CHAPTER 698c
RISK RETENTION GROUPS

Table of Contents

Sec. 38a-250. (Formerly Sec. 38-530). Definitions.
Sec. 38a-251. (Formerly Sec. 38-531). Licensure of risk retention groups chartered in this state. Submission of plan of operation.
Sec. 38a-252. (Formerly Sec. 38-532). Requirements for risk retention groups chartered outside the state.
Sec. 38a-253. (Formerly Sec. 38-533). Submission of information to Insurance Commissioner from risk retention groups domiciled outside state. Financial examination.
Sec. 38a-254. (Formerly Sec. 38-534). Premiums subject to taxation.
Sec. 38a-255. (Formerly Sec. 38-535). Notice on policies issued by risk retention group.
Sec. 38a-256. (Formerly Sec. 38-536). Solicitation or sale of insurance prohibited if financially impaired.
Sec. 38a-257. (Formerly Sec. 38-537). Solicitation or sale of insurance only to persons eligible for group membership.
Sec. 38a-258. (Formerly Sec. 38-538). Insurance company membership in risk retention group limited.
Sec. 38a-259. (Formerly Sec. 38-539). Insurance insolvency guaranty funds not applicable to risk retention groups.
Sec. 38a-260. (Formerly Sec. 38-540). Applicability of insurance laws to purchasing groups. Certain disclosures required. When.
Sec. 38a-261. (Formerly Sec. 38-541). Purchasing group to furnish notice to Insurance Commissioner.
Sec. 38a-262. (Formerly Sec. 38-542). Authority of Insurance Commissioner.
Sec. 38a-263. (Formerly Sec. 38-543). License required for producers.
Sec. 38a-264. (Formerly Sec. 38-544). Penalties for violations of chapter.
Sec. 38a-265. (Formerly Sec. 38-545). Federal injunctions enforceable in state courts.
Sec. 38a-266. (Formerly Sec. 38-546). Regulations by Insurance Commissioner.
Secs. 38a-267 to 38a-270.

      Sec. 38a-250. (Formerly Sec. 38-530). Definitions. For purposes of sections 38a-250 to 38a-266, inclusive:

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

      (2) "Doing business" means effecting any of the following acts in this state by mail or otherwise: (A) The making of or proposing to make, as an insurer, an insurance contract; (B) the making of or proposing to make, as guarantor or surety, any contract of guaranty or suretyship as a vocation and not merely incidental to any other legitimate business or activity of the guarantor or surety; (C) the taking or receiving of any application for insurance; (D) the receiving or collection of any premium, commission, membership fees, assessments, dues or other consideration for any insurance or any party thereof; (E) the issuance or delivery of contracts of insurance to residents of this state or to persons authorized to do business in this state; (F) directly or indirectly acting as an agent for or otherwise representing or aiding on behalf of another any person or insurer in the solicitation, negotiation, procurement or effectuation of insurance or renewals thereof or in the dissemination of information as to coverage or rates, or forwarding of applications, or delivery of policies or contracts, or inspection of risks, a filing of rates or investigation or adjustment of claims or losses or in the transaction of matters subsequent to effectuation of the contract and arising out of it, or in any other manner representing or assisting a person or insurer in the transaction of insurance with respect to subjects of insurance resident, located or to be performed in this state; (G) the doing of or proposing to do any insurance business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of the general statutes relating to insurance; and (H) any other transactions of business in this state by an insurer. The venue of an act committed by mail is at the point where the matter transmitted by mail is delivered and takes effect;

      (3) "Domicile", for purposes of determining the state in which a purchasing group is domiciled, means (A) for a corporation, the state in which the purchasing group is incorporated, and (B) for an unincorporated entity, the state of its principal place of business;

      (4) "Hazardous financial condition" means that, based on its present or reasonably anticipated financial condition, a risk retention group is unlikely to be able (A) to meet obligations to policyholders with respect to known claims and reasonably anticipated claims, or (B) to pay other obligations in the normal course of business;

      (5) "Insurance" means primary insurance, excess insurance, reinsurance, surplus lines insurance and any other arrangement for shifting and distributing risk which is determined to be insurance under applicable state or federal law;

