515E.1 PURPOSE.
The purpose of this chapter is to regulate the formation and
operation in this state of risk retention groups formed pursuant to
the Product Liability Risk Retention Act of 1981, 15 U.S.C. § 3901 et
seq., or the Risk Retention Amendments of 1986, Pub. L. No. 99-563.
As used in this chapter, "federal Act" means the Product
Liability Risk Retention Act of 1981 as amended. Section History: Recent Form
88 Acts, ch 1111, §2
515E.2 DEFINITIONS.
As used in this chapter, unless the context otherwise requires:
1. "Commissioner" means the commissioner of insurance or the
commissioner, director, superintendent of insurance, or similar
public official, in any other state.
2. "Completed operations liability" means liability arising
out of the installation, maintenance, or repair of any product at a
site which is not owned or controlled by either of the following:
a. A person who performs that work.
b. A person who hires an independent contractor to perform
that work.
However, liability for activities which are completed or abandoned
before the date of the occurrence giving rise to the liability is
included.
3. "Domicile", for purposes of determining the state in which
a purchasing group is domiciled, means either of the following:
a. For a corporation, the state in which the purchasing group
is incorporated.
b. For an unincorporated entity, the state of its principal
place of business.
4. "Hazardous financial condition" means a risk retention
group not yet financially impaired or insolvent, which, based on its
present or reasonably anticipated financial condition, is unlikely to
be able to do one of the following:
a. Meet obligations to policyholders with respect to known
claims and reasonably anticipated claims.
b. Pay other obligations in the normal course of business.
5. "Insurance" means primary insurance, excess insurance,
reinsurance, surplus lines insurance, and any other arrangement for
shifting and distributing risk which is determined to be insurance
under the laws of this state.
6. "Liability" means legal liability for damages, including
costs of defense, legal costs and fees, and other claims expenses,
because of injuries to other persons, damage to their property, or
other damage or loss to other persons resulting from or arising out
of either of the following:
a. A business, whether profit or nonprofit, trade, product,
services, including professional services, premises, or operations.
b. An activity of a state or local government, or an agency
or political subdivision of state or local government.
"Liability" does not include personal risk liability and an
employer's liability with respect to its employees other than an
employer's legal liability under the federal Employers' Liability
Act, 45 U.S.C. § 51 et seq.
7. "Personal risk liability" means liability for damages
because of injury to a person, damage to property, or other loss or
damage resulting from personal, familial, or household
responsibilities or activities, rather than from responsibilities or
activities referred to in subsection 6, paragraphs "a" and
"b".
8. "Plan of operation or a feasibility study" means an
analysis which presents the expected activities and results of a risk
retention group including, at a minimum, all of the following:
a. Information sufficient to verify that its members are
engaged in businesses or activities similar or related with respect
to the liability to which such members are exposed by virtue of any
related, similar, or common business, trade, product, services,
premises, or operations.
b. For each state in which it intends to operate, the
coverages, deductibles, coverage limits, rates, and rating
classification systems for each line of insurance the group intends
to offer.
c. Historical and expected loss experience of the proposed
members and national experience of similar exposures.
d. Pro forma financial statements and projections.
e. Appropriate opinions by a qualified, independent casualty
actuary, including a determination of minimum premium or
participation levels required to commence operations and to prevent a
hazardous financial condition.
f. Identification of management, underwriting and claim
procedures, marketing methods, managerial oversight methods,
investment policies, and reinsurance agreements.
g. Identification of each state in which the risk retention
group has obtained, or sought to obtain, a charter and license, and a
description of its status in each such state.
h. Other matters prescribed by the commissioner for liability
insurance companies of the state in which the risk retention group is
chartered or authorized by its insurance laws.
9. "Product liability" means liability for damages because of
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 a person for those
damages if the product involved was in the possession of the person
when the incident giving rise to the claim occurred.
