(a)(1) To be organized as a risk retention group in this state, the risk retention group must be organized and licensed to write only casualty insurance pursuant to this subchapter and, except as provided elsewhere in this subchapter, must comply with all of the laws, rules, and requirements applicable to such insurers licensed in this state and with § 23-94-205 to the extent such requirements are not a limitation on laws, rules, or requirements of this state. The commissioner shall issue a certificate of registration to a risk retention group organized, formed, or domiciled under the laws of this state when the commissioner is satisfied that the applicant group has fully complied with the provisions of this subchapter. No risk retention group organized, formed, or domiciled under the law
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(a) (1) To be organized as a risk retention group in this state, the risk retention group must be organized and licensed to write only casualty insurance pursuant to this subchapter and, except as provided elsewhere in this subchapter, must comply with all of the laws, rules, and requirements applicable to such insurers licensed in this state and with § 23-94-205 to the extent such requirements are not a limitation on laws, rules, or requirements of this state. The commissioner shall issue a certificate of registration to a risk retention group organized, formed, or domiciled under the laws of this state when the commissioner is satisfied that the applicant group has fully complied with the provisions of this subchapter. No risk retention group organized, formed, or domiciled under the laws of this state shall transact business in this state unless so authorized by a subsisting certificate of registration issued by the commissioner. (2) Notwithstanding any other provision to the contrary, all risk retention groups domiciled in this state shall file, annually on or before March 1, or within any extension of time therefor which the commissioner for good cause may have granted, with the State Insurance Department and the National Association of Insurance Commissioners, an annual statement in a form prescribed by the National Association of Insurance Commissioners and in diskette form, if required by the commissioner and completed in accordance with its instructions and the National Association of Insurance Commissioners' Accounting Practices and Procedures Manual. (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 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 ten (10) days of any such change. The risk retention group shall not offer any additional kinds of casualty insurance, in this state or in any other state, until a revision of the plan of operation or feasibility study is approved by the commissioner. (c) At the time of filing its application for a certificate of registration, the risk retention group shall provide to the commissioner in summary form the following information: the identity of the initial members of the risk retention group, the identity of those individuals who organized the risk retention group or who will provide administrative services or otherwise influence or control the activities of the risk retention group, the amount and nature of initial capitalization, the coverages to be afforded, and the states in which the risk retention group intends to operate. Upon receipt of this information, the commissioner shall forward such information to the National Association of Insurance Commissioners. Providing notification to the National Association of Insurance Commissioners is in addition to and shall not be sufficient to satisfy the requirements of § 23-94-205 or any other sections of this subchapter. (d) (1) Beginning July 1, 2018, an existing risk retention group shall comply with the governance standards in subsections (e)-(j) of this section. (2) A risk retention group applying for initial licensure in this state shall comply with the governance standards in this section at the time of licensure. (e) As used in this section: (1) "Board of directors" means a governing body of a risk retention group that is elected by the shareholders or members of the risk retention group to: (A) Establish policy; (B) Elect or appoint officers and committees; and (C) Make other governing decisions for the risk retention group; and (2) "Director" means an individual designated in the articles of the risk retention group, or designated, elected, or appointed by any other manner, name, or title to act as a director. (f) (1) (A) The board of directors of a risk retention group shall have a majority of independent directors. (B) (i) If the risk retention group is a reciprocal risk retention group, then an appointed attorney-in-fact of the reciprocal risk retention group is required to adhere to the same standards described in this section regarding independence of operation and governance as imposed on the board of directors or on the subscribers' advisory committee of the risk retention group. (ii) To the extent permissible under state law, a service provider of a reciprocal risk retention group shall contract with the risk retention group and not the attorney-in-fact. (2) (A) A director shall not qualify as independent unless the board of directors affirmatively determines that the director does not have a material relationship with the risk retention group. (B) A risk retention group shall annually disclose to the commissioner of the domiciliary state of the risk retention group the determinations made by the board of directors under subdivision (f)(2)(A) of this section. (3) (A) A director who is a direct or indirect owner of or subscriber in the risk retention group is independent for purposes of subdivision (f)(1)(A) of this section. (B) Subdivision (f)(3)(A) of this section includes an officer, director, or employee of a direct or indirect owner of or subscriber in the risk retention group, unless a different position of the officer, director, or employee constitutes a material relationship, as contemplated by section 3901(a)(4)(E)(ii) of the Liability Risk Retention Act of 1986, 15 U.S.C. § 3901 et seq., as it existed on January 1, 2017. (4) A person has a material relationship with a risk retention group if the person, a member of the person's immediate family, or any business with which the person is affiliated, has received from the risk retention group or a consultant or service provider to the risk retention group in the previous twelve-month period, any compensation, payment, or any other item of value, that is greater than or equal to five percent (5%) of the risk retention group's gross written premium for the same twelve-month period or two percent (2%) of its surplus, whichever is greater, as measured at the end of any fiscal quarter falling in the twelve-month period. (5) To determine whether or not a person is independent for the purposes of this section: (A) A person or an immediate family member of the person under subdivision (f)(4) of this section shall not be independent until at least one (1) year after receipt of any compensation from the risk retention group that falls below the threshold; (B) A director or an immediate family member of a director who is affiliated with or employed in a professional capacity by a present or former internal or external auditor of the risk retention group shall not be independent until one (1) year after the end of the affiliation, employment, or auditing relationship; or (C) A director or immediate family member of a director who is employed as an executive officer of another company where any of the risk retention group's present executives serve on that other company's board of directors shall