      (6) "Liability" means legal liability for damages, including 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 (A) any business, whether profit or nonprofit, trade, product, services, including professional services, premises or operations, or (B) any activity of any state or local government or any agency or political subdivision thereof. "Liability" does not include personal risk liability and an employer's liability with respect to its employees other than legal liability under the Federal Employers' Liability Act (45 USC 51 et seq.);

      (7) "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 referred to in subdivision (6) of this section;

      (8) "Plan of operation or a feasibility study" means an analysis which presents the expected activities and results of a risk retention group including, at a minimum, (A) the coverages, deductibles, coverage limits, rates and rating classification systems for each line of insurance the group intends to offer, (B) historical and expected loss experience of the proposed members and national experience of similar exposures to the extent that this experience is reasonably available, (C) pro forma financial statements and projections, (D) appropriate opinions by an independent member of the American Academy of Actuaries, including a determination of minimum premium or participation levels required to commence operations and to prevent a hazardous financial condition, (E) 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, (F) identification of management, underwriting and claims procedures, marketing methods, managerial oversight methods, investment policies and reinsurance agreements, (G) 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, and (H) such other matters as may be prescribed by the commissioner of the state in which the risk retention group is chartered for liability insurance companies authorized by the insurance laws of that state;

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

      (10) "Purchasing group" means any group which: (A) Has as one of its purposes the purchase of liability insurance on a group basis; (B) purchases such insurance only for its group members and only to cover their similar or related liability exposure, as described in subparagraph (C) of this subdivision; (C) is composed of members whose businesses 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; and (D) is domiciled in any state;

      (11) "Risk retention group" means any corporation or other limited liability association: (A) Whose primary activity consists of assuming and spreading all, or any portion, of the liability exposure of its group members; (B) which is organized for the primary purpose of conducting the activity described under subparagraph (A) of this subdivision; (C) which (i) is chartered and licensed as a liability insurance company under the laws of a state and authorized to engage in the business of insurance under the laws of such state, or (ii) before January 1, 1985, was chartered or licensed and authorized to engage in the business of insurance under the laws of Bermuda or the Cayman Islands and, before such date, had certified to the insurance commissioner of at least one state that it satisfied the capitalization requirements of such state, except that any such group shall be considered to be a risk retention group only if it has been engaged in business continuously since such date and only for the purpose of continuing to provide insurance to cover product liability or completed operations liability, as such terms were defined in the Product Liability Risk Retention Act of 1981, (15 USC 3901 et seq.), before the date of the enactment of the Liability Risk Retention Act of 1986; (D) which does not exclude any person from membership in the group solely to provide for members of such a group a competitive advantage over such a person; (E) which (i) has as its owners only persons who comprise the membership of the risk retention group and who are provided insurance by such group, or (ii) 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 such group; (F) whose 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; (G) whose activities do not include the provision of insurance other than (i) liability insurance for assuming and spreading all or any portion of the similar or related liability exposure of its group members, and (ii) reinsurance with respect to the similar or related liability exposure of any other risk retention group, or any member of such other group, which is engaged in businesses or activities so that such group or member meets the requirement described in subparagraph (F) of this subdivision for membership in the risk retention group which provides such reinsurance; and (H) the name of which includes the phrase "Risk Retention Group";

      (12) "State" means any state of the United States or the District of Columbia.

      (P.A. 87-135, S. 1, 18; P.A. 89-33, S. 1; P.A. 93-239, S. 25.)

      History: P.A. 89-33 deleted the definition of "located" and renumbered the remaining Subdivs. as necessary; Sec. 38-530 transferred to Sec. 38a-250 in 1991; P.A. 93-239 redefined "plan of operation or a feasibility study" to include information sufficient to verify the membership, businesses and activities with respect to the liability to which such members are exposed due to business, services trade or product, identification of various policies and procedures utilized, identification of states where insurer has sought or obtained charter and license and other information prescribed by commissioner of state where chartered and made technical corrections for statutory consistency.

