Bill Text: OR SB969 | 2011 | Regular Session | Introduced
Bill Title: Relating to captive insurance.
Sponsorship: Committee Bill
Status: (Failed) 2011-06-30 - In committee upon adjournment. [SB969 Detail]
Download: Oregon-2011-SB969-Introduced.html
76th OREGON LEGISLATIVE ASSEMBLY--2011 Regular Session
NOTE: Matter within { + braces and plus signs + } in an
amended section is new. Matter within { - braces and minus
signs - } is existing law to be omitted. New sections are within
{ + braces and plus signs + } .
LC 3997
Senate Bill 969
Sponsored by COMMITTEE ON BUSINESS, TRANSPORTATION AND ECONOMIC
DEVELOPMENT
SUMMARY
The following summary is not prepared by the sponsors of the
measure and is not a part of the body thereof subject to
consideration by the Legislative Assembly. It is an editor's
brief statement of the essential features of the measure as
introduced.
Authorizes captive insurers in this state. Sets standards for
captive insurers regarding formation, licensing, classes of
insurance transacted and reporting. Exempts captive insurers from
provisions of Insurance Code unless specified in Act. Exempts
certain captive insurer documents from disclosure as public
records.
A BILL FOR AN ACT
Relating to captive insurance.
Be It Enacted by the People of the State of Oregon:
SECTION 1. { + Sections 2 to 24 of this 2011 Act are added to
and made a part of the Insurance Code. + }
SECTION 2. { + As used in sections 2 to 24 of this 2011 Act:
(1)(a) 'Affiliated company' means a business entity that,
because of common ownership and control or common operation or
management, is in the same corporate system as:
(A) A parent;
(B) An industrial insured; or
(C) A member organization.
(b) For purposes of this subsection, 'common ownership and
control' means that two or more captive insurers are owned or
controlled by the same person or group of persons with:
(A) Direct or indirect ownership of 80 percent or more of the
outstanding voting stock of the stock corporation for a captive
insurer that is a stock corporation;
(B) Direct or indirect ownership of 80 percent or more of the
surplus and the voting power of the mutual corporation for a
captive insurer that is a mutual corporation; or
(C) Direct or indirect ownership by the same member or members
of 80 percent or more of the membership interests in the limited
liability company for a captive insurer that is a limited
liability company.
(2) 'Alien captive insurer' means an insurer:
(a) Formed to transact insurance for a parent or affiliate of
the insurer; and
(b) Licensed pursuant to the laws of another jurisdiction that
imposes statutory or regulatory standards:
(A) On a business entity transacting insurance in the other
jurisdiction; and
(B) In a form acceptable to the Director of the Department of
Consumer and Business Services.
(3) 'Association' means a legal association of two or more
persons that has been in continuous existence for at least one
year if:
(a) The association or its member organizations:
(A) Own, control, or hold with power to vote, all of the
outstanding voting securities of an association captive insurer
incorporated as a stock insurer; or
(B) Have complete voting control over an association captive
insurer incorporated as a mutual insurer;
(b) The association's member organizations collectively
constitute all of the subscribers of an association captive
insurer organized as a reciprocal insurer; or
(c) The association or its member organizations have complete
voting control over an association captive insurer formed as a
limited liability company.
(4) 'Association captive insurer' means a business entity that
insures risks of:
(a) A member organization of the association;
(b) An affiliate of a member organization of the association;
and
(c) The association.
(5) 'Branch captive insurer' means an alien captive insurer
that holds a certificate of authority issued under section 11 of
this 2011 Act to transact insurance in this state through a
business unit with a principal place of business in this state.
(6) 'Branch operation' means a business operation of a branch
captive insurer in this state.
(7) 'Captive insurer' means any of the following that is formed
or holds a certificate of authority issued under sections 2 to 24
of this 2011 Act:
(a) A branch captive insurer;
(b) A pure captive insurer;
(c) An association captive insurer;
(d) An industrial insured captive insurer; or
(e) A captive reinsurer;
(8) 'Captive reinsurer' means a reinsurer that is:
(a) Formed or holds a certificate of authority under sections 2
to 24 of this 2011 Act;
(b) Wholly owned by a qualifying reinsurer parent company; and
(c) A stock corporation.
(9) 'Controlled unaffiliated business' means a business entity:
(a)(A) For a pure captive insurer, that is not in the same
corporate system as a parent or the parent's affiliate but has a
contractual relationship with a parent or affiliate; or
(B) For an industrial insured captive insurer, that is not in
the same corporate system as an industrial insured or an
affiliated company of the industrial insured, but has a
contractual relationship with an industrial insured or an
affiliated company of the industrial insured; and
(b) Whose risks are managed by:
(A) A pure captive insurer; or
(B) An industrial insured captive insurer.
(10) 'Industrial insured' means an insured:
(a) That produces insurance by using the services of a
full-time employee acting as a risk manager or insurance manager
or by using the services of a regularly and continuously
qualified insurance consultant licensed under ORS 744.002;
(b) Whose aggregate annual premiums for insurance on all risks
total at least $25,000; and
(c) That has at least 25 full-time employees.
