S.B. 505 Senate Bill No. 505--Committee on Commerce and Labor May 25, 1995 _____________ Referred to Committee on Commerce and Labor SUMMARY--Makes various changes in regulation of insurance. (BDR 57-881) FISCAL NOTE: Effect on Local Government: Yes. Effect on the State or on Industrial Insurance: Executive Budget. EXPLANATION--Matter in italics is new; matter in bra ckets [ ] is material to be omitted. AN ACT relating to insurance; adding provisions concerning reinsurance, controlling producers, regulation of capital according to risk, and actuarial evaluation of reserves; making it unlawful to obstruct, interfere or fail to cooperate with the commissioner of insurance in certain proceedings or investigations; making it unlawful to violate certain orders of the commissioner; making various other changes relating to insurance; and providing other matters properly relating thereto. THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS: Section 1. Chapter 679B of NRS is hereby amended by adding thereto the provisions set forth as sections 2, 3 and 4 of this act. Sec. 2. \1. Except as otherwise provided in this subsection, no cause of action arises, nor may any liability be imposed against the commissioner, his authorized representatives or any examiner appointed by him for any statements made or act performed or omitted in good faith while carrying out the provisions of this chapter. This subsection does not provide the commissioner, his authorized representatives or any examiner with immunity from action or liability for any damage, loss, injury or harm caused by the gross negligence of that person. 2. No cause of action arises, nor may any liability be imposed against any person for the act of communicating or delivering information or data to the commissioner or his authorized representative or examiner pursuant to an examination made under this chapter, if the act of communication or delivery was performed in good faith and without fraudulent intent, the intent to deceive or gross negligence. 3. This section does not abrogate or reduce any common law or statutory privilege or immunity under statute or at common law enjoyed by any person identified in subsection 1. 4. A person identified in subsection 1 is entitled to an award of attorney's fees and costs if he is the prevailing party in a civil cause of action for libel, slander or any other relevant tort arising out of activities in carrying out the provisions of NRS 679B.230 to 679B.300, inclusive, and the party bringing the action was not substantially justified in doing so. For the purposes of this subsection, an action is "substantially justified" if it had a reasonable basis in law or fact at the time that it was brought.\\ Sec. 3. \1. If requested by the person examined, within the period allowed under subsection 1 of NRS 679B.280, or if ordered pursuant to subsection 2 of that section, the commissioner shall hold a hearing relative to the report and shall not file the report in the division for public inspection until after the hearing and his order thereon. 2. If no hearing has been requested or ordered, the examination report, with such modifications, if any, thereof as the commissioner deems proper, must be filed in the division for public inspection within 30 days after the expiration of the period allowed for review by the person examined. Otherwise the report must be so filed within 30 days after final hearing thereon, except that the commissioner may withhold from public inspection any report for so long as he deems such withholding to be necessary for the protection of the person examined against unwarranted injury or to be in the public interest. 3. The commissioner shall forward to the person examined a copy of the examination report as filed, together with any recommendations or statements relating thereto which he deems proper. 4. If the report concerns the examination of a domestic insurer, a copy of the report, or a summary thereof approved by the commissioner must be presented by the insurer's chief executive officer to the insurer's board of directors or similar governing body at its next regular board meeting. A copy of the report must also be furnished by the secretary of the insurer, if incorporated, or by the attorney-in-fact if a reciprocal insurer, within 30 days after receipt of the report in final form by the insurer, to each member of the insurer's board of directors or board of governors, if a reciprocal insurer, and the certificate of the secretary or attorney-in-fact that a copy of the examination report has been so furnished shall be deemed to constitute knowledge of the contents of the report by each such member. \\Sec. 4. \1. The commissioner may disclose the content of a report, preliminary report, or the results of an examination, or any matter relating thereto, to the division or any agency of any other state or country that regulates insurance, or to law enforcement officers of this or any other state, or to an agency of the Federal Government at any time, if the agency or office receiving the report or matter relating thereto agrees in writing to hold it confidential in a manner consistent with this chapter. Access may also be granted to the National Association of Insurance Commissioners. 