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      Sec. 38a-251. (Formerly Sec. 38-531). Licensure of risk retention groups chartered in this state. Submission of plan of operation. A risk retention group seeking to be chartered in this state must be chartered and licensed as a liability insurance company authorized by the insurance laws of this state and, except as provided in sections 38a-250 to 38a-266, inclusive, shall comply with all of the laws, rules, regulations and requirements applicable to such insurers chartered and licensed in this state, and with section 38a-252 to the extent such requirements are not a limitation on laws, rules, regulations or requirements of this state. Before it may offer insurance in any state, each risk retention group shall also submit for approval to the Insurance Commissioner of this state a plan of operation or a feasibility study and revisions of such plan or study if the group intends to offer any additional lines of liability insurance.

      (P.A. 87-135, S. 2, 18.)

      History: Sec. 38-531 transferred to Sec. 38a-251 in 1991.

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      Sec. 38a-252. (Formerly Sec. 38-532). Requirements for risk retention groups chartered outside the state. Risk retention groups chartered in states other than this state and seeking to do business as a risk retention group in this state shall, prior to offering insurance in this state submit to the Insurance Commissioner: (1) A statement identifying the state or states in which the risk retention group is chartered and licensed as a liability insurance company, date of chartering, its principal place of business, and such other information, including information on its membership, as the commissioner may require to verify that the risk retention group satisfies the definitional requirements of subdivision (11) of section 38a-250; (2) a copy of its plan of operations or a feasibility study and revisions of such plan or study submitted to its state of domicile, provided the provision relating to the submission of a plan of operation or a feasibility study shall not apply with respect to any line or classification of liability insurance which (A) was defined in the Product Liability Risk Retention Act of 1981 before the date of the enactment of the Liability Risk Retention Act of 1986, and (B) was offered before such date by any risk retention group which had been chartered and operating for not less than three years before such date; and (3) a statement of registration which designates the commissioner as its agent for the purpose of receiving service of legal documents or process.

      (P.A. 87-135, S. 3, 18; P.A. 89-33, S. 2.)

      History: P.A. 89-33 made technical change in the cited Subdiv. of Sec. 38-530; Sec. 38-532 transferred to Sec. 38a-252 in 1991.

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      Sec. 38a-253. (Formerly Sec. 38-533). Submission of information to Insurance Commissioner from risk retention groups domiciled outside state. Financial examination. (a) Any risk retention group not domiciled in this state which is doing business in this state shall submit to the Insurance Commissioner: (1) A copy of the group's financial statement submitted to its state of domicile, 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; (2) a copy of each examination of the risk retention group as certified by the commissioner or public official conducting the examination; (3) upon request by the commissioner, a copy of any audit performed with respect to the risk retention group; and (4) such information as may be required to verify that it satisfies the definitional requirements of subdivision (11) of section 38a-250.

      (b) Any risk retention group must submit to an examination by the Insurance Commissioner to determine its financial condition if the commissioner of the jurisdiction in which the group is chartered has not initiated an examination or does not initiate an examination within sixty days after a request by the Insurance Commissioner of this state. Any such examination shall be coordinated to avoid unjustified repetition and conducted in an expeditious manner and in accordance with the National Association of Insurance Commissioners' Examiner Handbook.

      (P.A. 87-135, S. 4, 18; P.A. 89-33, S. 3.)

      History: P.A. 89-33 made technical change in the cited Subdiv. of Sec. 38-530; P.A. 38-533 transferred to Sec. 38a-253 in 1991.

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      Sec. 38a-254. (Formerly Sec. 38-534). Premiums subject to taxation. All premiums paid for coverages within this state to risk retention groups and insurers other than licensed or eligible surplus lines insurers shall be subject to taxation as provided in section 38a-277.

      (P.A. 87-135, S. 5, 18.)

      History: Sec. 38-534 transferred to Sec. 38a-254 in 1991.

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      Sec. 38a-255. (Formerly Sec. 38-535). Notice on policies issued by risk retention group. Any policy 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.

      (P.A. 87-135, S. 6, 18.)

      History: Sec. 38-535 transferred to Sec. 38a-255 in 1991.

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      Sec. 38a-256. (Formerly Sec. 38-536). Solicitation or sale of insurance prohibited if financially impaired. No risk retention group or producer shall solicit or sell insurance if the risk retention group is in a hazardous financial condition or is financially impaired.

