Chapter 3960: RISK RETENTION

3960.01 Risk retention definitions.

As used in sections 3960.01 to 3960.13 of the Revised Code:

(A) "Completed operations liability" means liability arising out of the installation, maintenance, or repair of any product at a site that is not owned or controlled by either a person who performs that work or a person who hires an independent contractor to perform the work. "Completed operations liability" includes liability for activities that are completed or abandoned before the date of the occurrence giving rise to the liability.

(B) "Domicile," for purposes of determining the state in which a purchasing group is domiciled, means:

(1) For a corporation, the state in which the purchasing group is incorporated;

(2) For an unincorporated entity, the state of its principal place of business.

(C) "Hazardous financial condition" means that, based on its present or reasonably anticipated financial condition, a risk retention group, although not yet financially impaired or insolvent, is unlikely to be able to do either of the following:

(1) Meet obligations to policyholders with respect to known claims and reasonably anticipated claims;

(2) Pay other obligations in the normal course of business.

(D) "Insurance" means primary insurance, excess insurance, reinsurance, surplus lines insurance, and any other arrangement for shifting and distributing risk that is determined to be insurance under the laws of this state.

(E)

(1) "Liability," except as provided in division (E)(2) of this section, means legal liability for damages, including but not limited to costs of defense, legal costs and fees, and other claims expenses, because of injuries to other persons, damage to their property, or other damage or loss to such other persons resulting from or arising out of either of the following:

(a) Any business, whether profit or nonprofit, trade, product, or services, including but not limited to, professional services, premises, or operations;

(b) Any activity of any state or local government, or any agency or political subdivision of a state or local government.

(2) "Liability" does not include personal risk liability or an employer's liability with respect to its employees other than legal liability under the "Employers' Liability Act," 53 Stat. 1404, (1939) 45 U.S.C. 51 , as amended.

(F) "Personal risk liability" means liability for damages because of injury to any person, damage to property, or other loss or damage resulting from any personal, familial, or household responsibilities or activities, rather than from responsibilities or activities described in division (E) of this section.

(G) "Plan of operation or a feasibility study" means an analysis that presents the expected activities and results of a risk retention group, including, at a minimum, all of the following:

(1) Information sufficient to verify that its members are engaged in businesses or activities similar or related with respect to the liability to which such members are exposed by virtue of any related, similar, or common business, trade, product, services, premises, or operations;

(2) For each state in which it intends to operate, the coverages, deductibles, coverage limits, rates, and rating classification systems for each line of insurance it intends to offer;

(3) The historical and expected loss experience of the proposed members and national experience of similar exposures to the extent that this experience is reasonably available;

(4) Pro forma financial statements and projections;

(5) Appropriate opinions by a qualified, independent casualty actuary, including a determination of minimum premium or participation levels required to commence operations and to prevent a hazardous financial condition;

(6) Identification of management, underwriting, and claims procedures, marketing methods, managerial oversight methods, investment policies, and reinsurance agreements;

(7) Identification of each state in which the risk retention group has obtained, or sought to obtain, a charter and license, and a description of its status in each such state;

(8) Such other matters as may be prescribed for liability insurance companies authorized by the insurance laws of the state in which the risk retention group is chartered by the commissioner of insurance of that state.

(H) "Product liability" means liability for damages because of any personal injury, death, emotional harm, consequential economic damages, or property damages, including damages resulting from the loss of use of property, arising out of the manufacture, design, importation, distribution, packaging, labeling, lease, or sale of a product. "Product liability" does not include the liability of any person for those damages if the product involved was in the possession of the person when the incident giving rise to the claim occurred.

(I) "Purchasing group" means any group to which all of the following apply:

(1) It has as one of its purposes the purchase of liability insurance on a group basis;

(2) It purchases such insurance only for its group members and only to cover their similar or related liability exposure as described in division (I)(3) of this section;

(3) It is composed of members whose business or activities are similar or related with respect to the liability to which members are exposed by virtue of any related, similar, or common business, trade, product, services, premises, or operations;

(4) It is domiciled in any state;

(5) It meets the criteria established under the federal "Risk Retention Amendments of 1986," 100 Stat. 3170, 15 U.S.C. 3901 , as amended.

