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 31-165-5 - RRGs Licensed as Captive Insurers
Current through 2024-38, September 18, 2024
Notwithstanding any exemption from the requirements of the Maine Insurance Code otherwise available to captive insurers, an RRG that is licensed by the Superintendent as a captive insurer is subject to the following requirements:
1. Examinations.The Superintendent shall have all powers and responsibilities to examine any person with respect to the affairs and transactions of a captive RRG and, if applicable, its holding company system, as set forth in 24-A M.R.S.A. §§221, 222(1-A), and 223 through 228.
2. Accounting Practices and Procedures.A captive RRG's assets and liabilities shall be valued and reported in accordance with statutory accounting principles as provided in 24-A M.R.S.A. §901-A, subject to such permitted and prescribed practices as are appropriate to the nature, scope, and complexity of the RRG's business.
(1) For purposes of provisions requiring disclosure of information to regulators in other states, a captive RRG is considered "authorized" in any state where it is registered under that state's Risk Retention Act or substantially similar law.
(2) A captive RRG shall not be required to disclose risk-based capital information in any state that does not provide effective confidentiality protections for such information.
(3) The Superintendent may grant an exemption that adjusts the action level thresholds or modifies the corrective action requirements if the captive RRG demonstrates to the satisfaction of the Superintendent that:
(a) All continuing members of the captive RRG have given their informed consent to the exemption, and effective measures have been taken to provide adequate protection to all departing members for their outstanding exposures, including appropriate prioritization of claims payment obligations;
(b) Effective measures are in place for monitoring the ongoing performance of the captive RRG and promptly responding to adverse events; and
(c) All continuing members of the RRG are financially strong and able to withstand the risks posed by the exemption, giving due consideration to any financial guaranty given by a financially strong sponsoring organization or other financially strong guarantor. There is a rebuttable presumption that a member or guarantor that has submitted at least three years of historical audited financial statements is considered financially strong if it has an investment-grade rating from a nationally recognized statistical rating organization, or tangible net worth equal to the lesser of $100 million or ten times the captive RRG's largest net retained per-occurrence limit.
3. Holding Company Systems.A captive RRG shall be considered a domestic insurer for purposes of the Maine Insurance Holding Company System Act, 24-A M.R.S.A. §222, and the "Holding Company Rule", Maine Bureau of Insurance Rule 180, except to the extent that the Superintendent modifies those requirements to address unique aspects of the organization and operations of RRGs.
4. Reinsurance. Reinsurance ceded and assumed by a captive RRG is subject to the following requirements.
5. Diversification of Risk.A captive RRG shall avoid any imprudent concentration of risk in any one subject of insurance. The Superintendent may take such remedial action as may be necessary to prevent or correct a violation of this Subsection, including ordering the RRG to deny, terminate, or reinsure any coverage creating an imprudent concentration of risk.
6. Other Provisions Applicable.A captive RRG shall be considered a domestic insurer for purposes of the following provisions of the Maine Insurance Code and rules adopted by the Superintendent thereunder:
(A) The Maine Business Transacted with Broker-Controlled Insurer Act, 24-A M.R.S.A. Chapter 77 (§§ 6401 et seq.);
(B) The Maine Managing General Agents Act, 24-A M.R.S.A. Chapter 16, Subchapter 8 (§§ 1491 et seq.);
(C) The Maine Reinsurance Intermediary Act, 24-A M.R.S.A. Chapter 9, Subchapter 4 (§§ 741 et seq.); and
(D) The "Hazardous Condition Rule", Maine Bureau of Insurance Rule 710.
7. Transparency. To the extent that any disclosure requirement for captive RRGs, established or incorporated by reference by this Rule, conflicts with any confidentiality provision of the Maine Captive Insurance Company Act, 24-A M.R.S.A. Chapter 83, the disclosure requirement shall control. An RRG that is licensed as an association captive insurance company shall be subject to the disclosure requirements applicable to industrial insured groups under 24-A M.R.S.A. §§6707 and 6715. Each captive RRG shall acknowledge in writing, when it submits its plan of operation or feasibility study under 24-A M.R.S.A. §6094 or within 30 days after the effective date of this Rule, that as an RRG it assumes public reporting obligations not imposed on other captive insurers.
8. Standards for Discretionary Acts.When considering whether to grant any permitted accounting practice, or other request by a captive RRG for exemption, waiver, or modification of any requirement of general applicability, the Superintendent shall give due consideration to the lack of guaranty association protection for members insured by RRGs, and to the impact on the nationwide market in which the captive RRG is authorized by the Superintendent to do business. The Superintendent may enter into interstate regulatory cooperation agreements and arrangements to establish uniform standards and guidelines for the regulation of RRGs by their domiciliary states.