2. All working papers, recorded information, documents and copies thereof produced by, obtained by or disclosed to the commissioner or any other person in the course of an examination made under this chapter are confidential, are not subject to subpoena, and may not be made public by the commissioner or any other person, except as necessary for a hearing or as provided in this section and subsection 4 of section 3 of this act. A person to whom information is given must agree in writing before receiving the information to provide to it the same confidential treatment as required by this section, unless the prior written consent of the insurer to which it pertains has been obtained.\\ Sec. 5. NRS 679B.230 is hereby amended to read as follows: 679B.230 1. For the purpose of determining its financial condition, fulfillment of its contractual obligations and compliance with law, the commissioner shall, as often as he deems advisable, examine the affairs, transactions, accounts, records and assets of each authorized insurer, and of any person as to any matter relevant to the financial affairs of the insurer or to the examination. Except as otherwise expressly provided [,] \in this Title,\\ he shall so examine each [domestic] \authorized\\ insurer not less frequently than every [3] \5\\ years. Examination of an alien insurer [shall] \must\\ be limited to its insurance transactions, assets, trust deposits and affairs in the United States \,\\ [of America,] except as otherwise required by the commissioner. 2. The commissioner shall in like manner examine each insurer applying for an initial certificate of authority to transact insurance in this state. 3. In lieu of [making his own examination,] \an examination under this chapter,\\ the commissioner may [, in his discretion,] accept a [full] report of the [last recent] examination of a foreign or alien insurer [, certified to by the insurance supervisory officer of another state.] \prepared by the division for a foreign insurer's state of domicile or an alien insurer's state of entry into the United States.\\ 4. As far as practical the examination of a foreign or alien insurer [shall] \must\\ be made in cooperation with the insurance supervisory officers of other states in which the insurer transacts business. Sec. 6. NRS 679B.250 is hereby amended to read as follows: 679B.250 1. [Whenever] \When\\ the commissioner determines to examine the affairs of any person, he shall designate one or more examiners and instruct them as to the scope of the examination. The examiner shall, upon demand, exhibit his official credentials to the person under examination. 2. The commissioner shall conduct each examination in an expeditious, fair and impartial manner. 3. Upon any such examination the commissioner, or the examiner if specifically so authorized in writing by the commissioner, [shall have power to] \may\\ administer oaths, and [to] examine under oath any [individual] \person\\ as to any matter relevant to the affairs under examination or relevant to the examination. 4. Every person being examined, its officers, attorneys, employees, agents and representatives shall make freely available to the commissioner or his examiners the accounts, records, documents, files, information, assets and matters of [such] \the\\ person \examined\\ in his possession or control relating to the subject of the examination and shall facilitate the examination. 5. If the commissioner or examiner finds any accounts or records to be inadequate, or inadequately kept or posted, he may employ experts to reconstruct, rewrite, post or balance them at the expense of the person being examined if [such] \that\\ person has failed to maintain, complete or correct [such] \the\\ records or accounting after the commissioner or examiner has given him written notice and a reasonable opportunity to do so. 6. Neither the commissioner nor any examiner [shall] \may\\ remove any record, account, document, file or other property of the person being examined from the offices or place of [such] \the\\ person \examined\\ except with [the] \his\\ written consent [of such person in advance of such] \before\\ removal or pursuant to an order of court duly obtained. This provision [shall not be deemed to] \does not\\ affect the making and removal of copies or abstracts of any such record, account, document or file. 7. Any [individual] \person\\ who refuses without just cause to be examined under oath or who willfully obstructs or interferes with the examiners in the exercise of their authority pursuant to this section is guilty of a misdemeanor.\ 8. This chapter does not limit the commissioner's authority: (a) To terminate or suspend an examination in order to pursue other legal or regulatory action. (b) During any hearing or any legal action, to use and, if so ordered by a court, to make public a final or preliminary report of an examination, working papers or other documents of an examiner or insurer, or any other information discovered or developed during the course of an examination. Such documents must be given their appropriate evidentiary weight and must not be accepted as prima facie evidence of the facts contained therein.