(J) "Risk retention group" means any corporation or other limited liability association formed under the laws of any state, Bermuda, or the Cayman Islands to which all of the following apply:

(1) Its primary activity consists of assuming and spreading all, or any portion, of the liability exposure of its group members;

(2) It is organized for the primary purpose of conducting the activity described in division (J)(1) of this section;

(3) Either of the following applies to it:

(a) It is chartered and licensed as a liability insurance company and authorized to engage in the business of insurance under the laws of any state;

(b) It was, before January 1, 1985, chartered or licensed and authorized to engage in the business of insurance under the laws of Bermuda or the Cayman Islands and, before that date, had certified to the commissioner of insurance of at least one state that it satisfied the capitalization requirements of the state, except that it shall be considered to be a risk retention group only if it has been engaged in business continuously since that date and only for the purpose of continuing to provide insurance to cover "product liability" or "completed operations liability" as those terms were defined in the federal "Product Liability Risk Retention Act of 1981," 95 Stat. 949, 15 U.S.C. 3901 , before the effective date of the federal "Risk Retention Amendments of 1986," 100 Stat. 3170, 15 U.S.C. 3901 .

(4) It does not exclude any person from membership in it solely to provide for members of the group a competitive advantage over the person;

(5) Either of the following applies to it:

(a) It has as its owners only persons who comprise the membership of the risk retention group and who are provided insurance by the group;

(b) It has as its sole owner an organization which has as its members, only persons who comprise the membership of the risk retention group; and as its owners, only persons who comprise the membership of the risk retention group and who are provided insurance by the group.

(6) Its members are engaged in business or activities similar or related with respect to the liability of which the members are exposed by virtue of any related, similar, or common business trade, product, services, premises, or operations;

(7) Its activities do not include the provision of any insurance other than the following:

(a) Liability insurance for assuming and spreading all or any portion of the liability of its group members;

(b) Reinsurance with respect to the liability of any other risk retention group or any members of any other risk retention group that is engaged in business or activities so that the other group or member meets the requirements of division (J)(6) of this section for membership in the risk retention group that provides the reinsurance.

(8) Its name includes the phrase "risk retention group."

Cite as R.C. § 3960.01

Effective Date: 10-26-1989

3960.02 Requirements for transacting business.

(A) No risk retention group organized under the laws of this state shall transact business in this state unless both of the following apply:

(1) It has capital and surplus in an amount of not less than two million five hundred thousand dollars, and the superintendent of insurance issues a certificate of authority to transact the business of liability insurance as a risk retention group. Section 3960.03 of the Revised Code applies to the risk retention group only to the extent that that section does not conflict with or limit the operation of any law or rule of this state applicable to liability insurance companies.

(2) The superintendent has approved a plan of operation or a feasibility study submitted to the superintendent by the risk retention group applicable to the lines of liability insurance to be offered by the risk retention group. 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 days of the change. The group shall not offer any additional kinds of liability insurance, in this state or in any other state, until a revision of the plan or study is approved by the commissioner of insurance of each state.

(B) The superintendent, upon the filing of an application by a risk retention group for a certificate of authority to transact the business of liability insurance in this state, shall provide summary information to the national association of insurance commissioners including the name of the risk retention group, the identity of its initial members, the identity of the individuals who organized it or who will provide administrative services or otherwise influence or control its activities, the amount and nature of its initial capitalization, the coverages to be afforded by it, and the states in which it intends to operate. As part of its application, the risk retention group also shall provide such information in summary form.

(C) The laws of this state apply to risk retention groups doing business in the state, except as preempted by the federal "Risk Retention Amendments of 1986," 100 Stat. 3170, 15 U.S.C. 3901 , as amended, or other federal laws, and except to the extent modified in sections 3960.01 to 3960.13 of the Revised Code.

(D) Each risk retention group domiciled in this state is liable for the payment of franchise taxes or taxes on premiums of direct business for risks resident or located within this state. A risk retention group domiciled in this state also is subject to any taxes, applicable fines, and penalties as are any domiciled insurers.