(11) 'Industrial insured captive insurer' means a business
entity that:
(a) Insures risks of the industrial insureds that are part of
the industrial insured group; and
(b) May insure the risks of:
(A) An affiliated company of an industrial insured; or
(B) A controlled unaffiliated business of an industrial insured
or a controlled unaffiliated business of an affiliated company of
an industrial insured.
(12) 'Industrial insured group' means:
(a) A group of industrial insureds that collectively:
(A) Own, control, or hold with power to vote, all of the
outstanding voting securities of an industrial insured captive
insurer incorporated as a stock insurer; or
(B) Have complete voting control over an industrial insured
captive insurer incorporated as a mutual insurer;
(b) A group of industrial insureds that is formed as a
corporation or limited liability company under the Product
Liability Risk Retention Act of 1981, 15 U.S.C. 3901 to 3906, as
amended, and is a stock insurer or mutual insurer; or
(c) A group of industrial insureds that has complete voting
control over an industrial insured captive insurer formed as a
limited liability company.
(13) 'Member organization' means a person that belongs to an
association.
(14) 'Parent' means a person that directly or indirectly owns,
controls, or holds with power to vote, more than 50 percent of:
(a) The outstanding voting securities of a pure captive
insurer; or
(b) The pure captive insurer, if the pure captive insurer is
formed as a limited liability company.
(15) 'Pure captive insurer' means a business entity that
insures risks of a parent or affiliate of the business entity or
a controlled unaffiliated business.
(16)(a) 'Qualifying reinsurer parent company' means a reinsurer
that holds a certificate of authority to transact reinsurance in
this state and that has:
(A) A consolidated GAAP net worth of not less than $500
million; and
(B) A consolidated debt to total capital ratio not greater than
0.5.
(b) For purposes of this subsection:
(A) 'Consolidated debt to total capital ratio' means the ratio
of:
(i) An amount equal to the sum of all debts and hybrid capital
instruments including:
(I) All borrowings from depository institutions;
(II) All senior debts;
(III) All subordinated debts;
(IV) All trust preferred shares; and
(V) All other hybrid capital instruments that are not included
in the determination of consolidated GAAP net worth issued and
outstanding; and
(ii) An amount equal to the sum of:
(I) The amount described in sub-subparagraph (i) of this
subparagraph; and
(II) Shareholders' equity determined in accordance with
generally accepted accounting principles for reporting to the
United States Securities and Exchange Commission.
(B) 'Consolidated GAAP net worth' means the consolidated
shareholders' equity determined in accordance with generally
accepted accounting principles for reporting to the United States
Securities and Exchange Commission.
(C) 'Depository institution' means a financial institution as
defined in ORS 706.008. + }
SECTION 3. { + Except as otherwise provided in sections 2 to
24 of this 2011 Act, a captive insurer is subject only to the
provisions of sections 2 to 24 of this 2011 Act that are within
the Insurance Code. + }
SECTION 4. { + Except as otherwise provided in sections 2 to
24 of this 2011 Act, a branch captive insurer must be a pure
captive insurer with respect to business operations in this
state, unless otherwise permitted by rule of the Director of the
Department of Consumer and Business Services. + }
SECTION 5. { + The Director of the Department of Consumer and
Business Services may adopt rules to implement sections 2 to 24
of this 2011 Act. + }
SECTION 6. { + All documents, material or other information in
the possession of the Department of Consumer and Business
Services under sections 2 to 24 of this 2011 Act are subject to
public disclosure only as provided in ORS 705.137. + }
SECTION 7. { + (1)(a) When permitted by its articles of
incorporation or its charter and bylaws, a captive insurer may
apply to the Director of the Department of Consumer and Business
Services for a certificate of authority to transact any class of
insurance.
(b) Notwithstanding paragraph (a) of this subsection:
(A) A pure captive insurer may not insure a risk other than a
risk of its parent or affiliate or a controlled unaffiliated
business;
(B) An association captive insurer may not insure a risk other
than a risk of:
(i) An affiliate;
(ii) A member organization of its association; and
(iii) An affiliate of a member organization of its association;
(C) An industrial insured captive insurer may not insure a risk
other than a risk of:
(i) An industrial insured that is part of the industrial
insured group;
(ii) An affiliate of an industrial insured that is part of the
industrial insured group; and
(iii) A controlled unaffiliated business of an industrial
insured or an affiliate of an industrial insured that is part of
the industrial insured group;
(D) A captive insurer may not provide workers' compensation
insurance coverage, personal motor vehicle insurance coverage or
homeowner's insurance coverage or any component of such coverage;
and
(E) A captive insurer may not accept or cede reinsurance except
as provided in section 13 of this 2011 Act.
(2) To transact insurance in this state, a captive insurer
must:
(a) Obtain from the director a certificate of authority that
authorizes the captive insurer to transact insurance in this
state;
(b) Hold at least once each year in this state:
(A) A board of directors meeting; or
(B) In the case of a reciprocal insurer, a subscriber's
advisory committee meeting;
(c) Maintain in this state:
(A) The principal place of business of the captive insurer; or
(B) In the case of a branch captive insurer, the principal
place of business for the branch operations of the branch captive
insurer; and
(d) Except as provided in subsection (3) of this section,
appoint a resident registered agent to accept service of process,
notice or demand and to otherwise act on behalf of the captive
insurer in this state.
