Liability Risk Retention Amendments of 1990

Liability Risk Retention Amendments of 1990 - Amends the Liability Risk Retention Act to change the ways in which: (1) States are allowed to regulate risk retention groups; (2) such groups are explicitly exempt from State regulation; and (3) States may control the licensing of agents or brokers for such groups.

Allows a risk retention group to provide liability insurance to a nonmember in certain circumstances.

Changes the ways in which: (1) purchasing groups are explicitly exempt from State regulation; and (2) States may control the licensing of agents or brokers for such groups. Requires additional information in the notice to State insurance commissioners of intent by a purchasing group to do business.

Allows a purchasing group to purchase insurance only from an insurer meeting certain requirements of this Act.

Authorizes admitted insurers, approved surplus lines insurers, and other nonadmitted insurers to provide insurance under the Act to purchasing groups, provided certain conditions are met. Requires the provision of insurance by a qualified purchasing group insurer to be regulated in specified ways by the State in which the group has its principal place of business. Requires that purchasing group insurers furnish specified information to the insurance commissioner of the State in which it has its principal place of business and, in certain circumstances, to the insurance commissioner of each State in which it is doing business. Requires a purchasing group insurer to register with and designate the State insurance commissioner of each State in which it has insured members as its agent for receiving service of legal documents or process.

Requires the ownership interests of members of risk retention groups to be considered exempted securities for the purposes of the broker-dealer registration requirements of specified provisions of the Securities Act of 1933.

Declares that the exemption provided under specified provisions of this Act includes the promotion, sale, and distribution of ownership interests in a company or association which is being organized solely for the purpose of qualifying as a risk retention group.

Adds references to purchasing group insurers to provisions concerning the permissible State authority with regard to: (1) State motor vehicle no-fault and financial responsibility insurance law; (2) the applicability of the exemptions in the Act to liability insurance, and the provision or purchase of any other line of insurance; and (3) coverage which is prohibited generally by State statute or declared unlawful by the highest court of the State.

Allows a State, subject to certain provisions relating to discrimination, to specify acceptable means of demonstrating financial responsibility as a condition for obtaining a license or permit to undertake specified activities.

Prohibits a State from prohibiting any political subdivision or other public entity from becoming a member of a risk retention group or a purchasing group or from obtaining insurance provided by or for a group of which it is a member.

Prohibits a State, except the State in which a risk retention group is chartered or has its principal place of business, from requiring a risk retention group or a purchasing group to pay a registration fee.

Provides for injunctions to prevent: (1) application of State laws inconsistent with this Act; or (2) discrimination against a risk retention group or a purchasing group.

Prohibits a State or political subdivision from establishing or applying requirements or limitations which are not identical to those in this Act.