Cite as R.C. § 3960.02

Effective Date: 10-26-1989

3960.03 Requirements for foreign risk retention groups.

All of the following apply to risk retention groups chartered and licensed in states other than this state, that seek to do business as a risk retention group in this state:

(A) No risk retention group shall offer insurance in this state unless it has submitted to the superintendent of insurance, in a form satisfactory to the superintendent, all of the following:

(1) A statement identifying the state or states in which it is chartered and licensed as a liability insurance company, the date of chartering, its principal place of business, and any other information, including but not limited to, information on its membership, that the superintendent may require to verify that it is qualified under division (J) of section 3960.01 of the Revised Code;

(2) A copy of its plan of operation or a feasibility study and revisions of the plan or study submitted to the state in which the risk retention group is chartered and licensed. Division (A)(2) of this section does not apply to any line or classification of liability insurance that was defined in the federal "Product Liability Risk Retention Act of 1981," 95 Stat. 949, 15 U.S.C.A. 3901 , as amended, before October 27, 1986, and was offered before that date by any risk retention group that had been chartered and operating for not less than three years before that date. The risk retention group shall submit a copy of any revision to its plan of operation or feasibility study required by division (A)(2) of section 3960.02 of the Revised Code at the same time that the revision is submitted to the commissioner of insurance of its chartering state.

(3) A statement of registration, for which a filing fee shall be determined by the superintendent, that submits it to the jurisdiction of the superintendent and the courts of this state. The fee shall be paid into the state treasury to the credit of the department of insurance operating fund pursuant to section 3901.021 of the Revised Code.

(B) A risk retention group doing business in this state shall submit to the superintendent all of the following:

(1) A copy of its financial statement submitted to the state in which the risk retention group is chartered and domiciled, which shall be certified by an independent public accountant and contain a statement of opinion on loss and loss adjustment expense reserves made by a member of the American academy of actuaries or a qualified loss reserve specialist under criteria established by the national association of insurance commissioners;

(2) A copy of each examination of the group as certified by the commissioner or public official conducting the examination;

(3) Upon request by the superintendent, a copy of any information or document pertaining to any outside audit performed with respect to the group;

(4) Any information that may be required to verify, to the superintendent's satisfaction, its continuing qualification as a risk retention group under division (J) of section 3960.01 of the Revised Code.

(C)

(1) Agents or brokers for the risk retention group shall report to the superintendent the premiums for direct business for risks resident or located within this state that they have placed with or on behalf of a risk retention group not chartered in this state.

(2) The agent or broker shall keep a complete and separate record of all policies procured from each risk retention group, which record shall be open to examination by the superintendent. These records shall, for each policy and each kind of insurance provided, include the following:

(a) The limit of liability;

(b) The time period covered;

(c) The effective date;

(d) The name of the risk retention group that issued the policy;

(e) The gross premium charged;

(f) The amount of return premiums.

(D) Every risk retention group that is not chartered in this state shall do both of the following:

(1) On or before the thirty-first day of March, pay to the treasurer of state five per cent of all premiums, fees, assessments, dues, or other consideration for the preceding calendar year for risks resident or located in this state, as calculated on a form prescribed by the treasurer of state. If such tax is not paid when due, the tax shall be increased by a penalty of twenty-five per cent. An interest charge computed as set forth in section 5725.221 of the Revised Code shall be made on the entire sum of the tax plus penalty, which interest shall be computed from the date the tax is due until it is paid. All taxes collected under this section shall be paid into the general revenue fund. For purposes of division (D)(1) of this section, payment is considered made when it is received by the treasurer of state, irrespective of any United States postal service marking or other stamp or mark indicating the date on which the payment may have been mailed.

(2) On or before the thirty-first day of March, file a statement with the superintendent, on a form prescribed by the superintendent, showing the name and address of the insured, name and address of the insurer, subject of the insurance, general description of the coverage, the amount of gross premium, fee, assessment, dues, or other consideration for the insurance, after a deduction for return premium, if any, and any other information the superintendent requires.

(E) The superintendent may examine the financial condition of a risk retention group if the commissioner of insurance in the state in which it is chartered and licensed has not initiated an examination or does not initiate an examination within sixty days after the superintendent has requested an examination. The examination shall be conducted in an expeditious manner and in accordance with the national association of insurance commissioners' examiner handbook.