not be independent until one (1) year after the end of the service or the employment relationship. (g) (1) The term of any material service provider contract with the risk retention group shall not exceed five (5) years. (2) A material service provider contract, or its renewal, requires the approval of the majority of the risk retention group's independent directors. (3) The board of directors may terminate any service provider, audit, or actuarial contracts at any time for cause after providing adequate notice as defined in the contract. (4) The service provider contract is deemed material if the amount to be paid for a contract is greater than or equal to five percent (5%) of the risk retention group's annual gross written premium or two percent (2%) of its surplus, whichever is greater. (5) A service provider contract that qualifies as a material relationship described in subdivision (f)(4) of this section shall not be entered into unless the risk retention group has notified the commissioner in writing of its intention to enter into a transaction at least thirty (30) days before the transaction and the commissioner has not disapproved it within that period. (6) (A) As used in this subsection, "service provider" includes a captive manager, auditor, accountant, actuary, investment advisor, lawyer, managing general underwriter, or other party responsible for underwriting, determining rates, collecting premiums, adjusting and settling claims, or preparing financial statements. (B) "Service provider" does not include a lawyer who is retained as defense counsel by the risk retention group to defend claims unless the amount of fees paid to a lawyer qualifies as a material relationship described in subdivision (f)(4) of this section. (h) (1) The board of directors shall adopt a written policy in the plan of operation as approved by the board of directors. (2) The written policy described in subdivision (h)(1) of this section shall require the board of directors to: (A) Assure that an owner or insured of the risk retention group receives evidence of ownership interest; (B) Develop a set of governance standards applicable to the risk retention group; (C) Oversee the evaluation of the risk retention group's management, including without limitation the performance of the captive manager, managing general underwriter, or other party responsible for underwriting, determining rates, collecting premiums, adjusting or settling claims, or preparing financial statements; (D) Review and approve the amount to be paid for all material service providers; and (E) Annually review and approve: (i) Goals and objectives of the risk retention group relevant to the compensation of officers and service providers; (ii) The performance of officers and service providers in light of the goals and objectives described in subdivision (h)(2)(E)(i) of this section; and (iii) The continued engagement of the officers and material service providers. (i) (1) (A) A risk retention group shall have an audit committee composed of at least three (3) independent members of the board of directors as defined in subdivision (f)(1) of this section. (B) (i) A member of the board of directors who is not independent shall not be a member of an audit committee of a risk retention group. (ii) A member of the board of directors who is not independent may participate in the activities of the audit committee if invited by members of the audit committee. (2) The audit committee shall have a written charter that defines the purpose of the audit committee, as follows: (A) Assist the board of directors in oversight of: (i) The integrity of the financial statements of the risk retention group; (ii) Compliance with legal and regulatory requirements; and (iii) The qualifications, independence, and performance of the independent auditor and actuary of the risk retention group; (B) Discuss the annual audited financial statements and quarterly financial statements with the management of the risk retention group; (C) Discuss with the independent auditor of the risk retention group: (i) The annual audited financial statements of the risk retention group; and (ii) If advisable, the quarterly financial statements; (D) Discuss policies with respect to risk assessment and risk management; (E) Have meetings with the management of the risk retention group and the independent auditor separately and periodically, either directly or through a designated representative of the audit committee; (F) Review any audit problems or difficulties and the response by the management of the risk retention group with the independent auditor; (G) Set clear hiring policies of the risk retention group as to the hiring of an employee or former employee of the independent auditor; (H) Require the external auditor to rotate the lead or coordinating audit partner that has primary responsibility for the audit of the risk retention group and the audit partner that is responsible for reviewing the audit of the risk retention group so that neither individual performs the audit services for more than five (5) consecutive fiscal years; and (I) Report regularly to the board of directors. (3) The commissioner of the domiciliary state of the risk retention group may waive the requirement to establish an audit committee required in subdivision (i)(1)(A) of this section if the risk retention group is able to demonstrate to the commissioner of the domiciliary state of the risk retention group that: (A) It is impracticable to do so; and (B) The board of directors is able to accomplish the purposes of an audit committee as described in subdivision (i)(2) of this section. (j) (1) (A) The board of directors shall adopt and disclose its governance standards by making the information available through electronic methods, including without limitation by posting the information on the public website of the risk retention group, or by other means and providing the information to members or insureds upon request. (B) The information under subdivision (j)(1)(A) of this section shall include: (i) A process by which the directors are elected by the owners or insureds; (ii) Director qualification standards; (iii) Director responsibilities; (iv) Director access to the management of the risk retention group and, as necessary and appropriate, to independent advisors; (v) Director compensation; (vi) Director orientation and continuing education; (vii) The policies and procedures that are followed for management succession; and (viii) The policies and procedures that are followed for annual performance evaluation of the board of directors. (2) (A) (i) The board of directors shall adopt and disclose a code of business conduct and ethics for directors, officers, and employees. (ii) The code of business conduct and ethics for directors, officers, and employees shall include the following topics: (a) Conflicts of interest; (b) Matters covered under the corporate opportunities doctrine under the state of domicile; (c) Confidentiality; (d) Fair dealing; (e) Protection and proper use of risk retention group assets; (f) Compliance with all applicable laws and rules; and (g) Requiring the reporting of any illegal or unethical behavior that affects the operation of the risk retention group. (iii) The captive manager, president, or chief executive officer of the risk retention group shall promptly notify the commissioner of the domiciliary state of the risk retention group in writing if he or she becomes aware of any material noncompliance with any of the governance standards in this section. (B) Any waivers of the code of business conduct and ethics for directors or executive officers shall promptly be disclosed to the board of directors.