      (P.A. 87-135, S. 7, 18; P.A. 96-193, S. 5, 36.)

      History: Sec. 38-536 transferred to Sec. 38a-256 in 1991; P.A. 96-193 substituted "producer" for "agent or broker", effective June 3, 1996.

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      Sec. 38a-257. (Formerly Sec. 38-537). Solicitation or sale of insurance only to persons eligible for group membership. No risk retention group, purchasing group or producer shall solicit or sell insurance to any person who is not eligible for membership in such group.

      (P.A. 87-135, S. 8, 18; P.A. 96-193, S. 6, 36.)

      History: Sec. 38-537 transferred to Sec. 38a-257 in 1991; P.A. 96-193 substituted "producer" for "agent or broker", effective June 3, 1996.

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      Sec. 38a-258. (Formerly Sec. 38-538). Insurance company membership in risk retention group limited. No risk retention group shall be allowed to do business in this state if an insurance company is directly or indirectly a member or owner of such risk retention group, other than in the case of a risk retention group all of whose members are insurance companies.

      (P.A. 87-135, S. 9, 18.)

      History: Sec. 38-538 transferred to Sec. 38a-258 in 1991.

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      Sec. 38a-259. (Formerly Sec. 38-539). Insurance insolvency guaranty funds not applicable to risk retention groups. No risk retention group shall be permitted to join or contribute financially to any insurance insolvency guaranty fund, or similar mechanism, in this state, nor shall any risk retention group, or its insureds, receive any benefit from any such fund for claims arising out of the operations of such risk retention group.

      (P.A. 87-135, S. 10, 18.)

      History: Sec. 38-539 transferred to Sec. 38a-259 in 1991.

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      Sec. 38a-260. (Formerly Sec. 38-540). Applicability of insurance laws to purchasing groups. Certain disclosures required. When. Any purchasing group meeting the criteria established under the provisions of the Liability Risk Retention Act of 1986 shall be exempt from any law of this state relating to the creation of groups for the purchase of insurance, prohibition of group purchasing or any law that would discriminate against a purchasing group or its members. Any insurer shall be exempt from any law of this state which prohibits providing, or offering to provide, 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, coverage or other matters. Any purchasing group shall be subject to all other applicable laws of this state. Any purchasing group may not purchase insurance from a risk retention group that is not chartered in a state or from an insurer not admitted in this state, unless the purchase is effected through a licensed producer acting pursuant to the surplus lines, laws and regulations of this state. A purchasing group which obtains liability insurance from a risk retention group or an insurer not admitted in this state shall inform each of the members of the group which have a risk resident or located in this state that the risk is not protected by the Connecticut Insurance Guaranty Association, and that the risk retention group or insurer may not be subject to all insurance laws and regulations of this state. No purchasing group may purchase insurance providing for a deductible or self-insured retention applicable to the group as a whole; however, such coverage may provide for a deductible or self-insured retention applicable to individual members.

      (P.A. 87-135, S. 11, 18; P.A. 89-33, S. 4; P.A. 93-239, S. 26; P.A. 95-168, S. 4; P.A. 96-193, S. 7, 36.)

      History: P.A. 89-33 required a purchasing group to purchase insurance from insurers admitted in this state unless purchased through an agent or broker licensed in this state or from a risk retention group; Sec. 38-540 transferred to Sec. 38a-260 in 1991; P.A. 93-239 amended the section to require disclosure when the risk retention group or insurer is not admitted in this state; P.A. 95-168 added provision to require that no purchasing group may purchase insurance on a deductible or self-insured retention basis for a group as a whole but may provide such coverage on a deductible or self-insured retention basis if applicable to the individual members; P.A. 96-193 substituted "producer" for "agent or broker", effective June 3, 1996.

