GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2013
SESSION LAW 2014-65
HOUSE BILL 267
AN ACT to amend laws governing caPtive Insurance companies and risk retention groups, as recommended by the department of insurance.
The General Assembly of North Carolina enacts:
SECTION 1. G.S. 58‑10‑340 reads as rewritten:
"§ 58‑10‑340. Definitions.
The following definitions apply in this Part:
(9) Captive insurance company. Any pure captive insurance company, association captive insurance company, industrial insured captive insurance company, risk retention group, protected cell captive insurance company, incorporated cell captive insurance company, special purpose captive insurance company, or special purpose financial captive insurance company formed or licensed under this Part.
(37) Risk retention group. A captive insurance company organized under the laws of this State pursuant to the Liability Risk Retention Act of 1986, 15 U.S.C. § 3901, et seq., as amended, as a stock or mutual corporation or as a reciprocal or other limited liability entity. Risk retention groups formed under this Part are subject to all applicable insurance laws including, but not limited to, any applicable provisions in Articles 1, 2, 3, 7, 9, 10, 12, 19, 22, 33, and 34 of this Chapter.
(38) Securities. Those different types of debt obligations, equity, surplus certificates, surplus notes, funding agreements, derivatives, and other legal forms of financial instruments.
(38a) Special purpose captive insurance company. A captive insurance company that is formed or licensed under this Part that does not meet the definition of any other type of captive insurance company defined in this section and is designated as a special purpose captive insurance company by the Commissioner.
."
SECTION 2. G.S. 58‑10‑345 reads as rewritten:
"§ 58‑10‑345. Licensing; authority; confidentiality.
(a) Any captive
insurance companybusiness entity, when permitted by its
organizational documents, may apply to the Commissioner for a license to do any
and all insurance comprised in G.S. 58‑7‑15; provided,
however, that:
(1) No pure captive insurance company shall insure any risks other than those of its parent and affiliated companies or a controlled unaffiliated business or businesses.
(2) No association captive insurance company shall insure any risks other than those of its association, those of the member organizations of its association, and those of a member organization's affiliated companies.
(3) No industrial insured captive insurance company shall insure any risks other than those of the industrial insureds that comprise the industrial insured group, those of their affiliated companies, and those of the controlled unaffiliated business of an industrial insured or its affiliated companies.
(4) No risk retention group shall insure any risks other than those of its members and owners.
(5) No captive insurance company shall provide personal motor vehicle or homeowner's insurance coverage or any component thereof.
(6) No captive insurance company shall accept or cede reinsurance except as provided in G.S. 58‑10‑445 and G.S. 58‑10‑605.
(7) No captive insurance company shall provide accident and health insurance on a direct basis.
(8) No captive insurance company shall provide workers' compensation and employer's liability insurance on a direct basis.
(9) No captive insurance company shall provide life insurance or annuities on a direct basis.
(10) A special purpose captive insurance company may provide insurance or reinsurance or both for risks as approved by the Commissioner.
(c) In order to receive a license to issue policies of insurance as a captive insurance company in this State, an applicant business entity shall meet all of the following requirements:
(1) The applicant business
entity shall submit its organizational documents to the Commissioner. If the
Commissioner approves the organizational documents, then the Commissioner shall
issue a lettercertificate to the applicant business entity certifying
the Commissioner's approval. The applicant business entity shall submit the
organizational documents, along with a copy of the approval lettercertificate
of approval issued by the Commissioner, and the required filing fees for
organizational documents prescribed by North Carolina law to the Secretary of
State for filing. Upon filing the organizational documents, the Secretary of
State shall issue a certificate of filing to the applicant.applicant
business entity. The applicant business entity shall submit a copy of the
certificate of filing relative to the applicant's applicant business
entity's organizational documents issued by the Secretary of State to the
Commissioner.
(6) No less than the amount
required by G.S. 58‑10‑370 G.S. 58‑10‑370,
in a form acceptable to the Commissioner, shall be paid in byinto
the applicant business entity and deposited with the Commissioner. In the
alternative, an irrevocable letter of credit in that amount and acceptable to
the Commissioner shall be filed with the Commissioner.entity.
