activities of, the group;

(D) summary descriptions of the services, described in subdivision (C) of this subsection, and of any contracts under which the services are to be performed, including the method of compensation therefor;

(E) the amount and nature of initial capitalization;

(F) plans for the payment of dividends or other distributions of members' capital and surplus; and

(G) the states in which the group intends to file.

(2) The applicant may bind separately any portions of the application or any amendment thereto that contain proprietary information or documents, and request confidential treatment of such portions. For the purposes of this section, "proprietary information or documents" means certain information or documents furnished by or pertaining to any of the persons specified above that would customarily be treated as confidential or sensitive and the disclosure of which could result in harm or prejudice to the person to whom the information or documents pertain or unfair advantage to another person. Such information includes, trade secrets, historical or projected loss data, or case reserves of members or policyholders, actuarial analyses which include such data or reserves, historical or projected financial data not otherwise publicly available, and similar information or documents. The Commissioner shall determine which portions specified by the applicant fall within the definition of proprietary information or documents and treat such portions as confidential. Provided, however, that nothing herein shall excuse the applicant from making any required disclosure under the RRA 1986, this chapter or chapter 141 of this title, or prohibit the Commissioner from disclosing any proprietary information or documents in the furtherance of any legal or regulatory proceeding. Before using proprietary information or documents in a legal or regulatory proceeding that does not involve the applicant or any person named in the application or any amendment thereto, the Commissioner shall first seek to obtain the same information from nonconfidential sources. If unavailable from nonconfidential sources, the Commissioner shall seek to protect the confidential information or documents from unnecessary disclosure. Upon licensing, the Commissioner shall forward to the National Association of Insurance Commissioners all information required under the RRA 1986 to be submitted to each state where the risk retention group proposes to operate and all other information not deemed confidential under this section. Providing notification to the National Association of Insurance Commissioners is in addition to and shall not be sufficient to satisfy the requirements of section 6053 or any other sections of this chapter. In addition, the Commissioner may provide access to confidential application information with respect to risk retention groups to representatives of the National Association of Insurance Commissioners to inspect (but not copy) such information in connection with accreditation examinations, so long as the National Association of Insurance Commissioners agrees in writing to maintain the confidentiality of such information.

(d) The provisions of subsection 6008(c) of this title shall apply to risk retention groups chartered in this State, except that such provisions shall not apply to final examination reports relating to risk retention groups and except that the Commissioner may, in the Commissioner's discretion, grant access to any other examination information covered by subsection 6008(c) of this title to representatives of the National Association of Insurance Commissioners to inspect (but not copy) such information in connection with accreditation examinations, so long as the National Association of Insurance Commissioners agrees in writing to maintain the confidentiality of such information.

(e) The provisions of subchapter 13 of chapter 101 of this title shall apply to risk retention groups chartered in this State. However, no existing rule, regulation, or order promulgated under section 3688 of this title shall apply to a risk retention group chartered in this State unless the rule, regulation, or order or a provision thereof is specific to risk retention groups. The Commissioner shall establish procedures to implement the provisions of subchapter 13 of chapter 101 of this title as applied to risk retention groups chartered in this State by rule, regulation, or order. (Added 1991, No. 249 (Adj. Sess.), § 23, eff. Dec. 31, 1992; amended 1993, No. 235 (Adj. Sess.), § 9i, eff. June 21, 1994; 1997, No. 49, § 17, eff. June 26, 1997; 1999, No. 38, § 20, eff. May 20, 1999; 2009, No. 42, §§ 29, 30, eff. May 27, 2009; 2011, No. 21, § 25; 2011, No. 78 (Adj. Sess.), § 41, eff. April 2, 2012.)