10. "Purchasing group" means a group to which all of the
following apply:
a. It has as one of its purposes the purchase of liability
insurance on a group basis.
b. It purchases such insurance only for its group members and
only to cover their similar or related liability exposure, as
described in paragraph "c".
c. It is composed of members whose businesses or activities
are similar or related with respect to the liability to which members
are exposed by virtue of any related, similar, or common business,
trade, product, services, premises, or operations.
d. It is domiciled in any state.
11. "Risk retention group" means a corporation or other
limited liability association formed under the laws of any state,
Bermuda, or the Cayman Islands and to which all of the following
apply:
a. Its primary activity consists of assuming and spreading
all, or any portion, of the liability exposure of its group members.
b. It is organized for the primary purpose of conducting the
activity described under paragraph "a".
c. One of the following applies:
(1) It is chartered and licensed as a liability insurance company
and authorized to engage in the business of insurance under the laws
of any state.
(2) Before January 1, 1985, it was chartered or licensed and
authorized to engage in the business of insurance under the laws of
Bermuda or the Cayman Islands and, before that date, had certified to
the commissioner of at least one state that it satisfied the
capitalization requirements of that state, except that any such group
is a risk retention group only if it has been engaged in business
continuously since that date and only for the purpose of continuing
to provide insurance to cover product liability or completed
operations liability, as those terms were defined in the Product
Liability Risk Retention Act of 1981, 15 U.S.C. § 3901, before the
date of the enactment of the Risk Retention Amendments of 1986, Pub.
L. No. 99-563.
d. It does not exclude any person from membership in the
group solely to provide for members of the group a competitive
advantage over such a person.
e. One of the following applies:
(1) It has as its members only persons who have an ownership
interest in the group, and as its owners only persons who are members
and are provided insurance by the risk retention group.
(2) It has as its sole member and sole owner an organization
which is owned by persons who are provided insurance by the risk
retention group.
(3) It has as its sole owner an organization which has as its
members only persons who comprise the membership of the risk
retention group, and the organization members are the only persons
who comprise the membership of the risk retention group and who are
provided insurance by the group.
f. Its members are engaged in businesses or activities
similar or related with respect to the liability to which the members
are exposed by virtue of a related, similar, or common business
trade, product, services, premises, or operations.
g. Its activities do not include the provision of insurance
other than the following:
(1) Liability insurance for assuming and spreading all or any
portion of the liability of its group members.
(2) Reinsurance with respect to the liability of any other risk
retention group, or any members of another such group, which is
engaged in businesses or activities so that the group or member meets
the requirement described in paragraph "f" from membership in the
risk retention group which provides the reinsurance.
h. Its name includes the phrase "risk retention group".
12. "State" means a state of the United States or the
District of Columbia. Section History: Recent Form
88 Acts, ch 1111, §3
Referred to in § 515E.4, 515E.8
515E.3 RISK RETENTION GROUPS ORGANIZED IN THIS
STATE.
To be organized as a risk retention group in this state, the group
must be organized and licensed as a liability insurance company
authorized by the insurance laws of this state. Except as provided
elsewhere in this chapter, a risk retention group organized in this
state must comply with all of the laws, rules, and requirements
applicable to liability insurers organized in this state.
Additionally, a risk retention group organized in this state must
comply with section 515E.4. These requirements do not exempt risk
retention groups from a duty imposed by any other law or rule of the
state. Before it may offer insurance in any state, each risk
retention group shall also submit for approval to the commissioner of
insurance of this state a plan of operation or a feasibility study,
and revisions of the plan or study, within ten days of any change.
The name under which a risk retention group may be chartered and
licensed shall be a brief description of its membership followed by
the phrase "risk retention group" and, unless its membership consists
solely of insurers, shall not include the terms "insurance",
"mutual", "reciprocal", or any similar term. All risk retention
groups chartered in this state shall file with the division and the
national association of insurance commissioners an annual statement
blank prepared in accordance with instructions prescribed by the
commissioner. All financial information reflected in the annual
statement shall be kept and prepared in accordance with accounting
practices and procedures prescribed by the commissioner. The
commissioner may adopt by reference the annual statement handbook and
the accounting practices and procedures manual of the national
association of insurance commissioners.