 
HR 4351 IH
101st CONGRESS
2d Session
 H. R. 4351
To make amendments to the Liability Risk Retention Act, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
March 21, 1990
Mr. SLATTERY (for himself, Mr. LENT, and Mr. RITTER) introduced the following
bill; which was referred to the Committee on Energy and Commerce
A BILL
To make amendments to the Liability Risk Retention Act, and for other purposes.
  Be it enacted by the Senate and House of Representatives of the United
  States of America in Congress assembled, That this Act may be cited as the
  `Liability Risk Retention Amendments of 1990'.
  SEC. 2. Whenever in this Act an amendment is expressed in terms of an
  amendment to a section, the reference shall be considered to be a reference
  to the Liability Risk Retention Act (15 U.S.C. 3901 et seq. (1982 &
  Supp. 1988)).
  SEC. 3. A new purpose section is added to the Act as follows:
  `SEC. 2. The purpose of this Act is to facilitate the formation and
  operation of risk retention groups and purchasing groups by eliminating
  certain government regulations that would prevent or hinder the operation
  of these groups in interstate commerce.'.
  SEC. 4. Section 2(a)(1) of the Act is amended to read as follows:
  `(1) `insurance' means any arrangement for shifting and distributing risks
  which is considered insurance under applicable State or Federal law;'.
  SEC. 5. Section 2(a)(2) of the Act is amended--
  (1) in paragraph (A) by adding a new clause (iii) as follows:
  `(iii) includes all coverages included in commercial motor vehicle and
  trucking policy forms;' and
  (2) by adding at the end of paragraph (B) the following: `and employers
  liability insurance in excess of the minimum policy limits required under
  applicable State worker's compensation laws;'.
  SEC. 6. Section 2(a)(4)(G)(ii) of the Act is amended by adding after
  `liability exposure of' the following phrase `its own members or'.
  SEC. 7. Section 2(a) of the Act is amended by adding a new paragraph
  as follows:
  `(8) `principal place of business' means with respect to a purchasing group,
  the city and state in which the purchasing group maintains its principal
  office, if the group has and maintains members in that State.'.
  SEC. 8. Section 3(a)(1) of the Act is amended--
  (1) by amending paragraph (B) to read as follows:
  `(B) pay, on a nondiscriminatory basis, applicable premium and other taxes
  which are levied on admitted insurers under the laws of the State.'.;
  (2) by striking paragraph (C).
  SEC. 9. Section 3(a)(1)(I) of the Act is amended by adding after `10 point'
  the following phrase `or larger'.
  SEC. 10. Section 3(a)(3) of the Act is amended to read as follows:
  `(3) require any insurance policy issued to a risk retention group or any
  member of the group to be countersigned by an insurance agent or broker;'.
  SEC. 11. Section 3(a) of the Act is amended by adding the following new
  paragraphs:
  `(4) prohibit a risk retention group from ceding any or all of the insurance
  issued to its members to any reinsurer which meets the requirements of the
  risk retention group's chartering State for allowing balance sheet credit
  for reinsurance ceded;
  `(5) require a risk retention group to file its policy forms and rates
  for approval, except as may be required by the law of the State in which
  the group is chartered as an insurer;
  `(6) refuse to recognize as an asset a letter of credit that has been
  issued by a that is a member of the Federal Reserve System, if the letter
  of credit is drafted in a form that has been approved by the commissioner of
  the State in which the group is licensed as an insurer and that commissioner
  has recognized the letter of credit as an asset of the group.'.
  SEC. 12. Section 3(c) of the Act is amended to read as follows:
  `(c) A State may require a person acting as an agent or broker for a risk
  retention group to be licensed as such subject to the following--
  `(1) Officers, directors and full time employees of a risk retention group
  may engage in the direct sale and servicing of insurance to members without
  regard to the brokers' and agents' licensing requirements of any State.
  `(2) Other persons acting or offering to act as an agent or broker for
  a risk retention group must obtain a license from the chartering State,
  but that State may not:
  `(A) impose any qualification or requirement which discriminates against
  a nonresident insurance agent;
  `(B) impose licensing requirements different from those applicable to
  insurance agents generally in that State; or
  `(C) require a risk retention group to appoint a licensed insurance agent,
  if no person is acting or offering to act in that capacity.
  `(3) Any insurance agent licensed by the State in which a risk retention
  group is chartered may act as an insurance agent on behalf of that group