(7) The applicant business entity shall submit to the Commissioner for approval a description of the coverages, deductibles, coverage limits, and rates, together with such additional information as the Commissioner may require.
(d) Whenever a captive
insurance company desires to amend the organizational documents submitted
pursuant to subdivision (c)(1) of this section, the company shall submit the
amended organizational documents to the Commissioner. If the Commissioner
approves the amendment, then the Commissioner shall issue a lettercertificate
to the applicantcompany certifying the Commissioner's approval.
The applicant business entitycompany shall submit the
organizational documents, along with a copy of the approval lettercertificate
of approval issued by the Commissioner, and the required filing fees for
organizational documents prescribed in North Carolina law to the Secretary of
State for filing. Upon filing the organizational documents, the Secretary of
State shall issue a certificate of filing to the applicant.company.
The applicantcompany shall submit a copy of the certificate of
filing relative to the applicant'scompany's organizational
documents issued by the Secretary of State to the Commissioner.
(f) Information submitted
pursuant to this subsectionsection is confidential and may be
made public by the Commissioner or the Commissioner's designee only upon an
order of a court of competent jurisdiction except:
(1) This subdivisionsubsection
shall not apply to any risk retention group.
(2) The Commissioner shall have the discretion to disclose such information to a public official having jurisdiction over the regulation of insurance in another state, provided that:
a. The public official agrees in writing to maintain the confidentiality of such information; and
b. The laws of the state in which the public official serves require the information to be and to remain confidential.
(3) Organizational documents filed with the Secretary of State shall continue to be nonconfidential public records in the Secretary of State's office.
."
SECTION 3. G.S. 58‑10‑360 reads as rewritten:
"§ 58‑10‑360. Designation of captive manager.
Before licensing, captive
insurance companiesthe applicant business entity shall report in
writing to the Commissioner the name and address of the manager designated to
manage the captive insurance company. The Commissioner shall approve the
captive manager and may require the submission of additional information
regarding the proposed captive manager in a form and manner as the Commissioner
may designate."
SECTION 4. G.S. 58‑10‑365 reads as rewritten:
"§ 58‑10‑365. Names of companies.
No applicant business entity or captive insurance company shall adopt a name that is the same, deceptively similar, or likely to be confused with or mistaken for any other existing business name registered in this State nor any name likely to mislead the public. Any name adopted by an applicant business entity or a captive insurance company shall comply with the requirements of State law."
SECTION 5. G.S. 58‑10‑370 reads as rewritten:
"§ 58‑10‑370. Capital and surplus requirements.
(a) No captive insurance
companyapplicant business entity shall be issued a license unless it
possesses and maintains unimpaired paid‑in capital and surplus of:
(1) In the case of a pure captive insurance company, not less than two hundred fifty thousand dollars ($250,000) or such other amount determined by the Commissioner.
(2) In the case of an association captive insurance company, not less than five hundred thousand dollars ($500,000).
(3) In the case of an industrial insured captive insurance company, not less than five hundred thousand dollars ($500,000).
(4) In the case of a risk retention group, not less than one million dollars ($1,000,000).
(5) In the case of a protected cell captive insurance company, not less than two hundred fifty thousand dollars ($250,000).
(6) In the case of a special purpose captive insurance company, not less than two hundred fifty thousand dollars ($250,000).
(b) The Commissioner may prescribe additional capital and surplus based upon the type, volume, and nature of insurance business to be transacted.
(c) Capital and surplus required
by subsections (a) and (b) of this section shall be in the form of cash
or ancash, securities approved by the Commissioner, a clean irrevocable
letter of credit issued by a bank approved by the Commissioner.Commissioner,
or other form approved by the Commissioner."
SECTION 6. G.S. 58‑10‑395 reads as rewritten:
"§ 58‑10‑395. Change of business.
(a) Any material change in
a captive insurance company's business planplan of operation that
was filed with the Commissioner at the time of initial application and any
subsequent amendment of the plan requires prior approval from the Commissioner.
(b) Any change in any other information filed with the application must be filed with the Commissioner within 60 days but does not require prior approval."
SECTION 7. G.S. 58‑10‑400 reads as rewritten:
"§ 58‑10‑400. Insurance manager and intermediaries.