§ 6053. Risk retention groups not chartered in this state

Risk retention groups chartered and licensed in states other than this state and seeking to do business as a risk retention group in this state shall comply with the laws of this state as follows:

(1) Notice of operations and designation of secretary of state as agent.

submit to the commissioner:

(A) a statement identifying the state or states in which the risk retention group is chartered and licensed as a liability insurance company, charter date, its principal place of business, and such other information, including information on its membership, as the commissioner of this state may require to verify that the risk retention group is qualified under section 6051(11) of this title;

(B) a copy of its plan of operations and feasibility study and revisions of such plan or study submitted to the state in which the risk retention group is chartered and licensed; provided, however, that the provision relating to the submission of a plan of operation or feasibility study shall not apply with respect to any line or classification of liability insurance which:

(i) was defined in the Product Liability Risk Retention Act of 1981 before October 27, 1986; and

(ii) was offered before such date by any risk retention group which had been chartered and operating for not less than three years before such date; and

(iii) the risk retention group shall submit a copy of any revision to its plan of operation or feasibility study required by section 6052(b) of this title at the time that such revision has become effective in its chartering state; and

(C) a statement of registration, for which a filing fee shall be determined by the commissioner, which designates the secretary of state as its agent for the purpose of receiving service of legal documents or process.

(2) Financial condition. Any risk retention group doing business in this state shall submit to the commissioner:

(A) a copy of the group's financial statement submitted to the state in which the risk retention group is chartered and licensed which shall be certified by an independent public accountant and contain a statement of opinion on loss and loss adjustment expense reserves made by a member of the American Academy of Actuaries or a qualified loss reserve specialist, under criteria established by the National Association of Insurance Commissioners;

(B) a copy of each examination of the risk retention group as certified by the commissioner or public official conducting the examination; and

(C) upon request by the commissioner, a copy of any information or document pertaining to any outside audit performed with respect to the risk retention group.

(3) Taxation. Each risk retention group subject to the provisions of this section shall be liable for the payment of premium taxes and taxes on premiums of direct business for risks resident or located within this state as provided in section 8551 of Title 32, and shall report to the commissioner the net premiums written for risks resident or located within this state. Such risk retention group shall be subject to taxation, and any applicable fines and penalties related thereto, on the same basis as a foreign admitted insurer.

(4) Compliance with Unfair Claims Settlement Practices Law. Any risk retention group, its agents and representatives shall comply with the Unfair Claims Settlement Practices Act of this state, section 4724(9) of this title.

(5) Deceptive, false, or fraudulent practices. Any risk retention group shall comply with section 4724(1) through (5) of this title regarding deceptive, false or fraudulent acts or practices.

(6) Examination regarding financial condition. Any risk retention group may be required to submit to an examination by the commissioner to determine its financial condition if the commissioner of the jurisdiction in which the group is chartered and licensed has not initiated an examination or does not initiate an examination within 60 days after a request by the commissioner of this state. Any such examination shall be coordinated to avoid unjustified repetition and conducted in an expeditious manner and in accordance with the Examiner Handbook of the National Association of Insurance Commissioners.

(7) Notice to purchasers. Risk retention groups shall be required to notify purchasers as required by 15 U.S.C. § 3902(a)(1)(I).

(8) Prohibited acts regarding solicitation or sale. The following acts by a risk retention group are hereby prohibited:

(A) The solicitation or sale of insurance by a risk retention group to any person who is not eligible for membership in such group; and

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

(9) Prohibition on ownership by an insurance company. No risk retention group shall be allowed to do business in this state if an insurance company, other than an affiliated risk retention group, captive or other policyholder-owned insurance company or a risk retention group all of whose members are insurance companies, is directly or indirectly a member or owner of such risk retention group.

(10) Prohibited coverage. The terms of any insurance policy issued by any risk retention group shall not provide, or be construed to provide, coverage prohibited generally by statute of this state or declared unlawful by the highest court of this state whose law applies to such policy. This subsection shall not be construed to require the preapproval of forms by the commissioner.

(11) Delinquency proceedings. After an examination under section 6053(6) of this title, a risk retention group not chartered in this state and doing business in this state shall comply with a lawful order issued in a voluntary dissolution proceeding or in a delinquency proceeding commenced by a state insurance commissioner if there has been a finding of financial impairment within the meaning of chapter 145 of this title.