(F) The superintendent may issue any order appropriate in voluntary dissolution proceedings or commence delinquency proceedings against a risk retention group not chartered in this state that does business in this state if the superintendent finds, after an examination of the group under division (E) of this section, that its financial condition is impaired. A risk retention group that violates any provision of this chapter is subject to fines and penalties, including revocation of its right to do business in this state, applicable to licensed insurers generally.

Cite as R.C. § 3960.03

Amended by 128th General AssemblyFile No.18, HB 300, §1, eff. 5/26/2010.

Effective Date: 06-28-2002

3960.04 Notices on application forms and policies.

(A)

(1) Every application form for insurance from a risk retention group and every policy or certificate of insurance issued by a risk retention group shall contain in ten-point type on the front page and the declaration page, the following notice:

"Notice

This policy is issued by your risk retention group. Your risk retention group may not be subject to all of the insurance laws and regulations of your state. State insurance insolvency guaranty funds are not available for your risk retention group."

(2) No risk retention group shall fail to comply with the notice requirement of division (A)(1) of this section.

(B) No risk retention group shall do any of the following:

(1) Solicit or sell insurance to a person who is not eligible for membership in it;

(2) Solicit or sell insurance or operate as a risk retention group if it is in a hazardous financial condition or is financially impaired.

(C) No risk retention group shall do business in this state if an insurance company is directly or indirectly a member or owner of the risk retention group, except if all of the members of the risk retention group are insurance companies.

(D) The terms of any insurance policy issued by any risk retention group shall not provide, or be construed to provide, coverage prohibited generally by statute of this state or declared unlawful by the highest court of the state whose law applies to the policy.

(E) Sections 3901.19 to 3901.26 of the Revised Code apply to risk retention groups and to their agents and representatives.

Cite as R.C. § 3960.04

Effective Date: 10-26-1989

3960.05 No coverage by Ohio insurance guaranty association or similar mechanism.

(A) Sections 3955.01 to 3955.19 of the Revised Code do not apply to risk retention groups. No risk retention group shall be required or permitted to join or contribute financially to the Ohio insurance guaranty association or similar mechanism in this state. No risk retention group, or its insureds or claimants against its insureds, shall receive any benefit from any such association or mechanism for claims arising under the insurance policies issued by the risk retention group.

(B) When the laws of this state or any of its political subdivisions require any person to obtain liability insurance as a condition of licensure, approval, permission, or other authorization, the insurance may be obtained from a risk retention group as defined in division (J) of section 3960.01 of the Revised Code, if the public agency administering those laws has made a determination that the protection of the Ohio insurance guaranty association provided by Chapter 3955. of the Revised Code is not necessary and that insurance provided by a risk retention group is acceptable to the public agency under the standards of the law that it administers.

(C) When a purchasing group obtains insurance covering its members' risks from an insurer not authorized in this state or a risk retention group, the risks are not covered by any insurance guaranty association or similar mechanism in this state.

(D) When a purchasing group obtains insurance covering its members' risks from an authorized insurer, only risks resident or located in this state shall be covered by the state guaranty association subject to Chapter 3955. of the Revised Code.

Cite as R.C. § 3960.05

Effective Date: 10-26-1989

3960.06 Applicability of laws to purchasing group.

(A) A purchasing group and its insurer or insurers are subject to all applicable laws of this state, except that a purchasing group and its insurer or insurers, in regard to liability insurance for the purchasing group, are exempt from any law that does any of the following:

(1) Prohibits the establishment of a purchasing group;

(2) Makes it unlawful for an insurer to provide or offer to provide insurance on a basis providing, to a purchasing group or its members, advantages based on their loss and expense experience not afforded to other persons with respect to rates, policy forms, coverages, or other matters;

(3) Prohibits a purchasing group or its members from purchasing insurance on a group basis described in division (A)(2) of this section;

(4) Prohibits a purchasing group from obtaining insurance on a group basis because the group has not been in existence for a minimum period of time or because any member has not belonged to the group for a minimum period of time;

(5) Requires that a purchasing group have a minimum number of members, common ownership or affiliation, or a certain legal form;

(6) Requires that a certain percentage of a purchasing group obtain insurance on a group basis;

(7) Otherwise discriminates against a purchasing group or any of its members;

(8) Requires that any insurance policy issued to a purchasing group or any of its members be countersigned by an insurance agent or broker residing in this state.