A risk retention group organized in this state shall file in the
office of the commissioner a power of attorney and an agreement in
writing that service of process in any action or proceeding against
the society may be served on the commissioner and shall be of the
same legal force and validity as if served upon the society, and that
the authority shall continue in force so long as any liability
remains outstanding in this state. Copies of the power of attorney,
certified by the commissioner, shall be deemed sufficient evidence of
the appointment and shall be admitted in evidence with the same force
and effect as the original. Section History: Recent Form
88 Acts, ch 1111, § 4; 92 Acts, ch 1162, § 43; 2003 Acts, ch 91,
§46
Referred to in § 515E.4
515E.3A FOREIGN RISK RETENTION GROUP MAY BECOME
DOMESTIC.
1. A risk retention group that is organized under the laws of any
other state for the purpose of writing insurance, as authorized by
this chapter, may redomesticate to this state by doing all of the
following:
a. Complying with section 490.902.
b. Complying with all of the requirements of law relative to
the organization and licensing of a domestic risk retention group and
the capital and surplus requirement set forth in subsection 4.
c. Designating its principal place of business in this state.
2. A risk retention group that meets the requirements of
subsection 1 shall be entitled to a certificate of its corporate
existence and a license to transact business in this state, and be
subject in all respects to the authority and jurisdiction of this
state.
3. The certificate of authority, producer appointments and
licenses, rates, and other items which are in existence at the time a
risk retention group transfers its corporate domicile to this state
pursuant to this section shall continue in full force and effect upon
such transfer. For purposes of existing authorizations and all other
corporate purposes, the risk retention group is deemed to be the same
entity as it was prior to the transfer of its domicile. All
outstanding policies of any transferring risk retention group shall
remain in full force and effect.
4. A risk retention group redomesticating to this state pursuant
to this chapter shall comply with the minimum capital and surplus
requirements of chapter 521E or five million dollars, whichever is
greater. If the risk retention group's prior domestic regulator
allowed the use of letters of credit to meet that regulator's surplus
requirements, the risk retention group may continue to use the
letters of credit to meet this state's minimum surplus requirements
for up to five years from the date of redomestication in this state.
The risk retention group shall eliminate a minimum of twenty percent
of the letters of credit being used each year based upon the
aggregate amount of letters of credit being used to meet surplus
requirements at the time of redomestication in this state.
5. Letters of credit used by a risk retention group to meet
surplus requirements shall be clean, irrevocable, and unconditionally
issued or confirmed by a qualified United States financial
institution as defined in section 521B.4, subsection 2. The
beneficiary of each letter of credit being used shall be the
commissioner.
6. If a risk retention group redomesticating to this state fails
to comply with the provisions of this section, the commissioner shall
take action as prescribed in chapter 507C.
7. The commissioner shall adopt rules pursuant to chapter 17A to
implement this section. Section History: Recent Form
2006 Acts, ch 1117, §72
515E.4 RISK RETENTION GROUPS NOT ORGANIZED IN THIS
STATE.
Risk retention groups chartered in other states and seeking to do
business as a risk retention group in this state must observe and
abide by the laws of this state as provided in this section.
However, a risk retention group failing to qualify under the
definitional requirement of the federal Act, will not benefit from
this exemption from state law. The commissioner, therefore, may
apply any of the laws that otherwise may be preempted by the federal
Act because the nonexempt group will not qualify for the preemption.
1. Notice of operations and designation of commissioner as
agent. Before offering insurance in this state, a risk retention
group shall submit to the commissioner all of the following:
a. A statement identifying the state or states in which the
risk retention group is chartered and licensed as a liability
insurance company, date of chartering, its principal place of
business, and other information, including information on its
membership, as the commissioner of this state requires to verify that
the risk retention group is qualified under section 515E.2,
subsection 11.
b. A copy of its plan of operations or a feasibility study
and revisions of the plan or study submitted to its state of
domicile. However, the provision relating to the submission of a
plan of operation or a feasibility study does not apply with respect
to a line or classification of liability insurance which was defined
in the Product Liability Risk Retention Act of 1981 before October
27, 1986, and was offered before that date by a risk retention group
which had been organized and operating for not less than three years
before that date.
c. A statement of registration which designates the
commissioner as its agent for the purpose of receiving service of
legal documents or process for which a filing fee set by the
commissioner shall be paid.
d. The risk retention group shall submit a copy of any
revision to its plan of operation or feasibility study required by
section 515E.3 at the same time that such revision is submitted to
the commissioner of its chartering state.