\\ Sec. 7. NRS 679B.270 is hereby amended to read as follows: 679B.270 1. [Upon] \No later than 60 days after the\\ completion of an examination, the examiner designated by the commissioner shall make a true report thereof which [shall] \must\\ comprise only facts appearing upon the books, records or other documents of the person examined, or as ascertained from the sworn testimony of [its] \the\\ officers or agents or other [individuals] \persons\\ examined concerning its affairs, and such conclusions and recommendations as may reasonably be warranted from [such] \the\\ facts. The report of examination [shall] \must\\ be verified by the oath of the examiner making the report. 2. Such a report of examination of an insurer so verified [shall be] \is\\ prima facie evidence in any action or proceeding for the receivership, conservation or liquidation of the insurer brought in the name of the state against the insurer, its officers or agents upon the facts stated therein. Sec. 8. NRS 679B.280 is hereby amended to read as follows: 679B.280 1. [The] \Upon receipt of the verified report of the examination, the\\ commissioner shall deliver a copy of the [examination] report to the person examined, together with a notice affording [the person] \him\\ 10 days or such additional reasonable period as the commissioner for good cause may allow within which to review the report and [recommend changes therein. 2. If so requested by the person examined, within the period allowed under subsection 1, or if deemed advisable by the commissioner without such request, the commissioner shall hold a hearing relative to the report and shall not file the report in the division for public inspection until after such hearing and his order thereon. 3. If no such hearing has been requested or held, the examination report, with such modifications, if any, thereof as the commissioner deems proper, must be accepted by the commissioner and filed in the division for public inspection upon expiration of the review period provided for in subsection 1. The report must in any event be so accepted and filed within 6 months after final hearing thereon, except that the commissioner may withhold from public inspection any examination report for so long as he deems such withholding to be necessary for the protection of the person examined against unwarranted injury or to be in the public interest. 4. The commissioner shall forward to the person examined a copy of the examination report as filed for public inspection, together with any recommendations or statements relating thereto which he deems proper. 5. If the report concerns the examination of a domestic insurer, a copy of the report, or a summary thereof approved by the commissioner, when filed for public inspection, or if withheld from public inspection under subsection 3, together with the recommendations or statements of the commissioner or his examiner, must be presented by the insurer's chief executive officer to the insurer's board of directors or similar governing body at a meeting thereof which must be held within 30 days next following receipt of the report in final form by the insurer. A copy of the report must also be furnished by the secretary of the insurer, if incorporated, or by the attorney-in-fact if a reciprocal insurer, to each member of the insurer's board of directors or board of governors, if a reciprocal insurer, and the certificate of the secretary or attorney-in-fact that a copy of the examination report has been so furnished shall be deemed to constitute knowledge of the contents of the report by each such member.] \make a written submission or rebuttal with respect to recommended changes or any matters contained in the report. 2. Within 30 days after the end of the period allowed for the receipt of written submissions or rebuttals, the commissioner shall fully consider and review the report, together with any written submissions or rebuttals and any relevant portions of the examiner's working papers and enter an order: (a) Adopting the report as filed or with modification or corrections; (b) Rejecting the report with directions to the examiner to reopen the examination for purposes of obtaining additional data, documentation or information, and requiring the refiling of the report pursuant to subsection 1 of NRS 679B.270; or (c) For an investigatory hearing for purposes of obtaining additional documentation, data, information and testimony. 3. If the report reveals that the insurer is operating in violation of any law, regulation or previous order of the commissioner, the commissioner may order the insurer to take any action the commissioner considers necessary or appropriate to cure the violation.\\ Sec. 9. Chapter 680A of NRS is hereby amended by adding thereto a new section to read as follows:\ 1. The commissioner may adopt regulations to define when an insurer is considered to be in a hazardous financial condition and to set forth the standards to be considered by the commissioner in determining whether the continued operation of an insurer transacting business in this state may be considered to be hazardous to its policyholders or creditors or to the general public. 