No person shall act in or from
this State as a managing general agent, producer, or reinsurance intermediary
for captive business without the authorization of the Commissioner.
Application for such authorization must be on a form prescribed by the
Commissioner.Commissioner."
SECTION 8. G.S. 58‑10‑405 reads as rewritten:
"§ 58‑10‑405. Annual reports.
(a) No captive insurance companies shall be required to make any annual report to the Commissioner except as provided in this Part.
(b) Prior to March 1 of
each year, and prior to March 15 of each year in the case of pure captive
insurance companies or industrial insured captive insurance companies, each
captive insurance company shall submit to the Commissioner a report of its
financial condition, verified by oath of two of its executive officers. Each
captive insurance company shall report using generally accepted accounting
principles, unless the Commissioner requires, approves, or accepts the use of
statutory accounting principles or other comprehensive basis of accounting. The
Commissioner may require, approve, or accept any appropriate or necessary
modifications of the statutory accounting principles or other comprehensive
basis of accounting for the type of insurance and kinds of insurers to be
reported upon. The Commissioner may require additional information to
supplement such report. Except as otherwise provided, each risk retention group
and association captive insurance company shall file its report in the form
required by G.S. 58‑2‑165, and each risk retention group and
association captive insurance company shall comply with the requirements
set forth in G.S. 58‑4‑5. All other captive insurance companies
shall report on forms adopted by the Commissioner. G.S. 58‑10‑345(f)
shall apply to each report filed pursuant to this section. Branch captive
insurance companies shall file the report required by this section unless
otherwise required by G.S. 58‑10‑545. Special Purpose
Financial Captive insurance companies shall report in accordance with G.S. 58‑10‑625.
(c) A pure captive
insurance companycompany, a special purpose captive insurance
company, or an industrial insured captive insurance company may make written
application to the Commissioner for filing the required report on an
alternative reporting date based on the company's fiscal year‑end. If an
alternative reporting date is granted by the Commissioner, then:
(1) The annual
report is due 75 days after the fiscal year‑end.
(2) In order to
provide sufficient detail to support the premium tax return, the pure captive
insurance company or industrial insured captive insurance company shall file,
prior to March 15 of each year for each calendar year‑end, pages 1, 2, 3,
and 5 of the "Captive Annual Statement; Pure or Industrial Insured,"
verified by oath of two of its executive officers.then the annual report
is due 75 days after the fiscal year‑end."
SECTION 9. G.S. 58‑10‑415 reads as rewritten:
"§ 58‑10‑415. Annual audit and actuarial certification.
(a) All captive insurance companies with the exception of risk retention groups shall have an annual audit by an independent certified public accountant and shall file such audited financial report with the Commissioner on or before June 30 for the prior calendar year. Risk retention groups shall comply with Parts 6 and 7 of Article 10 of this Chapter instead of this section.
(b) Captive insurance companies that have received approval to report on other than a calendar year basis pursuant to G.S. 58‑10‑405 shall file such statements within 180 days after the end of their fiscal year.
(c) Captive insurance companies with less than one million two hundred thousand dollars ($1,200,000) in written premium may make a written request for exemption from the annual audit requirement. Such request must be made at least 90 days prior to the captive insurance company's fiscal year‑end or as otherwise required by the Commissioner. Requests will be considered on a case‑by‑case basis and may be subject to the Commissioner receiving an annual audit of the captive insurance company's parent company in lieu of the annual audit of the captive insurance company.
(c1) Extensions of the due dates for filings required by this section may be granted by the Commissioner for 30‑day periods upon a showing by the captive insurance company and its independent certified public accountant of the reasons for requesting an extension and determination by the Commissioner of good cause for the extension. The request for extension must be received in writing not less than 10 days before the due date and in sufficient detail to permit the Commissioner to make an informed decision with respect to the requested extension.
(c2) G.S. 58‑10‑345(f) shall apply to all information filed pursuant to this section.
(d) The annual audit
report shall be considered part of the captive insurance company's annual
report of financial condition except with respect to the date by which it must
be filed with the Commissioner. The annual audit shall consist of the
following:
(1) Opinion of
independent certified public accountant. Financial statements furnished
pursuant to this section shall be audited by independent certified public
accountants in accordance with generally accepted auditing standards as
determined by the American Institute of Certified Public Accountants or
statutory accounting principles in accordance with the NAIC Accounting
Practices and Procedures Manual in effect for the period covered by the report.
