Code of Maine Rules
02 - DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION
031 - BUREAU OF INSURANCE
Chapter 165 - PRUDENTIAL STANDARDS FOR DOMESTIC RISK RETENTION GROUPS
Section 31-165-4 - Corporate Governance and Operational Standards for Domestic RRGs

A. The RRG's board of directors shall have a majority of independent directors. A director does not qualify as independent unless the board affirmatively determines that the director has no material relationship with the RRG. The RRG shall review its determinations of independence and disclose them to the Superintendent at least annually.

(1) A director has a material relationship with the RRG if the director, an immediate family member, or any business with which the director is affiliated has received compensation or other valuable consideration from the RRG or from any consultant or service provider to the RRG, during any consecutive 12-month period, beginning within the preceding 24 months, that is greater than or equal to 5% of the RRG's gross written premium or 2% of its surplus, as measured at the end of any fiscal quarter ending within that 12-month period.

(2) A director has a material relationship with the RRG if the director or animmediate family member is, or has been within the past year, affiliated with or employed in a professional capacity by a present or formerinternal or external auditor of the RRG.

(3) A director has a material relationship with the RRG if the director or an immediate family member is, or has been within the past year, employed as anexecutive officer of a business entity whose board of directors or management includes any of the RRG's current executives.

(4) The relationships described in Subparagraphs (1) through (3) are examples, not an exhaustive list. The board shall regard any relationship that would give a reasonable person comparable or greater concerns about the director's independence as a material relationship.

(5) Membership in the RRG, direct or indirect ownership of a member of the RRG, or service as an employee, director, or officer of a member of the RRG or the direct or indirect parent of a member of the RRG, is not considered a material relationship with the RRG and therefore does not, without more, disqualify someone with such a relationship with a member of the RRG from serving as an independent director of the RRG.

B. If an RRG is not organized as a stock or mutual insurance corporation, the term "board of directors" shall refer to its managers, subscribers' advisory committee, or similar governing body. If an organization comprising the members of the RRG is the sole owner of the RRG and the Superintendent determines that the parent organization's board possesses and exercises effective control over the RRG, then the board of directors of the parent organization shall be considered the board of directors of the RRG for purposes of this Section; otherwise, both boards of directors are subject to all applicable requirements of this Section.

C. If the RRG is a reciprocal insurer, its attorney-in-fact shall adhere to the same standards regarding independence of operation and governance as imposed on the RRG's subscribers' advisory committee under this Section. The RRG's attorney-in-fact may not:

(1) Contract directly, rather than on behalf of the RRG, with any service provider for services to the RRG; or

(2) Recruit, negotiate with, or make the decision to engage any service provider with which the attorney-in-fact has a material relationship.

A. Service providers include captive managers, auditors, accountants, actuaries, investment advisors, legal service providers, managing general underwriters, and any other persons or entities responsible for underwriting, determination of rates, collection of premium, adjusting and settling claims, or the preparation of financial statements.

B. A service provider contract is material if the amount to be paid for the contract is greater than or equal to 5% of the RRG's annual gross written premium or 2% of its surplus, whichever is greater.

C. A lawyer retained by the RRG to defend insurance claims is not considered the RRG's legal service provider unless the lawyer also provides other legal services to the RRG, or the lawyer has received material levels of compensation for claims defense during three of the past five calendar years.

D. No material service provider contract may take effect unless the RRG has notified the Superintendent in writing of its intention to enter into the contract at least one month before the requested effective date and the Superintendent has not disapproved it within the review period.

A. Discharge its duties with the care, skill, prudence, and diligence of prudent directors acting in a similar enterprise and purpose;

B. Ensure that all insured members of the RRG receive evidence of ownership interest in the RRG or its parent organization;

C. Ensure that the RRG's management is accountable for the RRG's compliance with the plan of operation and with applicable law, including the obligation to write only insurance to cover liabilities, incurred by its members, of the kinds described in 24-A M.R.S.A. §6093(6) and 15 U.S.C. § 3901(a)(2);

D. Develop a set of governance standards for the RRG;

E. Oversee the evaluation of the RRG's management, including but not limited to the performance of any captive manager, managing general underwriter, or other party or parties responsible for underwriting, determination of rates, collection of premium, adjusting or settling claims, or the preparation of financial statements;

F. Review and approve the amount to be paid for all material service providers; and

G. Review and approve, at least annually:

(1) The RRG's goals and objectives, its expectations for the performance of its officers and service providers in meeting those goals and objectives, and a management compensation plan consistent with those expectations;

(2) The officers' and service providers' performance in light of those goals and objectives; and,

(3) The continued retention of the officers and material service providers in light of their performance reviews.

A. A process by which the directors are elected by the RRG's insured members;

B. Director qualification standards;

C. Director responsibilities;

D. Director access to management and, as necessary and appropriate, independent advisors;

E. Director compensation;

F. Director orientation and continuing education;

G. Policies and procedures for management succession; and

H. Policies and procedures for annual performance evaluation of the board.

A. Conflicts of interest;

B. Matters covered under this State's corporate opportunities doctrine;

C. Confidentiality;

D. Fair dealing;

E. Protection and proper use of RRG assets;

F. Compliance with all applicable law; and

G. Requirements to report any illegal or unethical behavior that affects the operation of the RRG.