  in all States where it does business notwithstanding that the insurance
  agent is not licensed by any other State.'.
  SEC. 13. Section 3 of the Act is amended by adding two new subsections
  as follows:
  `(d) A risk retention group may provide liability insurance coverage to a
  nonmember as an additional named insured under coverage issued to a member
  in order to provide insurance for the liability of any such nonmember
  assumed under a contract entered into during the course of any business
  or activity described in section 2(a)(4)(F) of this Act.
  `(e) No State, other than the jurisdiction in which a risk retention
  group is chartered, may require the group to submit to an examination
  for the purpose of determining whether its members are engaged in similar
  businesses or activities as defined in section 2(a)(4)(F) of this Act.'.
  SEC. 14. Section 4 of the Act is amended by--
  (1) amending subsection (a)(2) to read as follows:
  `(2) make it unlawful for insurers to provide or offer to provide liability
  insurance, or to act or to offer act as agent or broker with respect to the
  provision of any such insurance, on a group basis, or any other basis which
  affords rate, coverage, policy form, or other advantages to a purchasing
  group which are not made available to persons who are not members of the
  purchasing group;';
  (3) by amending section (a)(7) to read as follows:
  `(7) require that any insurance policy issued to a purchasing group or
  any members of the group be countersigned by an insurance agent or broker;'.
  SEC. 15. Section 4(c) of the Act is amended to read as follows:
  `(c) A State may require a person acting as an agent or broker for a
  purchasing group to be licensed as such, subject to the following--
  `(1) Officers, directors and full time employees of a purchasing group may
  engage in the direct sale and servicing of insurance to members without
  regard to the brokers' and agents' licensing requirements of any State.
  `(2) Other persons acting or offering to act as an agent or broker for
  a purchasing group must obtain a license from the chartering State, but
  that State may not:
  `(A) impose any qualification or requirement which discriminates against
  a nonresident insurance agent;
  `(B) impose licensing requirements different from those applicable to
  insurance agents generally in that State; or
  `(C) require a purchasing group to appoint a licensed insurance agent if
  no person is acting or offering to act in that capacity.
  `(3) Any insurance agent licensed by the State in which a purchasing group
  maintains its principal place of business may act as an insurance agent on
  behalf of that group in all States where it does business notwithstanding
  that the insurance agent is not licensed by any other State.'.
  SEC. 16. Section 4(d) of that Act is amended by--
  (1) amending subparagraph (1)(C) to read as follows:
  `(C) shall identify the insurance company from which the group intends to
  purchase insurance and the address, telephone number and domicile of that
  company; and';
  (2) adding the following new subparagraphs:
  `(E) shall identify the principals or officers of the purchasing group;
  `(F) shall identify any organization engaged to manage or service the
  operation of the purchasing group and the address of any such organization;
  and
  `(G) shall certify that all members of the purchasing group are engaged
  in similar or related activities with regard to their exposure to the
  liability which is insured under the group's program.'.
  SEC. 17. Section 4(f) of the Act is amended to read as follows:
  `(f) a purchasing group may purchase insurance only from an insurer meeting
  the requirements set forth in section 5 of this Act.'.
  SEC. 18. Section 4(g) of this Act is amended by adding after the phrase
  `purchasing group' the phrase `or purchasing group insurer'.
  SEC. 19. A new section 5 is added to the Act as follows:
  `SEC. 5. (a) Admitted insurers, approved surplus lines insurers and other
  nonadmitted insurers are authorized to provide insurance under this Act to
  purchasing groups pursuant to the following conditions and qualifications
  and subject to the other provisions of this Act:
  `(1) An insurer is qualified to write purchasing group insurance in any
  State if the insurer:
  `(A) is admitted in at least one State, and;
  `(i) retains risk, net of reinsurance, in an amount less than the maximum
  permitted for admitted insurers under the laws of each State in which the
  insurer is writing insurance for a purchasing group or its members; and
  `(ii) maintains minimum capital and surplus of at least $3,000,000 as
  determined in accordance with the statutory accounting principles of the
  State in which the group maintains its principal place of business; or
  `(B) is an alien insurer that is listed on the most recent NAIC Non-Admitted