(B) The superintendent of insurance may require or exempt a risk retention group from participation in any joint underwriting association established under section 3930.03 or in the plan established under section 4509.70 of the Revised Code. Any risk retention group that is required to participate under this division shall submit sufficient information to the superintendent to enable the superintendent to apportion on a nondiscriminatory basis the risk retention group's proportionate share of losses and expenses.

Cite as R.C. § 3960.06

Effective Date: 10-26-1989; 12-30-2004; 06-27-2005

3960.07 Requirements of purchasing group for transacting business.

(A) No purchasing group shall conduct business in this state unless it has done both of the following:

(1) Issued a notice to the superintendent of insurance that does all of the following:

(a) Identifies the state in which the purchasing group is domiciled and all other states in which the group intends to do business;

(b) Specifies the lines and classifications of liability insurance that the purchasing group intends to purchase and specifies the method by which and the person or persons, if any, through whom insurance will be offered to its members whose risks are resident or located in this state;

(c) Identifies the name and domicile of the insurance company from which the purchasing group intends to purchase its insurance;

(d) Identifies the principal place of business of the purchasing group;

(e) Provides any other information that the superintendent may require to verify that the purchasing group is qualified under division (I) of section 3960.01 of the Revised Code.

A purchasing group, within ten days, shall notify the superintendent of any changes in any of the items set forth in division (A)(1) this section.

(2) Registered with the superintendent, paid a filing fee as determined by the superintendent, and consented to the exercise of jurisdiction over it by the superintendent and the courts of this state. The fee shall be paid into the state treasury to the credit of the department of insurance operating fund pursuant to section 3901.021 of the Revised Code.

Division (A)(2) of this section does not apply to a purchasing group to which all of the following apply:

(a) It was domiciled in any state before April 1, 1986, and on and after October 27, 1986;

(b) It purchased insurance from an insurance carrier licensed in any state before and after October 27, 1986;

(c) It was a purchasing group meeting the requirements of the federal "Product Liability Risk Retention Act of 1981," 95 Stat. 949, 15 U.S.C. 3901 , before October 27, 1986;

(d) It does not purchase insurance that was not authorized for purposes of an exemption under that act, as in effect before October 27, 1986.

(B) Each purchasing group that is required to give notice pursuant to division (A)(1) of this section also shall furnish any information that may be required by the superintendent to do both of the following:

(1) Determine where the purchasing group is located;

(2) Determine appropriate tax treatment.

(C) Within thirty days after the effective date of this section, any purchasing group that was doing business in this state prior to the enactment of this section shall furnish notice to the superintendent pursuant to division (A)(1) of this section and furnish any information that may be required pursuant to division (B) of this section.

(D) Sections 3937.01 to 3937.17 of the Revised Code apply to admitted insurers that provide insurance to purchasing groups.

Cite as R.C. § 3960.07

Effective Date: 10-26-1989

3960.08 Restricting purchases of insurance.

(A) No purchasing group shall purchase insurance from a risk retention group that is not chartered, or from an insurer that is not admitted to do business, in the state in which the purchasing group is located, unless the purchase is effected through an agent or broker licensed in this state to sell surplus lines.

(B)

(1) A purchasing group that obtains liability insurance from an insurer not admitted in this state or a risk retention group shall inform, as provided in division (B)(2) of this section, each of the members of such group that have a risk resident or located in this state that the risk is not protected by an insurance insolvency guaranty association or mechanism in this state, and that the risk retention group or insurer may not be subject to all insurance laws and regulations of this state.

(2)

(a) Every application form for insurance from a purchasing group and every policy or certificate of insurance issued by a purchasing group shall contain in ten-point type on the front page the following notice:

"Notice

Your risk is not protected by the state insurance insolvency fund, and the insurer or the risk retention group from which your purchasing group obtained its insurance may not be subject to all of the insurance laws and rules of this state."

(b) No purchasing group shall fail to comply with the notice requirements of division (B)(2)(a) of this section.