The opinion of the independent certified public accountant shall cover all
years presented. The opinion shall be addressed to the captive insurance
company on stationery of the accountant showing the address of issuance and
shall be signed and dated.
Annual audited financial report. The annual audited financial report shall include the following:
a. Financial statements. Financial statements shall be prepared in accordance with generally accepted accounting principles, unless the Commissioner requires, approves, or accepts the use of statutory accounting principles or other comprehensive basis of accounting, with useful or necessary modifications or adaptations required, approved or accepted by the Commissioner, and shall be audited by an independent certified public accountant in accordance with generally accepted auditing standards as determined by the American Institute of Certified Public Accountants. The Commissioner may require that the financial statement be supplemented by additional information.
b. Notes to financial statements. The notes to financial statements shall be those required by generally accepted accounting principles, or as otherwise approved by the Commissioner, and shall also include a reconciliation of differences, if any, between the audited financial report and the report of the captive insurance company's financial condition filed with the Commissioner in accordance with G.S. 58‑10‑405(b).
c. Related required auditor communications. Copies of related required auditor communications in accordance with generally accepted auditing standards.
(2) Report of evaluation
of internal controls. This report shall include an evaluation of the internal
controls of the captive insurance company relating to the methods and
procedures used in the securing of assets and the reliability of the financial
records, including, but not limited to, such controls as the system of
authorization and approval and the separation of duties. The review shall be
conducted in accordance with generally accepted auditing standards or statutory
accounting principles and the report filed with the Commissioner. An exemption
from this evaluation may be granted on a case‑by‑case basis upon
written request to the Commissioner.
Certified public accountant's affirmation. The certified public accountant shall furnish a written statement in the engagement letter or other document submitted to the captive insurance company that the certified public accountant is aware of and will comply with the responsibilities imposed by G.S. 58‑10‑420(b) and G.S. 58‑10‑420(c).
(3) Accountant's
letter of qualifications. The accountant shall furnish the captive insurance
company, for inclusion in the filing of the audited annual report, a letter
stating:
a. That the
accountant is independent with respect to the captive insurance company and
conforms to the standards of the profession as contained in the Code of
Professional Ethics, pronouncements of the American Institute of Certified
Public Accountants, and pronouncements of the Financial Accounting Standards
Board.
b. The general
background and experience of the staff engaged in the audit, including the
experience in auditing captives or other insurance companies.
c. That the
accountant understands that the audited annual report and the accountant's
opinions thereon will be filed in compliance with this section with the
Commissioner.
d. That the
accountant consents to the requirements of G.S. 58‑10‑420(b)
and (c) and that the accountant consents and agrees to make available for
review by the Commissioner, the Commissioner's appointed agent, or other
designee the work papers as defined in G.S. 58‑10‑420(c).
e. That the
accountant is properly licensed by an appropriate state licensing authority and
that he or she is a member in good standing of the American Institute of
Certified Public Accountants.
(4) Financial
statements. Statements required shall be as follows:
a. Balance sheets
reporting assets, liabilities, capital, and surplus.
b. Statements of
operations.
c. Statements of
cash flow.
d. Statements of
changes in capital and surplus.
e. Notes to
financial statements. The notes to financial statements shall be those required
by generally accepted accounting principles, or as required by any other
comprehensive basis of accounting in use by the captive insurance company and
approved by the Commissioner, and shall include:
1. A
reconciliation of differences, if any, between the audited financial report and
the report of its financial condition filed with the Commissioner in accordance
with G.S. 58‑10‑405(b).
2. A summary of
ownership and relationship of the captive insurance company and all affiliated
corporations or companies insured by the captive insurance company.
3. A narrative
explanation of all material transactions and balances with the captive
insurance company.
(5) Certification of loss
reserves and loss expense reserves. The annual auditaudited
financial report shall be filed with a Statement of Actuarial Opinion
evaluating the captive insurance company's loss reserves and loss expense
reserves. The individual who prepares the Statement of Actuarial Opinion shall
be a Fellow of the Casualty Actuarial Society, a member in good standing of the
American Academy of Actuaries, or an individual who has demonstrated competence
in loss reserve evaluation to the Commissioner. Certification shall be in such
form as the Commissioner deems appropriate."