  Insurers Quarterly Listing.
  `(b) The provision of insurance by a qualified purchasing group insurer
  shall be regulated by the State in which the purchasing group has its
  principal place of business and the authority of other States in which
  insurance is provided to any group member is limited to those matters
  authorized by this section.
  `(1) The State in which a purchasing group has its principal place of
  business shall, with regard to the insurer's provision of insurance to
  the group, apply the policy form, coverage and rating laws and regulations
  of that State in the same manner as it applies those laws to an admitted
  insurer doing business in the State;
  `(2) Any State may require a purchasing group insurer to--
  `(A) comply with the unfair claim settlement practices law of the State;
  `(B) pay, on a nondiscriminatory basis, applicable premium and other taxes
  which are levied on admitted insurers and surplus lines insurers under
  the laws of the State;
  `(C) register with and designate the State insurance commissioner as
  its agent solely for the purpose of receiving service of legal documents
  or process;
  `(D) submit to an examination by the State insurance commissioner in any
  State in which the purchasing group insurer is doing purchasing group
  business to determine the group's financial condition, if--
  `(i) the commissioner of the jurisdiction in which the purchasing group
  insurer is domiciled has not begun or has refused to initiate an examination
  of the insurer; and
  `(ii) any such examination has been coordinated to avoid unjustified
  duplication and unjustified repetition;
  `(E) comply with a lawful order issued--
  `(i) in a delinquency proceeding commenced by the State insurance
  commissioner if there has been a finding of financial impairment under
  subparagraph (D); or
  `(ii) in a voluntary dissolution proceeding;
  `(F) comply with any State law regarding deceptive, false, or fraudulent
  acts or practices, except that if the State seeks an injunction regarding
  any such conduct, the injunction must be obtained from a court of competent
  jurisdiction;
  `(G) comply with an injunction issued by a count of competent jurisdiction,
  upon a petition by the State insurance commissioner alleging that
  the purchasing group insurer is a hazardous financial condition or is
  financially impaired; and
  `(H) provide the following notice, in ten point or larger type, in any
  insurance policy issued to a purchasing group:
`NOTICE
  `This policy is issued by your purchasing group insurer which may not be
  subject to all of the insurance laws and regulations of your State. State
  insurance insolvency guaranty funds may not be available for your purchasing
  group insurer.'
  `(3) No State may:
  `(A) require any insurance policy issued to a purchasing group or any
  member of the group to be countersigned by an insurance agent or broker;
  `(B) require the submission of declinations or certificates of
  nonavailability prior to or as a condition of writing purchasing group
  insurance; or
  `(C) otherwise discriminate against a purchasing group insurer, except that
  nothing in this section shall be construed to affect the applicability of
  State laws generally applicable to persons or corporations.
  `(4) No State, other than the State in which the purchasing group has
  its principal place of business, shall have the right to regulate policy
  forms, rates or coverage provided the purchasing group except as otherwise
  authorized by this Act.
  `(c) Purchasing group insurers shall furnish--
  `(1) to the insurance commissioner of the State in which the purchasing
  group has its principal place of business--
  `(A) the coverages, deductibles, coverage limits, rates, and rating
  classification systems for each line of insurance the insurer intends to
  offer the purchasing group and its members; and
  `(B) a copy of the insurer's annual financial statement, which statement
  shall be certified by an independent public accountant and contain a
  statement of opinion on loss and loss adjustment expense reserves made by--
  `(i) a member of the American Academy of Actuaries, or
  `(ii) a qualified loss reserve specialist.
  `(C) such other information as the Commissioner may require.
  `(2) Copies of each of the documents required to be filed with the State
  in which the purchasing group has its principal place of business shall be
  filed with the insurance commissioner of each State in which the purchasing
  group is doing business. Copies of any document filed with the State in
  which the purchasing group has its principal place of business shall be
  sufficient for submission to all other States.
  `(d) Nothing in this section shall be construed to affect the authority
  of any Federal or State court to enjoin--
  `(1) the solicitation or sale of insurance by a purchasing group insurer