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      Sec. 38a-261. (Formerly Sec. 38-541). Purchasing group to furnish notice to Insurance Commissioner. A purchasing group which intends to do business in this state shall furnish notice to the Insurance Commissioner which shall: (1) Identify the state in which the group is domiciled; (2) specify the lines and classifications of liability insurance which the purchasing group intends to purchase; (3) identify the insurance company from which the group intends to purchase its insurance and the domicile of such company; (4) identify the principal place of business of the group; (5) provide such other information as may be required by the Insurance Commissioner to verify that the purchasing group satisfies the definitional requirements of subdivision (10) of section 38a-250; (6) register with and designate the Insurance Commissioner as its agent solely for the purpose of receiving service of legal documents or process, in accordance with Section 4 of the Liability Risk Retention Act of 1986; (7) identify all other states in which the group intends to do business; and (8) specify 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. A purchasing group shall, within ten days, notify the commissioner of any changes in any of the items set forth in this section.

      (P.A. 87-135, S. 12, 18; P.A. 89-33, S. 5; P.A. 93-239, S. 27.)

      History: P.A. 89-33 made technical change in the cited Subdiv. of Sec. 38-530; Sec. 38-541 transferred to Sec. 38a-261 in 1991; P.A. 93-239 added additional requirements re the identification of all other states in which the risk retention group intends to do business, re the specification of the methods used and persons involved in offering such insurance to the members in this state and re notification to the commissioner within ten days of any changes in the requirements required by Sec. 38a-261.

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      Sec. 38a-262. (Formerly Sec. 38-542). Authority of Insurance Commissioner. The Insurance Commissioner is authorized to make use of any of the powers established under this title to enforce the laws of this state so long as those powers are not specifically preempted by the Product Liability Risk Retention Act of 1981, (15 USC 3901 et seq.), as amended by the Liability Risk Retention Act of 1986. Such authorization includes, but is not limited to, the commissioner's administrative authority to investigate, issue subpoenas, conduct depositions and hearings, issue orders and impose penalties. With regard to any investigation, administrative proceedings or litigation, the commissioner may rely on the procedural law and regulations of the state. The injunctive authority of the commissioner in regard to risk retention groups is restricted by the requirement that any injunction be issued by a court of competent jurisdiction.

      (P.A. 87-135, S. 13, 18.)

      History: Sec. 38-542 transferred to Sec. 38a-262 in 1991.

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      Sec. 38a-263. (Formerly Sec. 38-543). License required for producers. Any person acting, or offering to act, as a producer for a risk retention group or purchasing group which solicits members, sells insurance coverage, purchases coverage for its members located within the state or otherwise does business in this state shall, before commencing any such activity, obtain a license from the Insurance Commissioner in such form as the commissioner prescribes in accordance with the provisions of section 38a-769.

      (P.A. 87-135, S. 14, 18; P.A. 96-193, S. 8, 36.)

      History: Sec. 38-543 transferred to Sec. 38a-263 in 1991; P.A. 96-193 substituted "producer" for "agent or broker", effective June 3, 1996.

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      Sec. 38a-264. (Formerly Sec. 38-544). Penalties for violations of chapter. A risk retention group which violates any provision of sections 38a-250 to 38a-266, inclusive, shall be subject to fines and penalties applicable to licensed insurers generally, including revocation of its license and the right to do business in this state.

      (P.A. 87-135, S. 15, 18.)

      History: Sec. 38-544 transferred to Sec. 38a-264 in 1991.

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      Sec. 38a-265. (Formerly Sec. 38-545). Federal injunctions enforceable in state courts. An order issued by a district court of the United States enjoining a risk retention group from soliciting or selling insurance or operating, in any state, or in all states or in any territory or possession of the United States, upon a finding that such a group is in a hazardous financial condition shall be enforceable in the courts of this state.

      (P.A. 87-135, S. 16, 18.)

      History: Sec. 38-545 transferred to Sec. 38a-265 in 1991.

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      Sec. 38a-266. (Formerly Sec. 38-546). Regulations by Insurance Commissioner. The commissioner may adopt regulations, in accordance with the provisions of chapter 54, relating to risk retention groups as may be necessary to carry out the provisions of sections 38a-250 to 38a-265, inclusive.

      (P.A. 87-135, S. 17, 18.)

      History: Sec. 38-546 transferred to Sec. 38a-266 in 1991.

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      Secs. 38a-267 to 38a-270. Reserved for future use.

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