SECTION 10. G.S. 58‑10‑420 reads as rewritten:
"§ 58‑10‑420. Independent certified public accountants.
(a) A captive insurance company, after becoming subject to this Part, shall within 60 days report to the Commissioner in writing, the name and address of the independent certified public accountant retained to conduct the annual audit set forth in G.S. 58‑10‑415.
(b) A captive insurance
company shall require its independent certified public accountant to
immediately notify in writing an officer and all members of the board of
directors of the captive insurance company of any determination by the
independent certified public accountant that the captive insurance company has
materially misstated its financial condition in its report to the Commissioner
as required in G.S. 58‑10‑405. The independent certified
public accountant shall furnish such notification to the Commissioner within
five working days of notifying the captive insurance company.A captive
insurance company receiving a notification pursuant to this subsection shall
forward a copy of the notification to the Commissioner within five business
days after receipt of the notification and shall provide the independent
certified public accountant with proof that the notification was forwarded to
the Commissioner. If the independent certified public accountant fails to
receive the proof within the five‑day period required by this subsection,
the independent certified public accountant shall within the next five business
days submit a copy of the notification to the Commissioner.
(c) A captive insurance company shall require its independent certified public accountant to make available for review by the Commissioner or his or her appointed agent the work papers prepared in the conduct of the audit of the captive insurance company. The captive insurance company shall require that the independent certified public accountant retain the audit work papers for a period of not less than five years after the period reported upon. The aforementioned review by the Commissioner shall be considered an examination, and all working papers obtained during the course of such examination shall be confidential. The captive insurance company shall require that the independent certified public accountant provide copies, in such form as the Commissioner deems appropriate, of any of the working papers which the Commissioner considers relevant. Such working papers may be retained by the Commissioner. "Work papers" as referred to in this section include, but are not necessarily limited to, schedules, analyses, reconciliations, abstracts, memoranda, narratives, flow charts, copies of captive insurance company records, or other documents prepared or obtained by the independent certified public accountant and the independent certified public accountant's employees in the conduct of their audit of the captive insurance company.
(d) The lead audit partner may not act in that capacity for more than five consecutive years. For purposes of this subsection, lead audit partner means the partner having primary responsibility for the audit. The person shall be disqualified from acting in that or similar capacity for the captive insurance company for a period of five consecutive years. A captive insurance company may make application to the Commissioner for relief from the above rotation requirement on the basis of unusual circumstances. This application should be made at least 30 days before the end of the calendar year. The Commissioner may consider the following factors in determining if the relief should be granted:
(1) Number of partners, expertise of the partners, or the number of insurance clients in the firm;
(2) Premium volume of the captive insurance company; or
(3) Number of jurisdictions in which the insurer transacts business.
(e) Risk retention groups shall comply with Part 7 of Article 10 of this Chapter instead of this section."
SECTION 11. G.S. 58‑10‑425 reads as rewritten:
"§ 58‑10‑425. Deposit requirement.
(a) Whenever the
Commissioner deems that the financial condition of a captive insurance company
warrants additional security beyond that required pursuant to G.S. 58‑10‑345(c)(6),
theThe Commissioner may require a captive insurance company to maintain
a deposit with the Commissioner additional cash or securities approved
by the Commissioner or, alternatively, to furnish the Commissioner a clean
irrevocable letter of credit issued by a bank chartered by the State or by a member
bank of the Federal Reserve System and approved by the Commissioner.in a
form and amount as the Commissioner may specify.
(b) A captive insurance company may receive interest or dividends from deposits held by the Commissioner or exchange the deposits for others of equal value with the approval of the Commissioner.
(c) If a captive insurance company discontinues business, the Commissioner shall return deposits held by the Commissioner only after being satisfied that all obligations of the captive insurance company have been discharged."
SECTION 12. G.S. 58‑10‑430 reads as rewritten:
"§ 58‑10‑430. Examinations.