2. Financial condition. A risk retention group doing
business in this state shall submit to the commissioner all of the
following:
a. A copy of the group's financial statement submitted to its
state of domicile, 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.
c. Upon request by the commissioner, a copy of any audit
performed with respect to the risk retention group.
d. Information required to verify its continuing
qualification as a risk retention group under section 515E.2,
subsection 11.
3. Taxation.
a. Premiums paid for coverages within this state to risk
retention groups are subject to taxation as provided in section
432.5.
b. To the extent agents or brokers are used, they shall
report and pay the taxes for the premiums for risks which they have
placed with or on behalf of a risk retention group not chartered in
this state.
c. To the extent agents or brokers are not used or fail to
pay the tax, each risk retention group shall pay the tax for risks
insured within the state. Each risk retention group shall report all
premiums paid to it for risks insured within the state.
4. Compliance with unfair claims settlement practices law. A
risk retention group, its agents, and representatives, shall comply
with the unfair claims settlement practices law in section 507B.4,
subsection 9.
5. Deceptive, false, or fraudulent practices. A risk
retention group shall comply with sections 507B.3 and 507B.4
regarding deceptive, false, or fraudulent acts or practices.
However, if the commissioner seeks an injunction regarding such
conduct, the injunction must be obtained from a court of competent
jurisdiction.
6. Examination regarding financial condition. A risk
retention group shall submit to an examination by the commissioner to
determine its financial condition if the commissioner of the
jurisdiction in which the group is chartered has not initiated an
examination or does not initiate an examination within sixty 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
national association of insurance commissioners' examiner handbook.
7. Notice to purchasers. Every application form for
insurance from a risk retention agency and every policy issued by a
risk retention group shall contain in ten point type on the front
page and the declaration page, the following notice:
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.
8. Prohibited acts regarding solicitation or sale. The
following acts by a risk retention group are prohibited:
a. The solicitation or sale of insurance by a risk retention
group to a person who is not eligible for membership in the group.
b. The solicitation or sale of insurance by, or operation of,
a risk retention group that is in a hazardous financial condition or
is financially impaired.
9. Prohibition against ownership by an insurance company. A
risk retention group shall not be allowed to do business in this
state if an insurance company is directly or indirectly a member or
owner of the risk retention group, other than in the case of a risk
retention group all of whose members are insurance companies.
10. Prohibited coverage. A risk retention group shall not
offer insurance policy coverage prohibited by law or declared
unlawful by the highest court of this state.
11. Delinquency proceedings. 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
after an examination under subsection 6. Section History: Recent Form
88 Acts, ch 1111, §5
Referred to in § 515E.3
515E.5 COMPULSORY ASSOCIATIONS.
A risk retention group shall not join or contribute financially to
an insurance insolvency guaranty fund, or similar mechanism, in this
state, nor shall a risk retention group, or its insureds, receive any
benefit from an insurance insolvency guaranty fund, or similar
mechanism, in this state, for claims arising out of the operations of
the risk retention group. Section History: Recent Form
88 Acts, ch 1111, §6
515E.6 COUNTERSIGNATURES NOT REQUIRED. Repealed by
98 Acts, ch 1057, §13.
515E.7 PURCHASING GROUPS EXEMPTIONS.
A purchasing group which meets the criteria established under the
federal Act is exempt from any law of this state relating to the
creation of groups for the purchase of insurance, the prohibition of
group purchasing, or any law that would discriminate against a
purchasing group or its members. An insurer is exempt from any law
of this state which prohibits providing, or offering to provide, to a
purchasing group or its members advantages based on their loss and
expense experience not afforded to other persons with respect to
rates, policy forms, coverages, or other matters. A purchasing group
is subject to all other applicable laws. Section History: Recent Form
88 Acts, ch 1111, §8; 98 Acts, ch 1057, §11
515E.8 PURCHASING GROUPS -- REQUIREMENTS.