(3) In the case of a captive insurer formed as a corporation or
organized as a reciprocal insurer, if the registered agent cannot
be found with reasonable diligence at the registered office of
the captive insurer, the director is the agent of the captive
insurer upon whom process, notice, or demand may be served.
(4)(a) An applicant captive insurer formed as a corporation
shall file with the director:
(A) Certified copies of the articles of incorporation or the
charter and bylaws of the corporation;
(B) A statement under oath of the president and secretary of
the corporation showing the financial condition of the
corporation; and
(C) Any other statement or document required by the director as
adopted by rule.
(b) An applicant captive insurer organized as a reciprocal
insurer shall file with the director:
(A) A certified copy of the power of attorney of the
attorney-in-fact of the reciprocal insurer;
(B) A certified copy of the subscribers' reciprocal agreement;
(C) A statement under oath of the attorney-in-fact of the
reciprocal insurer showing the financial condition of the
reciprocal insurer; and
(D) Any other statement or document required by the director by
rule.
(c) An applicant captive insurer shall submit to the director
for approval a description of the coverages, deductibles,
coverage limits, rates and any other information required by the
director by rule.
(d)(A) If there is a subsequent material change in an item in
the description required under paragraph (c) of this subsection
for an applicant captive insurer organized as a reciprocal
insurer, the reciprocal insurer shall submit to the director for
approval an appropriate revision to the description.
(B) A reciprocal insurer that is required to submit a revision
to the description under subparagraph (A) of this paragraph may
not offer any additional classes of insurance until the director
approves the revision.
(C) A reciprocal insurer shall inform the director of a
material change in a rate within 30 days of the adoption of the
change.
(e) In addition to the other information required by this
subsection, an applicant captive insurer shall file with the
director evidence of:
(A) The amount and liquidity of the assets of the applicant
captive insurer relative to the risks to be assumed by the
applicant captive insurer;
(B) The adequacy of the expertise, experience and character of
the individual who will manage the applicant captive insurer;
(C) The overall soundness of the plan of operation of the
applicant captive insurer;
(D) The adequacy of the loss prevention programs for any
parent, member organization or industrial insured of the
applicant captive insurer; and
(E) Any other factor the director adopts by rule and considers
relevant in ascertaining whether the applicant captive insurer is
able to meet the policy obligations of the applicant captive
insurer.
(5)(a) A captive insurer shall pay to the Department of
Consumer and Business Services nonrefundable fees established by
the department by rule for:
(A) Examining, investigating and processing of the captive
insurer's application for issuance of a certificate of authority;
(B) Obtaining a certificate of authority for the year the
director issues a certificate of authority to the captive
insurer, which shall not be less than $5,000; and
(C) Renewing a certificate of authority, which shall not be
less than $5,000.
(b) The fees a captive insurer pays to the department for
obtaining or renewing a certificate of authority are in lieu of
any payment of premium tax on receipt of premium by the captive
insurer. Fees for obtaining or renewing a certificate of
authority may be increased by the department by rule and may be
scaled on the basis of premiums the captive insurer collects in
any given year.
(c) The director may retain legal, financial and examination
services from outside the department to perform any functions
described in sections 2 to 24 of this 2011 Act and may charge the
applicant captive insurer the reasonable cost of services
performed.
(6) If the director is satisfied that the documents and
statements filed by the applicant captive insurer meet the
requirements of sections 2 to 24 of this 2011 Act, the director
may issue a certificate of authority that authorizes the captive
insurer to transact insurance in this state.
(7) A certificate of authority issued under this section
expires annually and must be renewed by December 31 of each year
beginning with the year following the year that the original
certificate was issued and by December 31 of each year
thereafter. + }
SECTION 8. { + A captive insurer may not assume a business
name that is:
(1) The same as any other existing assumed business name
registered under ORS chapter 648;
(2) Deceptively similar to any other existing assumed business
name registered under ORS chapter 648; or
(3) Likely to be confused with or mistaken for any other
existing assumed business name registered under ORS chapter
648. + }
SECTION 9. { + (1)(a) The Director of the Department of
Consumer and Business Services may not issue a certificate of
authority to a captive insurer described in paragraph (c) of this
subsection unless the captive insurer possesses and thereafter
maintains unimpaired paid-in capital of:
(A) In the case of a pure captive insurer, not less than
$100,000;
(B) In the case of an association captive insurer incorporated
as a stock insurer, not less than $400,000; or
(C) In the case of an industrial insured captive insurer
incorporated as a stock insurer, not less than $200,000; or
(b) The paid-in capital required under paragraph (a) of this
subsection may be in the form of:
(A) Cash or cash equivalent; or
(B) An irrevocable letter of credit issued by an insured
institution, as defined in ORS 706.008, and approved by the
director.
(c) This subsection applies to:
(A) A pure captive insurer;
(B) An association captive insurer incorporated as a stock
insurer; or
(C) An industrial insured captive insurer incorporated as a
stock insurer.