  to any person who is not eligible for membership in such group; or
  `(2) the solicitation or sale of insurance by, or operation of, a purchasing
  group insurer that is in hazardous financial condition or is financially
  impaired;
  `(3) any false, deceptive or fraudulent conduct by a purchasing group or
  its insurer, agents or broker.
  `(e)(1) Nothing in this Act shall be construed to affect the authority of any
  State to make use of any of its powers to enforce the laws of such State with
  respect to which a purchasing group insurer is not exempt under this Act.
  `(2) If a State seeks an injunction regarding the conduct described in
  subsection (d) of this section, the injunction must be obtained from a
  Federal or State court of competent jurisdiction.
  `(f) Nothing in this Act shall affect the authority of any State to bring
  an action in any Federal or State court.
  `(g) A purchasing group insurer shall register with and designate the State
  insurance commissioner of each State in which the purchasing group has
  insured members as its agent solely for the purpose of receiving service
  of legal documents or process.'.
  SEC. 20. Section 2(a) of this Act is amended by adding a new paragraph
  as follows:
  `(9) `group basis' includes a group master policy, coverage issued on
  an individual basis pursuant to a mass marketing plan, or any other
  arrangement for providing liability insurance to members of a purchasing
  group on substantially the same terms and conditions.'.
  SEC. 21. Section 5 [now 6] of the Act is amended by--
  (1) renumbering paragraph (2) as paragraph (3) and adding a new paragraph
  (2) as follows:
  `(2) considered exempted securities for the purposes of the broker-dealer
  registration requirements of section 15(a)(1) of the Securities Act of 1933
  [15 U.S.C. 77o.(a)(1)];'; and
  (2) adding a new paragraph as follows:
  `(d) the exemption provided under this section includes the promotion,
  sale, and distribution of ownership interests in a company or association
  which is being organized solely for the purpose of qualifying as a risk
  retention group as defined in section 2(a)(4).'.
  SEC. 22. Section 6 [now section 7] of the Act is amended by--
  (1) adding after the words `risk retention group' in subsections (a),
  (b) and (c), the phrase `or purchasing group insurer';
  (2) by amending subsection (d) to read as follows:
  `(d) subject to the provisions of section 3(a)(4) and section 4(a)(8)
  relating to discrimination, nothing in this Act shall be construed to
  preempt any State statute or regulation issued under a State statute
  that specifies acceptable means of demonstrating financial responsibility
  as a condition for obtaining a license or permit to undertake specified
  activities. As used in this subsection, `acceptable means of demonstrating
  financial responsibility' includes a demonstration that the risk retention
  group or insurer of a purchasing group maintains the minimum capital and
  surplus required for an admitted insurer in the State in which coverage
  is provided to a group member.'.
  (3) adding a new subsection (e) as follows:
  `(e) no State may prohibit any political subdivision or other public
  entity from becoming a member of a risk retention group or a member of a
  purchasing group or from obtaining insurance provided by or for a group
  of which it is a member.'.
  SEC. 23. The Act is amended by adding the following new sections:
  `SEC.  . (a) No State, except the State in which a risk retention group is
  chartered or the State in which a purchasing group maintains its principal
  place of business, may require a risk retention group or a purchasing
  group to pay a registration fee.
  `SEC.  . The Attorney General or the Secretary of Commerce (with the
  concurrence of the Attorney General) may bring a civil action to enjoin
  a State insurance commissioner from--
  `(1) applying any State law or regulation that is inconsistent with this
  Act; or
  `(2) discriminating against a risk retention group or a purchasing group.
  `SEC.  . Whenever this Act establishes a requirement or authorizes an
  activity, no State or political subdivision of a state may establish or apply
  any requirement or limitation on the authority of a risk retention group
  or purchasing group which is not identical to those set forth in this Act.
  `SEC.  . (a) The Secretary of Commerce shall, in accordance with chapter 5
  of title 5, United States Code, prescribe standard forms for the filing of
  notification by a purchasing group or risk retention group that it intends
  to do business in a State and a standard form appointing the insurance
  commissioner as a group's agent for service of process.
  `(b) The Secretary shall before issuing any standard forms described
  in subsection (a), consult with the National Association of Insurance
  Commissioners.'.