(12) Penalties. A risk retention group subject to this section that violates any provision of this chapter will be subject to the fines and the penalties including revocation of its right to do business in this state, applicable to licensed insurers generally under this title.

(13) Operation prior to enactment of this chapter. In addition to complying with the requirements of this section, any risk retention group operating in this state prior to enactment of this chapter shall, within 30 days after December 31, 1992, comply with the provision of subdivision (1)(A) of this section. (Added 1991, No. 249 (Adj. Sess.), § 23, eff. Dec. 31, 1992; amended 1993, No. 40, § 10, eff. June 3, 1993.)

§ 6054. Compulsory associations

(a) No risk retention group shall be required or permitted to join or contribute financially to any insurance insolvency guaranty fund, or similar mechanism, in this state, nor shall any risk retention group, or its insureds or claimants against its insureds, receive any benefit from any such fund for claims arising under the insurance policies issued by such risk retention group.

(b) When a purchasing group obtains insurance covering its members' risks from an insurer not authorized in this state or from a risk retention group, no such risks, wherever resident or located, shall be covered by any insurance guaranty fund or similar mechanism in this state.

(c) When a purchasing group obtains insurance covering its members' risks from a licensed insurer, only risks resident or located in this state shall be covered by the state guaranty fund subject to chapter 112 of this title. (Added 1991, No. 249 (Adj. Sess.), § 23, eff. Dec. 31, 1992.)

§ 6055. Purchasing groups; Exemption from certain laws

A purchasing group and its insurer or insurers shall be subject to all applicable laws of this state, except that a purchasing group and its insurer or insurers shall be exempt from state laws as provided in 15 U.S.C. § 3903(a)(1) through (a)(8). (Added 1991, No. 249 (Adj. Sess.), § 23, eff. Dec. 31, 1992.)

§ 6056. Notice and registration requirements of purchasing groups

(a) A purchasing group intending to do business in this state shall, prior to doing business, furnish notice to the commissioner which shall:

(1) be as provided in 15 U.S.C. § 3903(d);

(2) identify all other states in which the group intends to do business;

(3) specify the method by which, and the person or persons, if any, through whom insurance will be offered to its members whose risks are resident or located in this state; and

(4) provide such other information as may be required by the commissioner to verify that the purchasing group is qualified under subdivision 6051(9) of this title.

(b) The purchasing group shall register with and designate the secretary of state as its agent solely for the purpose of receiving service of legal documents or process, except for any groups exempted under 15 U.S.C. § 3903(e). Service shall be effected in the manner provided in section 3383 of this title.

(c) Each purchasing group that is required to give notice pursuant to subsection (a) of this section shall also furnish such information as may be required by the commissioner to:

(1) verify that the entity qualifies as a purchasing group;

(2) determine where the purchasing group is located; and

(3) determine appropriate tax treatment under section 6058 of this title.

(d) Any purchasing group which was doing business in this state prior to the enactment of this chapter shall, within 30 days after December 31, 1992, furnish notice to the commissioner pursuant to the provisions of subsection (a) of this section and furnish such information as may be required pursuant to subsections (b) and (c) of this section. (Added 1991, No. 249 (Adj. Sess.), § 23, eff. Dec. 31, 1992.)

§ 6057. Restrictions on insurance purchased by purchasing groups

(a) A purchasing group may not purchase insurance from a risk retention group that is not chartered in a state or from an insurer not admitted in the state in which the purchasing group is located, unless the purchase is effected through a licensed agent or broker acting pursuant to the surplus lines laws and regulations of such state.

(b) A purchasing group which obtains liability insurance from an insurer not admitted in this state or a risk retention group shall inform each of the members of such group which have a risk resident or located in this state that such risk is not protected by an insurance insolvency guaranty fund in this state in writing that such risk retention group or such insurer may not be subject to all insurance laws and regulations of this state.