(2)(a) The director by rule may prescribe additional capital
based on the class, volume and nature of insurance transacted.
(b) The capital prescribed by the director under this
subsection may be in the form of cash or an irrevocable letter of
credit issued by an insured institution, as defined in ORS
706.008.
(3)(a) Except as provided in paragraph (d) of this subsection,
a branch captive insurer, as security for the payment of
liabilities attributable to branch operations, must establish and
maintain, through its branch operations, a trust fund funded by
an irrevocable letter of credit or other acceptable asset in the
United States.
(b) The trust fund established under this subsection shall be
for the benefit of United States policyholders and United States
ceding insurers under insurance policies issued or reinsurance
contracts issued or assumed.
(c) The amount of the security required under this subsection
must be equal to or greater than:
(A) The capital and surplus required by ORS 731.554; and
(B) The reserves on the insurance policies or reinsurance
contracts, including:
(i) Loss reserves;
(ii) Allocated loss adjustment expenses;
(iii) Losses incurred but not reported; and
(iv) Unearned premiums with regard to insurance transacted by
branch operations.
(d) The director may permit a branch captive insurer that is
required to post security for loss reserves on insurance
transacted by its reinsurer to reduce the funds in the trust
account established under this section by the same amount as the
security posted if the security remains posted with the
reinsurer.
(4)(a) Without the prior approval of the director, a captive
insurer may not pay:
(A) A dividend out of capital or surplus in excess of the
reserve limits and limits imposed by the director; or
(B) A distribution with respect to capital or surplus in excess
of the reserve limits and limits imposed by the director.
(b) The director shall condition approval of an ongoing plan
for the payment of dividends or other distributions on the
retention, at the time of each payment, of capital or surplus in
amounts determined in accordance with formulas adopted by the
director by rule. + }
SECTION 10. { + (1)(a) Except as provided in subsection (2) of
this section, the Director of the Department of Consumer and
Business Services may not issue a certificate of authority to a
captive insurer unless the captive insurer possesses and
maintains a surplus in excess of required capital of:
(A) In the case of a pure captive insurer, not less than
$150,000;
(B) In the case of an association captive insurer incorporated
as a stock insurer, not less than $350,000;
(C) In the case of an industrial insured captive insurer
incorporated as a stock insurer, not less than $300,000;
(D) In the case of an association captive insurer incorporated
as a mutual insurer, not less $750,000; or
(E) In the case of an industrial insured captive insurer
incorporated as a mutual insurer, not less than $500,000.
(b) The surplus in excess of required capital under paragraph
(a) of this subsection may be in the form of cash or an
irrevocable letter of credit issued by an insured institution, as
defined in ORS 706.008, and approved by the director.
(2) A captive insurer organized as a reciprocal insurer under
section 11 of this 2011 Act may not be issued a certificate of
authority unless the captive insurer possesses and maintains a
surplus in excess of required capital of $1 million.
(3)(a) The director may prescribe an additional surplus in
excess of required capital based upon the class, volume and
nature of insurance transacted.
(b) The additional surplus in excess of required capital
prescribed under paragraph (a) of this subsection may be in the
form of an irrevocable letter of credit issued by an insured
institution, as defined in ORS 706.008.
(4)(a) Without the prior approval of the director, a captive
insurer may not pay:
(A) A dividend out of capital or surplus in excess of the
reserve limits; or
(B) A distribution with respect to capital or surplus in excess
of the reserve limits.
(b) The director shall condition approval of an ongoing plan
for the payment of dividends or other distribution on the
retention, at the time of each payment, of capital or surplus in
excess of amounts determined by the director, or determined in
accordance with formulas adopted by the director, by rule. + }
SECTION 11. { + (1) A pure captive insurer must be
incorporated as a stock insurer with the capital of the pure
captive insurer divided into shares and held by the shareholders
of the pure captive insurer.
(2) An association captive insurer or an industrial insured
captive insurer may be:
(a) Incorporated as a stock insurer with the capital of the
association captive insurer or industrial insured captive insurer
divided into shares and held by the shareholders of the
association captive insurer or industrial insured captive
insurer;
(b) Incorporated as a mutual insurer without capital stock,
with a governing body elected by the member organizations of the
association captive insurer or industrial insured captive
insurer; or
(c) Organized as a reciprocal insurer.
(3) A captive insurer may not have fewer than three
incorporators, and at least two of the incorporators or
organizers shall be residents of this state.
(4)(a) Before a captive insurer formed as a corporation files
the corporation's articles of incorporation with the Secretary of
State, the incorporators shall obtain from the Director of the
Department of Consumer and Business Services a certificate
finding that the establishment and maintenance of the proposed
corporation will promote the general good of this state.
(b) In considering a request for a certificate under paragraph
(a) of this subsection, the director shall consider:
(A) The character, reputation, financial standing and purposes
of the incorporators;
(B) The character, reputation, financial responsibility,
insurance experience and business qualifications of the officers
and directors;
(C) Any information provided to the Department of Consumer and
Business Services in the application for a certificate of
authority or maintained in the department's files; and
(D) Other aspects the director considers advisable.