(a) Whenever the Commissioner determines it to be prudent, the Commissioner shall visit a captive insurance company and inspect and examine its affairs to ascertain its financial condition, its ability to fulfill its obligations, and whether it has complied with this Part. The expenses and charges of the examination shall be paid by the captive insurance company.
(b) G.S. 58‑2‑160 shall apply to examinations conducted under this section.
(c) All examination reports, preliminary examination reports or results, working papers, recorded information, documents, and copies thereof produced by, obtained by, or disclosed to the Commissioner or any other person in the course of an examination made under this section are confidential, are not subject to subpoena, and may not be made public by the Commissioner or an employee or agent of the Commissioner. Nothing in this subsection shall prevent the Commissioner from using such information in furtherance of the Commissioner's regulatory authority under this Chapter. The Commissioner shall have the discretion to grant access to such information to public officials having jurisdiction over the regulation of insurance in any other state or country or to law enforcement officers of this State or any other state or agency of the federal government at any time only if the officials receiving the information agree in writing to maintain the confidentiality of the information in a manner consistent with this subsection.
(d) Risk retention groups are not subject to this section and shall instead be examined in accordance with the Examination Law, G.S. 58‑2‑131 through G.S. 58‑2‑134."
SECTION 13. G.S. 58‑10‑440(b) reads as rewritten:
"§ 58‑10‑440. Investment requirements.
(b) No pure captive
insurance company, industrial insured captive insurance company, protected cell
captive insurance company, incorporated cell captive insurance company, or special
purpose captive insurance company, or special purpose financial captive
insurance company shall be subject to any restrictions on allowable
investments, provided that the Commissioner may prohibit or limit any
investment that threatens the solvency or liquidity of any such company."
SECTION 14. G.S. 58‑10‑445 reads as rewritten:
"§ 58‑10‑445. Reinsurance.
(a) Any captive insurance company may provide reinsurance as authorized by this Chapter on risks ceded by any other insurer.
(b) Any captive insurance
company may take credit for the reinsurance of risks or portions of risks ceded
to reinsurers complying with this Chapter. If the reinsurer is licensed as a
risk retention group, then the ceding risk retention group or its members must
qualify for membership with the reinsurer. The Commissioner shall have the
discretion to allow a captive insurance company to take credit for the
reinsurance of risks or portions of risks ceded to an unauthorized reinsurer,
after review, on a case‑by‑case basis. The Commissioner may require
any documents, financial information, or other evidence that suchwill
allow an unauthorized reinsurer will be able to demonstrate adequate
security for its financial obligations.
(c) In addition to
reinsurers authorized by this Chapter, a captive insurance company may take
credit for the reinsurance of risks or portions of risks ceded to a pool,
exchange, or association to the extent authorized by the Commissioner. The
Commissioner may require any documents, financial information, or other
evidence that such a pool, exchange, or association will be able to provide
adequate security for its financial obligations. The Commissioner may deny
authorization or impose any limitations on the activities of a reinsurance
pool, exchange, or association that in the Commissioner's judgment are
necessary and proper to provide adequate security for the ceding captive
insurance company and for the protection and consequent benefit of the
public at large.
."
SECTION 15. G.S. 58‑10‑465 reads as rewritten:
"§ 58‑10‑465. Applicable provisions.
(a) No provisions of this Chapter, other than those contained in this Part or as expressly provided in this Part, shall apply to captive insurance companies. Risk retention groups shall have the privileges and be subject to Article 22 of this Chapter in addition to the applicable provisions of this Part.
(b) The Commissioner may exempt, by rule, regulation, or order, special purpose captive insurance companies, on a case by case basis, from provisions of this Chapter and any rules established under this Chapter that the Commissioner determines to be inappropriate given the nature of the risks to be insured."
SECTION 16. G.S. 58‑10‑510(o) reads as rewritten:
"(o) The business written by a protected cell captive insurance company, with respect to each protected cell, must be secured by one of the following methods:
(1) Fronted by an insurance company licensed under the laws of any state.
(2) Reinsured by a reinsurer authorized or approved by this State.