(c) No purchasing group may purchase insurance providing for a deductible or self-insured retention applicable to the group as a whole; however, coverage may provide for a deductible or self-insured retention applicable to individual members.

(d) Purchases of insurance by purchasing groups are subject to the same standards regarding aggregate limits which are applicable to all purchases of group insurance. (Added 1991, No. 249 (Adj. Sess.), § 23, eff. Dec. 31, 1992.)

§ 6058. Purchasing group taxation

Premium taxes and taxes on premiums paid for coverage of risks resident or located in this state by a purchasing group or any members of the purchasing groups shall be:

(1) imposed at the same rate and subject to the same interest, fines and penalties as that applicable to premium taxes and taxes on premiums paid for similar coverage from a similar insurance source by other insureds; and

(2) paid first by such insurance source, and if not by such source, by the agent or broker for the purchasing group, and if not by such agent or broker, then by the purchasing group, and if not by such purchasing group, then by each of its members. (Added 1991, No. 249 (Adj. Sess.), § 23, eff. Dec. 31, 1992.)

§ 6059. Administrative and procedural authority regarding risk retention groups and purchasing groups

The commissioner is authorized to make use of any of the powers established under this title to enforce the laws of this state not specifically preempted by the Risk Retention Act of 1986 including the commissioner's administrative authority to investigate, issue subpoenas, conduct depositions and hearings, issue orders, impose penalties and seek injunctive relief. With regard to any investigation, administrative proceedings or litigation, the commissioner can rely on the procedural laws of this state. The injunctive authority of the commissioner, in regard to risk retention groups, is restricted by the requirement that any injunction be issued by a court of competent jurisdiction. (Added 1991, No. 249 (Adj. Sess.), § 23, eff. Dec. 31, 1992.)

§ 6060. Duties of agent or brokers to obtain license

(a) Purchasing groups.

(1) No person, firm, association or corporation shall act or aid in any manner in soliciting, negotiating or procuring liability insurance in this state for a purchasing group from an authorized insurer or a risk retention group chartered in a state unless such person, firm, association or corporation is licensed as an insurance agent or broker in accordance with chapter 131 of this title.

(2) No person, firm, association or corporation shall act or aid in any manner in soliciting, negotiating or procuring liability insurance coverage in this state for any member of a purchasing group under a purchasing group's policy unless such person, firm, association or corporation is licensed as an insurance agent or broker in accordance with chapter 131 of this title.

(3) No person, firm, association or corporation shall act or aid in any manner in soliciting, negotiating or procuring liability insurance from an insurer not authorized to do business in this state on behalf of a purchasing group located in this state unless such person, firm, association or corporation is licensed as a surplus lines broker or excess line broker in accordance with chapter 131 of this title.

(b) For purposes of acting as an agent or broker for a purchasing group pursuant to subsection (a) of this section, the requirement of residence in this state shall not apply.

(c) Every person, firm, association or corporation licensed pursuant to the provisions of chapter 131 of this title, on business written through a purchasing group, shall inform each prospective insured of the provisions of the notice required by section 6057(c) of this title. (Added 1991, No. 249 (Adj. Sess.), § 23, eff. Dec. 31, 1992.)

§ 6061. Binding effect of orders issued in United States district court

An order issued by any district court of the United States enjoining a risk retention group from soliciting or selling insurance, or operating in any state, or in all states or in any territory or possession of the United States, shall be enforceable in the courts of this state, upon a finding that such a group is in hazardous financial or financially impaired condition. (Added 1991, No. 249 (Adj. Sess.), § 23, eff. Dec. 31, 1992.)


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8 142 RISK RETENTION GROUPS AND PURCHASING GROUPS 2012-01-01 2013-06-30
8 142 RISK RETENTION GROUPS AND PURCHASING GROUPS 2013-07-01 2099-12-31

Access Date: 2014-01-09
Version: 2013-07-01 - 2099-12-31