(5)(a) A captive insurer formed as a corporation shall file
with the Secretary of State:
(A) The captive insurer's articles of incorporation; and
(B) The certificate issued pursuant to subsection (4) of this
section.
(b) The Secretary of State shall accept both the articles of
incorporation and the certificate described in subsection (4) of
this section for a captive insurer that complies with this
section.
(6)(a) The organizers of a captive insurer formed as a
reciprocal insurer shall obtain from the director a certificate
finding that the establishment and maintenance of the proposed
association will promote the general good of this state.
(b) In considering a request for a certificate under paragraph
(a) of this subsection, the director shall consider:
(A) The character, reputation, financial standing and purposes
of the organizers;
(B) The character, reputation, financial responsibility,
insurance experience and business qualifications of the officers
and directors;
(C) Any information provided to the department in the
application for a certificate of authority or maintained in the
department's files; and
(D) Other aspects the director considers advisable.
(7)(a) An alien captive insurer applying to the director for a
certificate of authority to act as a branch captive insurer shall
obtain from the director a certificate finding that:
(A) The home jurisdiction of the alien captive insurer imposes
statutory or regulatory standards in a form acceptable to the
director on captive insurers transacting insurance in that
jurisdiction; and
(B) After considering the character, reputation, financial
responsibility, insurance experience and business qualifications
of the officers and directors of the alien captive insurer, and
other relevant information, the establishment and maintenance of
the branch operations will promote the general good of this
state.
(b) After the director issues a certificate under paragraph (a)
of this subsection to an alien captive insurer, the alien captive
insurer may obtain a certificate of authority to act as a branch
captive insurer.
(8) The capital stock of a captive insurer incorporated as a
stock insurer may not be issued at less than par value.
(9) At least one of the members of the board of directors of a
captive insurer formed as a corporation shall be a resident of
this state.
(10) At least one of the members of the subscribers' advisory
committee of a captive insurer organized as a reciprocal insurer
shall be a resident of this state.
(11)(a) A captive insurer formed as a corporation under
sections 2 to 24 of this 2011 Act has the privileges of and is
subject to ORS chapter 60 and sections 2 to 24 of this 2011 Act.
(b) If a conflict exists between a provision of ORS chapter 60
and a provision of sections 2 to 24 of this 2011 Act, sections 2
to 24 of this 2011 Act shall control.
(c) Except as provided in paragraph (d) of this subsection, the
provisions of sections 2 to 24 of this 2011 Act pertaining to a
merger, consolidation, conversion, mutualization and
redomestication apply in determining the procedures to be
followed by a captive insurer in carrying out any of the
transactions described in those provisions.
(d) The director may by rule waive or modify the requirements
for public notice and hearing.
(12) The articles of incorporation or bylaws of a captive
insurer may not authorize a quorum of a board of directors to
consist of fewer than one-third of the fixed or prescribed number
of directors as provided in rules adopted by the director. + }
SECTION 12. { + (1)(a) An association captive insurer and an
industrial insured group must comply with the investment
requirements of ORS 733.510 to 733.780.
(b) The Director of the Department of Consumer and Business
Services may by rule approve the use of alternative reliable
methods of valuation and rating for an association captive
insurer or an industrial insured group.
(2)(a) A pure captive insurer or industrial insured captive
insurer is not subject to any restrictions on allowable
investments under ORS 733.510 to 733.780.
(b) The director may by rule prohibit or limit an investment
that threatens the solvency or liquidity of a pure captive
insurer or an industrial insured captive insurer.
(3)(a)(A) A captive insurer may not make loans to the parent of
the captive insurer or an affiliate of the captive insurer.
(B) Notwithstanding subparagraph (A) of this paragraph, a pure
captive insurer may make loans to the parent of the pure captive
insurer or an affiliate of the pure captive insurer.
(b) A loan under paragraph (a) of this subsection may be made
only on the prior written approval of the director and must be
documented in a form approved by the director.
(c) A pure captive insurer may not make a loan from the paid-in
capital required under section 9 of this 2011 Act or the surplus
in excess of required capital required under section 10 of this
2011 Act. + }
SECTION 13. { + (1) A captive insurer may provide reinsurance
on risks ceded by any other insurer.
(2)(a) A captive insurer may take credit for reserves on risks
or portions of risks ceded to reinsurers if the captive insurer
complies with subsections (3) and (4) of this section.
(b) A captive insurer may not take credit for reserves on risks
or portions of risks ceded to a reinsurer if the reinsurer does
not comply with subsection (3) of this section.
(3)(a) A captive reinsurer may discount its loss and loss
adjustment expense reserves at treasury rates applied to the
applicable payments projected through the use of the expected
payment pattern associated with the reserves.
(b) As used in this subsection, 'treasury rates' means the
asked yield on United States Treasury strip as published in the
Wall Street Journal on the balance sheet date.
(4)(a) A captive reinsurer must annually file with the
Department of Consumer and Business Services an actuarial opinion
provided by an independent actuary on loss and loss adjustment
expense reserves.
(b) The independent actuary described in paragraph (a) of this
subsection may not be an employee of the captive reinsurer or an
affiliate of the captive reinsurer that files the actuarial
opinion.