(3) Secured by a trust fund
in the United States for the benefit of policyholders and claimants, funded by
an irrevocable letter of credit, or other arrangement that is acceptable to the
Commissioner. The amount of security provided shall be no less than the
reserves associated with those liabilities which are neither fronted nor
reinsured, including reserves for losses, allocated loss adjustment expenses,
incurred but not reported losses, and unearned premiums for business written
through the participant's protected cell. The Commissioner may require the
protected cell captive insurance company to increase the funding of any
security arrangement established under this subdivision. If the form of
security is a letter of credit, the letter of credit shall be issued or
confirmed by a bank approved by the Commissioner. A trust maintained
pursuant to this subdivision shall be established in a form and upon such terms
approved by the Commissioner."
SECTION 17. G.S. 58‑10‑520 reads as rewritten:
"§ 58‑10‑520. Combining assets of protected cells.
Notwithstanding G.S. 58‑10‑510,
the assets of two or more protected cells may be combined for purposes of
investment and such combination shall not be construed as defeating the
segregation of such assets for accounting or other purposes.Protected cell
captive insurance companies shall comply with the investment requirements
contained in G.S. 58‑7‑167, 58‑7‑170, 58‑7‑172,
58‑7‑173, 58‑7‑178, 58‑7‑179, 58‑7‑180,
58‑7‑183, 58‑7‑185, 58‑7‑187, 58‑7‑188,
58‑7‑192, 58‑7‑193, 58‑7‑197, 58‑7‑200,
and 58‑7‑205, as applicable; provided that compliance with such
investment requirements shall be waived for protected cell captive insurance
companies to the extent that credit for reinsurance ceded to reinsurers is
allowed pursuant to G.S. 58‑10‑445 or to the extent otherwise
deemed reasonable and appropriate by the Commissioner. Notwithstanding any
other provision of this Chapter, the Commissioner may approve the use of
alternative reliable methods of valuation and rating."
SECTION 18. G.S. 58‑10‑565(c) reads as rewritten:
"(c) A complete SPFC application shall include the following:
(5) An affidavit from the applicant SPFC verifying:
a. The applicant SPFC complies with this Part.
b. The applicant SPFC operates only pursuant to this Part.
c. The applicant SPFC's investment strategy reflects and takes into account the liquidity of assets and the reasonable preservation, administration, and asset management of such assets relative to the risks associated with the SPFC contract and the insurance securitization transaction.
d. The securities proposed
to be issued, if any, are valid legal obligations that are either properly
registered with the Commissioner or constitute an exempt security or
form part of an exempt transaction.
(6) Any other statements or documents required by the Commissioner to evaluate and complete the licensing of the SPFC."
SECTION 19. G.S. 58‑10‑625 reads as rewritten:
"§ 58‑10‑625. Changes in plan of operation; filing of audit and statement of operation; examinations.
(c) An SPFC shall
report using statutory accounting principles, unless the Commissioner requires,
approves, or accepts the use of generally accepted accounting principles or
other comprehensive basis of accounting. In each case the Commissioner may
require, approve, or accept any appropriate or necessary modifications or
adaptations to the accounting basis, and may require the report to be
supplemented by additional information.
(d) Each SPFC shall file by
March 1 a statement of operations,report of its financial condition,
using either generally accepted accounting principles or, if approved,
accepted, or required by the Commissioner, statutory accounting principles with
useful or necessary modifications or adaptations for the type of insurance and
kinds of insurers to be reported upon, and as supplemented by additional
information required by the Commissioner. The statement of operationsreport
shall include a statement of income, a balance sheet, and may include a
detailed listing of invested assets, including identification of assets held in
trust to secure the obligations of the SPFC under the SPFC contract. The SPFC
also may include with the filing risk‑based capital calculations and
other adjusted capital calculations to assist the Commissioner with evaluating
the levels of the surplus of the SPFC for the year ending on December 31 of the
previous year. The statementsreport shall be prepared on forms
required by the Commissioner. In addition, the Commissioner may require the
filing of performance assessments of the SPFC contract.
."
SECTION 20. G.S. 58‑3‑165 reads as rewritten:
"§ 58‑3‑165. Business transacted with producer‑controlled property or casualty insurers.
(a) As used in this section:
(1) "Accredited state" means a state in which the insurance department or regulatory agency has qualified as meeting the minimum financial regulatory standards promulgated and established from time to time by the NAIC.