(C) No purchasing group shall purchase insurance providing for a deductible or self-insured retention applicable to the group as a whole. Coverage may provide for a deductible or self-insured retention applicable to individual members.

Cite as R.C. § 3960.08

Effective Date: 10-26-1989

3960.09 Premium taxes or taxes on premiums paid for coverage of risks.

Premium taxes or taxes on premiums paid for coverage of risks resident or located in this state by a purchasing group or any members of the purchasing group shall be imposed and paid in accordance with the following:

(A) Imposed at the same rate and subject to the same interest, fines, and penalties as those applicable to premium taxes and taxes on premiums paid for similar coverage from a similar insurance source by other insureds;

(B) Paid first by the insurance source; if not by the source, then by the agent or broker for the purchasing group; if not by the agent or broker, then by the purchasing group; and if not by the purchasing group, then by each of its members.

Cite as R.C. § 3960.09

Effective Date: 10-26-1989

3960.10 Authority and powers of superintendent of insurance.

(A) The superintendent of insurance may exercise any powers to enforce the insurance laws of this state applicable to risk retention groups and purchasing groups, except those that are specifically preempted by the federal "Product Liability Risk Retention Act of 1981," 95 Stat. 949, 15 U.S.C. 3901 , as amended by the federal "Risk Retention Amendments of 1986," 100 Stat. 3170, 15 U.S.C. 3901 , as amended.

(B) The authority of the superintendent under division (A) of this section includes, but is not limited to, the superintendent's administrative authority under the laws of this state to investigate, issue subpoenas, conduct depositions and hearings, issue orders, and impose penalties. Actions by the superintendent seeking an injunction are subject to the restrictions in the federal "Risk Retention Amendments of 1986," 100 Stat. 3170, 15 U.S.C. 3901 , as amended.

Cite as R.C. § 3960.10

Effective Date: 10-26-1989

3960.11 Soliciting, negotiating, or procuring liability insurance restricted to licensed agents and brokers.

(A) No person shall act or aid in any manner in soliciting, negotiating, or procuring liability insurance in this state from a risk retention group unless the person is licensed as an insurance agent or broker in accordance with Chapter 3905. of the Revised Code.

(B) No person shall act or aid in any manner in soliciting, negotiating, or procuring liability insurance in this state for a purchasing group from an authorized insurer or a risk retention group chartered in a state unless the person is licensed as an insurance agent or broker in accordance with Chapter 3905. of the Revised Code.

(C) No person shall act or aid in any manner in soliciting, negotiating, or procuring liability insurance coverage in this state for any member of a purchasing group under a purchasing group's policy unless the person is licensed as an insurance agent or broker in accordance with Chapter 3905. of the Revised Code.

(D) No person shall act or aid in any manner in soliciting, negotiating, or procuring liability insurance from an insurer not authorized to do business in this state on behalf of a purchasing group located in this state unless the person is licensed as a surplus line broker in accordance with section 3905.30 of the Revised Code.

Cite as R.C. § 3960.11

Effective Date: 09-01-2002

3960.12 Adoption of rules for enforcement.

The superintendent of insurance may adopt any rules necessary or desirable for the enforcement of sections 3960.01 to 3960.13 of the Revised Code.

Cite as R.C. § 3960.12

Effective Date: 10-26-1989

3960.13 Enforcement powers of superintendent of insurance.

The superintendent of insurance, after notice and an opportunity for hearing under Chapter 119. of the Revised Code, may do all of the following:

(A) Suspend, revoke, or refuse to renew the certificate of authority of a risk retention group that violates any provision of sections 3960.01 to 3960.13 of the Revised Code for which a specific sanction is not imposed by the law applicable to liability insurance companies admitted to do business in this state;

(B) Impose a civil penalty not to exceed three thousand five hundred dollars for each violation of the type described in division (A) of this section, but not to exceed an aggregate penalty of thirty-five thousand dollars in any six-month period upon the group or any member of the group that participates in the violation;

(C) Obtain injunctive relief to restrain or prevent a violation or threatened violation of the type described in division (A) of this section.

Cite as R.C. § 3960.13

Effective Date: 10-26-1989