(5) The Director of the Department of Consumer and Business
Services may disallow the discounting of loss and loss adjustment
reserves of a captive reinsurer if the captive reinsurer violates
any provision of sections 2 to 24 of this 2011 Act. + }
SECTION 14. { + A captive insurer is not required to join a
rating organization. + }
SECTION 15. { + (1) A captive insurer, including a captive
insurer organized as a reciprocal insurer authorized under
section 11 of this 2011 Act, may not join or contribute
financially to the Oregon Insurance Guaranty Association created
by ORS 734.550, or any other guaranty or insolvency fund.
(2) A captive insurer, the insured of a captive insurer, the
parent of a captive insurer, an affiliate of a captive insurer, a
member organization of an association captive insurer or, in the
case of a captive insurer organized as a reciprocal insurer, a
subscriber of the captive insurer, may not receive a benefit from
the Oregon Insurance Guaranty Association or any other guaranty
or insolvency fund for claims arising out of the operations of
the captive insurer in this state. + }
SECTION 16. { + (1)(a) An association captive insurer or
industrial insured group incorporated as a stock insurer or
mutual insurer may be converted to a reciprocal insurer, or
merged with and into a reciprocal insurer, in accordance with a
plan and the provisions of this section.
(b) The conversion must be accomplished under a reasonable plan
and procedures that are approved by the Director of the
Department of Consumer and Business Services.
(2) A plan for a conversion or merger under this section:
(a) Must be fair and equitable to the shareholders of a stock
insurer or the policyholders of a mutual insurer; and
(b) Must provide for the purchase of:
(A) The shares of any nonconsenting shareholder of a stock
insurer in substantially the same manner and subject to the same
rights and conditions as are provided a dissenting shareholder;
or
(B) The policyholder interest of any nonconsenting policyholder
of a mutual insurer in substantially the same manner and subject
to the same rights and conditions as are provided a dissenting
policyholder.
(3)(a) The director may not approve the plan for a conversion
under this section unless the plan:
(A) Provides for the conversion of existing shareholder or
policyholder interests into subscriber interests in the resulting
reciprocal insurer, proportionate to shareholder or policyholder
interests in the stock or mutual insurer; and
(B) Is approved:
(i) In the case of a stock insurer, by a majority of the shares
entitled to vote represented in person or by proxy at a duly
called regular or special meeting at which a quorum is present;
or
(ii) In the case of a mutual insurer, by a majority of the
voting interests of policyholders represented in person or by
proxy at a duly called regular or special meeting at which a
quorum is present.
(b) If the director approves a plan for a conversion, the
director shall amend the converting insurer's certificate of
authority to reflect conversion to a reciprocal insurer and issue
the amended certificate of authority to the converting insurer's
attorney-in-fact.
(c) The conversion takes effect and the corporate existence of
the converting insurer ceases when the director issues an amended
certificate of authority to a reciprocal insurer. The resulting
reciprocal insurer shall notify the Secretary of State of the
conversion.
(4)(a) A merger authorized under subsection (1) of this section
must be accomplished in accordance with ORS 732.517 to 732.546,
except that, solely for purposes of the merger:
(A) The plan for a merger must satisfy the requirements of
subsection (2) of this section;
(B) The subscribers' advisory committee of a reciprocal insurer
is equivalent to the board of directors of a stock or mutual
insurer;
(C) The subscribers of a reciprocal insurer are the equivalent
of the policyholders of a mutual insurer; and
(D) If a subscribers' advisory committee does not have a
president or secretary, the committee's officers who have
substantially equivalent duties are the president and secretary
of the committee.
(b) The director shall approve the articles of merger if the
director finds that the merger will promote the general good of
this state in conformance with the standards under section 11 (4)
of this 2011 Act.
(c) Notwithstanding sections 9 and 10 of this 2011 Act, the
director may permit the formation, without capital and surplus,
of a captive insurer organized as a reciprocal insurer, into
which an existing captive insurer may be merged to facilitate a
transaction under this subsection, if only one authorized insurer
survives the merger.
(d) An alien captive insurer may be a party to a merger
authorized under subsection (1) of this section if:
(A) The requirements for the merger between a domestic and a
foreign insurer as determined by the director are applied to the
merger; and
(B) The alien captive insurer is an insurer with a certificate
of authority by a jurisdiction other than this state.
(e) If the director approves the articles of merger under this
subsection, the director shall endorse the director's approval on
the articles and the surviving insurer shall register the
business name with the Secretary of State.
(5)(a) Except as provided in paragraph (b) of this subsection,
a conversion authorized under subsection (1) of this section must
provide for a hearing. Notice of the hearing must be given to the
insurer, its directors and officers and the shareholders of a
stock insurer or the policyholders of a mutual insurer. All such
persons have the right to appear at the hearing.
(b) The director may waive or modify the requirements for the
hearing.
(c) If a notice of hearing is required and has been given under
paragraph (a) of this subsection but no hearing is requested, the
director may cancel the hearing. + }
SECTION 17. { + (1)(a) Before March 1 of each year, a captive
insurer must submit to the Director of the Department of Consumer
and Business Services a report of the financial condition of the
captive insurer, verified by oath of two of the executive
officers of the captive insurer.