(2) "Captive insurer" means an insurance company that is owned by another organization and whose exclusive purpose is to insure risks of the parent organization and affiliated companies. In the case of groups and associations, "captive insurer" means an insurance organization that is owned by the insureds, and whose exclusive purpose is to insure risks of member organizations or group members and their affiliates. "Captive insurer" does not include a risk retention group licensed under Part 9 of Article 10 of this Chapter.
(3) "Control" and its cognates mean the direct or indirect possession of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control is presumed to exist if any person directly or indirectly owns, controls, holds with the power to vote, or holds proxies representing ten percent (10%) or more of the voting securities of any other person.
(4) "Controlled insurer" means an insurer that is controlled, directly or indirectly, by a producer.
(5) "Controlling producer" means a producer who, directly or indirectly, controls an insurer.
(6) "Insurer"
means any person licensed to write property or casualty insurance in this
State. "Insurer" does not mean a risk retention group under
Article 22 of this Chapter,includes a risk retention group licensed
under Part 9 of Article 10 of this Chapter but excludes a residual market
mechanism, a joint underwriting authority, nor and a captive
insurer.
(7) "Producer" means an insurance broker or brokers or any other person, when, for any compensation, commission, or other thing of value, that person acts or aids in any manner in soliciting, negotiating, or procuring the making of any insurance contract on behalf of an insured other than that person. "Producer" does not mean an exclusive agent or any independent agent acting on behalf of a controlled insurer, including any subagent or representative of the agent, who acts as such in the solicitation of, negotiation for, or procurement or making of an insurance contract, if the agent is not also acting in the capacity of an insurance broker in the transaction in question.
."
SECTION 21. G.S. 58‑12‑2 reads as rewritten:
"§ 58‑12‑2. Definitions.
As used in this Article, the following terms have the following meanings:
(1) Adjusted risk‑based capital report. A risk‑based capital report that has been adjusted by the Commissioner under G.S. 58‑12‑6.
(2) Corrective order. An order issued by the Commissioner specifying corrective actions that the Commissioner has determined are required.
(3) Domestic insurer. Any
insurance company or health organization organized in this State under Article
7 of this Chapter as specified in subdivisions (4b) and (5a) of this section or
under Article 15, 65, or 67 of this Chapter.Chapter or any risk
retention group organized in this State under Part 9 of Article 10 of this
Chapter.
."
SECTION 22. G.S. 58‑22‑15 reads as rewritten:
"§ 58‑22‑15. Risk retention groups chartered in this State.
(a) A risk retention group shall, pursuant to the provisions of Part 9 of Article 10 of this Chapter, be chartered and licensed to write only liability insurance pursuant to this Article and, except as provided elsewhere in this Article, must comply with all of the laws and rules applicable to such insurers chartered and licensed in this State and with G.S. 58‑22‑20 to the extent such requirements are not a limitation on laws, administrative rules, or requirements of this State.
(b) Before it may offer insurance in any state, each risk retention group shall also submit for approval to the Commissioner of this State a plan of operation or feasibility study. The Commissioner may limit the net amount of risk retained by a risk retention group for any individual risk. The risk retention group shall submit an appropriate revision in the event of any subsequent material change in any item of the plan of operation or feasibility study, within 10 days after any such change. 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.
(c) At the time of filing its application for a charter, the risk retention group shall provide to the Commissioner in summary form the following information: the identity of the initial members of the group, the identity of those individuals who organized the group or who will provide administrative services or otherwise influence or control the activities of the group, the amount and nature of initial capitalization, the coverages to be afforded, and the states in which the group intends to operate. Upon receipt of this information, the Commissioner shall forward such information to the NAIC. Providing notification to the NAIC is in addition to and shall not be sufficient to satisfy the requirements of G.S. 58‑22‑20 or any other sections of this Article."
SECTION 23. This act becomes effective July 1, 2014.
In the General Assembly read three times and ratified this the 30th day of June, 2014.
s/ Daniel J. Forest
President of the Senate
s/ Tim Moore
Presiding Officer of the House of Representatives
s/ Pat McCrory
Governor
Approved 4:20 p.m. this 7th day of July, 2014