1. A purchasing group which intends to do business in this state
shall, prior to doing business, furnish notice to the commissioner
which notice shall include all of the following:
a. The state in which the group is domiciled and all states
in which the group does or intends to do business.
b. The lines and classifications of liability insurance which
the purchasing group intends to purchase.
c. The insurance company from which the group intends to
purchase its insurance and the domicile of that company.
d. The principal place of business of the group.
e. 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.
f. Other information as required by the commissioner to
verify that the purchasing group is qualified under section 515E.2,
subsection 10.
g. The commissioner may require the notice to be in a form
prescribed by the national association of insurance commissioners.
2. A purchasing group, within ten days of any changes in any of
the items set forth in subsection 1, shall notify the commissioner of
the changes.
3. The purchasing group shall register with and designate the
commissioner as its agent solely for the purpose of receiving service
of legal documents or process, for which a filing fee determined by
the commissioner shall be paid, except that the requirements do not
apply in the case of a purchasing group to which all of the following
apply:
a. It was domiciled before April 2, 1986, and is domiciled on
and after October 27, 1986, in any state of the United States.
b. Before and since October 27, 1986, it purchased insurance
from an insurance carrier licensed in any state.
c. It was a purchasing group under the requirements of the
Product Liability Risk Retention Act of 1981 before October 27, 1986.
d. It does not purchase insurance that was not authorized for
purposes of an exemption under that Act, as in effect before October
27, 1986. Section History: Recent Form
88 Acts, ch 1111, § 9; 92 Acts, ch 1162, § 44
515E.9 PURCHASING GROUP RESTRICTIONS.
A purchasing group shall not purchase insurance from an insurer
not admitted in this state unless the purchase is effected through a
duly licensed agent or broker acting pursuant to sections 515.120
through 515.122. Section History: Recent Form
88 Acts, ch 1111, §10; 90 Acts, ch 1234, §44; 2007 Acts, ch 152,
§81
515E.10 COMMISSIONER'S ADMINISTRATIVE AND PROCEDURAL
AUTHORITY.
The commissioner may make use of any of the powers established
under the laws of this state to enforce the laws of this state so
long as those powers are not specifically preempted by the federal
Act, including but not limited to, the commissioner's authority to
investigate, issue subpoenas, conduct depositions and hearings, issue
orders, impose penalties, and seek injunctive relief. With regard to
an investigation, administrative proceeding, or litigation, the
commissioner may rely on the procedural law and rules of the state.
A risk retention group or purchasing group operating under this
chapter shall be considered a person for purposes of chapter 507B.
Section History: Recent Form
88 Acts, ch 1111, §11; 93 Acts, ch 88, §25
515E.11 PENALTIES.
A risk retention group which violates a provision of this chapter
is subject to fines and penalties applicable to licensed insurers
generally, including revocation of the group's license and of the
right to do business in this state. Section History: Recent Form
88 Acts, ch 1111, §12
515E.12 LICENSE REQUIRED FOR AGENTS AND BROKERS.
A person acting, or offering to act, as an agent or broker for a
risk retention group or purchasing group, which solicits members,
sells or procures insurance coverage, purchases coverage for its
members located within the state, or otherwise does business in this
state shall, before commencing any such activity, obtain a license
from the commissioner. Section History: Recent Form
88 Acts, ch 1111, §13
515E.13 EFFECT OF FEDERAL DISTRICT COURT ORDERS.
An order issued by a 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, upon a finding that such a group is
in a hazardous or impaired financial condition, is enforceable in the
courts of this state. Section History: Recent Form
88 Acts, ch 1111, §14
515E.14 RULES.
The commissioner may establish and from time to time amend rules
relating to risk retention groups as necessary or desirable to carry
out the provisions of this chapter. Section History: Recent Form
88 Acts, ch 1111, §15