(b) Except as provided in sections 9 and 10 of this 2011 Act, a
captive insurer must report:
(A) The use of generally accepted accounting principles, except
to the extent that the director requires, approves, or accepts
the use of a statutory accounting principle;
(B) The use of a useful or necessary modification or adaptation
to an accounting principle that is required, approved, or
accepted by the director for the class of insurance and type of
insurer to be reported upon; and
(C) Any supplemental or additional information required by the
director.
(c)(A) An association captive insurer and an industrial insured
group shall file the report determined and required by the
director; and
(B) An industrial insured group shall comply with rules adopted
and identified by the director.
(2)(a) A pure captive insurer may make written application to
the director for approval to file the required report on an
alternative reporting date that is consistent with the end of the
fiscal year of the parent of the pure captive insurer.
(b) If the director approves an alternative reporting date for
a pure captive insurer under paragraph (a) of this subsection,
the annual report is due 60 days after the end of the fiscal year
of the parent of the pure captive insurer.
(3)(a) Sixty days after the end of its fiscal year, an alien
captive insurer acting as a branch captive insurer in this state
must file with the director a copy of all reports and statements
required to be filed under the laws of the jurisdiction in which
the alien captive insurer is formed, verified by oath by two of
the alien captive insurer's executive officers.
(b) If the director is satisfied that the annual report filed
by the alien captive insurer in the jurisdiction in which the
alien captive insurer is formed provides adequate information
concerning the financial condition of the alien captive insurer,
the director may waive the requirement for an annual report of
financial condition for a captive insurer under this section with
respect to insurance transacted in the alien jurisdiction.
(c) A waiver by the director under paragraph (b) of this
subsection must be in writing and is subject to public
inspection. + }
SECTION 18. { + (1)(a) The Director of the Department of
Consumer and Business Services, or the director's designee, shall
examine the affairs of each captive insurer once in each
three-year period.
(b) The three-year period described in paragraph (a) of this
subsection is determined on the basis of three full annual
accounting periods of operation.
(c) The examination is to be made as of December 31 of the full
three-year period.
(d) In addition to an examination required under this
subsection, the director, or the director's designee, may examine
a captive insurer whenever the director determines it to be
prudent.
(2) During an examination under this section, the director, or
the director's designee, shall thoroughly examine the affairs of
the captive insurer to ascertain:
(a) The financial condition of the captive insurer;
(b) The ability of the captive insurer to fulfill the
obligations of the captive insurer; and
(c) Whether the captive insurer meets the requirements of
sections 2 to 24 of this 2011 Act.
(3) The director upon application may expand the three-year
period described in subsection (1) of this section to five years
if during that period a captive insurer is subject to a
comprehensive annual audit:
(a) Of a scope satisfactory to the director; and
(b) Performed by independent auditors approved by the director.
(4) A captive insurer that is examined under this section shall
pay the expenses and charges of the examination. + }
SECTION 19. { + (1) The Director of the Department of Consumer
and Business Services, or the director's designee, shall examine
only the branch operations of, and the insurance transacted by, a
branch captive insurer in this state if the branch captive
insurer:
(a) Provides annually to the director a certificate of
compliance, or an equivalent, issued by or filed with the
licensing authority of the jurisdiction in which the branch
captive insurer is formed; and
(b) Demonstrates to the satisfaction of the director that the
branch captive insurer is operating in sound financial condition
in accordance with all applicable laws and regulations of the
jurisdiction in which the branch captive insurer is formed.
(2) As a condition of obtaining a certificate of authority, a
branch captive insurer shall authorize the director to examine
the affairs of the branch captive insurer in the jurisdiction in
which the branch captive insurer is formed.
(3) A branch captive insurer that is examined under this
section shall pay the expenses and charges of the
examination. + }
SECTION 20. { + (1) The Director of the Department of Consumer
and Business Services may suspend or revoke the certificate of
authority issued to a captive insurer to transact insurance in
this state for:
(a) Insolvency or impairment of capital or surplus;
(b) Failure to meet the requirements of sections 2 to 24 of
this 2011 Act;
(c) Refusal or failure to submit an annual report required by
section 17 of this 2011 Act or any other report or statement
required by law or by lawful order of the director;
(d) Failure to comply with the charter, bylaws or other
organizational document of the captive insurer;
(e) Failure to submit to an examination under section 18 or 19
of this 2011 Act or any legal obligation relative to an
examination under section 18 or 19 of this 2011 Act;
(f) Refusal or failure to pay the cost of examination under
section 18 or 19 of this 2011 Act;
(g) Use of methods that, although not otherwise specifically
prohibited by law, render:
(A) The operation of the captive insurer detrimental to the
public or the policyholders of the captive insurer; or
(B) The condition of the captive insurer unsound with respect
to the public or to the policyholders of the captive insurer; or
(h) Failure otherwise to comply with laws of this state.
(2) If the director finds, upon examination, hearing, or other
evidence, that a captive insurer has committed any of the acts
specified in subsection (1) of this section, the director may
suspend or revoke the certificate of authority issued to the
captive insurer if the director considers it in the best interest
of the public and the policyholders of the captive insurer to
revoke the certificate of authority. + }
SECTION 21. { + (1) A captive reinsurer must be incorporated
as a stock insurer with its capital divided into shares and held
by the captive reinsurer's shareholders.
(2) A captive reinsurer may not have fewer than three
incorporators, and at least two of the incorporators of a captive
reinsurer shall be residents of this state.
(3)(a) Before the articles of incorporation are filed with the
Secretary of State, the incorporators shall obtain from the
Director of the Department of Consumer and Business Services a
certificate finding that the establishment and maintenance of the
proposed corporation promotes the general good of this state.
(b) In considering a request for a certificate under paragraph
(a) of this subsection, the director shall consider:
(A) The character, reputation, financial standing and purposes
of the incorporators;
(B) The character, reputation, financial responsibility,
insurance experience and business qualifications of the officers
and directors; and
(C) Other factors the director considers advisable.
(4) The capital stock of a captive reinsurer must be issued at
par value or greater.
(5) At least one of the members of the board of directors of a
captive reinsurer incorporated in this state must be a resident
of this state. + }
SECTION 22. { + (1)(a) If permitted by its articles of
incorporation or charter, a captive reinsurer may apply to the
Director of the Department of Consumer and Business Services for
a certificate of authority to transact reinsurance covering
property and casualty insurance or reinsurance contracts.
(b) A captive reinsurer that is issued a certificate of
authority may transact reinsurance contracts covering risks in
any state.
(2) To transact reinsurance in this state, a captive reinsurer
must:
(a) Obtain from the director a certificate of authority that
authorizes the captive reinsurer to transact reinsurance in this
state;
(b) Hold at least one board of directors' meeting each year in
this state or by telephone conference;
(c) Maintain its principal place of business in this state; and
(d) Appoint a registered agent to accept service of process,
notice and demand and to otherwise act on behalf of the captive
reinsurer in this state.
(3) An applicant captive reinsurer shall file with the
director:
(a) A certified copy of its articles of incorporation or its
charter, and bylaws;
(b) A statement under oath of its president and secretary
showing the financial condition of the applicant captive
reinsurer; and
(c) Any other document required by the director by rule.
(4) In addition to the information required by subsection (3)
of this section, the applicant captive reinsurer shall file with
the director evidence of:
(a) The amount and liquidity of the applicant captive
reinsurer's assets relative to the risks to be assumed;
(b) The adequacy of the expertise, experience and character of
the individual who manages the applicant captive reinsurer;
(c) The overall soundness of the applicant captive reinsurer's
plan of operation; and
(d) Other overall factors considered relevant by the director
in ascertaining if the applicant captive reinsurer is able to
meet its policy obligations.
(5)(a) Information submitted pursuant to this section is
confidential and may not be disclosed to the public by the
director, or the director's designee, without the written consent
of the applicant captive insurer, except that:
(A) Information may be discoverable by a party in a civil
action or contested case to which the applicant captive reinsurer
is a party, upon a showing by the party seeking to discover the
information that:
(i) The information sought is relevant to and necessary for the
furtherance of the action or case;
(ii) The information sought is unavailable from other
non-confidential sources; and
(iii) A subpoena issued by a judicial or administrative law
officer of competent jurisdiction has been submitted to the
director; or
(B) The director may disclose the information to the public
officer having jurisdiction over the regulation of insurance in
another state if:
(i) The public official agrees in writing to maintain the
confidentiality of the information; and
(ii) The laws of the state in which the public official serves
require the information to be confidential.
(b) This subsection does not apply to an industrial insured
captive reinsurer insuring the risks of an industrial insured
group. + }
SECTION 23. { + (1)(a) The Director of the Department of
Consumer and Business Services may not issue a certificate of
authority to a captive reinsurer unless the captive reinsurer
possesses and maintains capital or surplus in excess of required
capital of not less than the greater of:
(A) $300 million; or
(B) 10 percent of the reserves of the captive reinsurer.
(b) The surplus required by this subsection may be in the form
of cash or securities.
(2) The director may prescribe additional capital or surplus
based upon the class, volume and nature of the insurance
transacted in this state.
(3)(a) A captive reinsurer may not pay a dividend out of, or
other distribution with respect to, capital or surplus without
the prior approval of the director.
(b) Approval of an ongoing plan for the payment of dividends or
other distributions must be conditioned upon the retention at the
time of each payment of capital or surplus in excess of amounts
determined by, or determined in accordance with formulas adopted
by, rule of the director. + }
SECTION 24. { + At least 35 percent of the assets of a captive
reinsurer must be managed by an asset manager domiciled in this
state. + }
SECTION 25. { + A captive insurer, as defined in section 2 of
this 2011 Act, making an election under section 831(b) of the
Internal Revenue Code, as amended, shall be afforded the same tax
treatment on receipt of premiums and tax on investment earnings
for state income tax purposes as exists for federal income tax
purposes except that the income tax rates on taxable income of
the captive insurer shall be those identified under state law
rather than federal law. + }
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