2. If the commissioner determines that any insurer is in a hazardous financial condition, he may, instead of suspending or revoking the insurer's certificate of authority, limit the insurer's certificate of authority as he deems reasonably necessary to correct, eliminate or remedy any conduct, condition or ground that is deemed to be a cause of the hazardous financial condition. 3. An order or decision of the commissioner under this section is subject to review in accordance with NRS 679B.310 to 679B.370, inclusive, at the request of any party to the proceedings whose interests are substantially affected.\\ Sec. 10. NRS 680A.150 is hereby amended to read as follows: 680A.150 To apply for an original certificate of authority an insurer shall file with the commissioner its written application therefor on forms as prescribed and furnished by the commissioner, accompanied by the applicable fees specified in NRS 680B.010 \,\\ [(fee schedule),] stating under the oath of the president or vice president or other chief officer and the secretary of the insurer, or of the attorney-in-fact [(] if a reciprocal insurer \,\\ [),] the insurer's name, location of its home office \,\\ or principal office in the United States [(] if an alien insurer \,\\ [),] the kinds of insurance to be transacted, date of organization or incorporation, form of organization, state or country of domicile, and such additional information as the commissioner may reasonably require, together with the following documents, as applicable: 1. If a corporation, a copy of its charter or certificate or articles of incorporation, together with all amendments thereto, or as restated and amended under the laws of its state or country of domicile, currently certified by the public officer with whom the originals are on file in [such] \that\\ state or country. 2. If a domestic incorporated insurer or a mutual insurer, a copy of its bylaws, certified by the insurer's corporate secretary. 3. If a reciprocal insurer, a copy of the power of attorney of its attorney-in-fact, certified by the attorney- in-fact; and if a domestic reciprocal insurer, the declaration provided for in NRS 694B.060. 4. A complete copy of its financial statement as of not earlier than the December 31 next preceding in form as customarily used in the United States [of America] by like insurers, sworn to by at least two executive officers of the insurer or certified by the public insurance supervisory officer of the insurer's state of domicile, or of entry into the United States [of America (] if an alien insurer \.\\ [).] 5. A copy of the report of last examination made of the insurer within not more than [3] \5\\ years next preceding, certified by the public insurance supervisory officer of the insurer's state of domicile, or of entry into the United States [of America (] if an alien insurer \.\\ [).] 6. The appointment of the commissioner pursuant to NRS 680A.250 as its attorney to receive service of legal process. 7. If a foreign or alien insurer, a certificate of the public insurance supervisory officer of its state or country of domicile showing that it is authorized or qualified for authority to transact in such state or country the kinds of insurance proposed to be transacted in this state. 8. If a foreign insurer, a certificate as to a deposit if it is to be tendered pursuant to NRS 680A.140. 9. A copy of the insurer's rate book and of each form of policy currently proposed to be issued in this state, and of the form of application therefor. 10. If an alien insurer, a copy of the appointment and authority of its United States manager, certified by its officer having custody of its records. 11. Designation by the insurer of its officer or representative authorized to appoint and remove its agents in this state. Sec. 11. NRS 680A.200 is hereby amended to read as follows: 680A.200 1. The commissioner may refuse to continue or may suspend, limit or revoke an insurer's certificate of authority if he finds after a hearing thereon, or upon waiver of hearing by the insurer, that the insurer has: (a) Violated or failed to comply with any lawful order of the commissioner; (b) Conducted his business in an unsuitable manner; (c) Willfully violated or willfully failed to comply with any lawful regulation of the commissioner; or (d) Violated any provision of this code other than one for violation of which suspension or revocation is mandatory. In lieu of such a suspension or revocation, the commissioner may levy upon the insurer, and the insurer shall pay forthwith, an administrative fine of not more than $2,000 [. 2. The] \for each act or violation. 2. Except as otherwise provided in chapter 696B of NRS, the\\ commissioner shall suspend or revoke an insurer's certificate of authority on any of the following grounds if he finds after a hearing thereon that the insurer: (a) Is in unsound condition, is being fraudulently conducted, or is in such a condition or is using such methods and practices in the conduct of its business as to render its further transaction of insurance in this state currently or prospectively hazardous or injurious to policyholders or to the public. (b) With such frequency as to indicate its general business practice in this state: (1) Has without just cause failed to pay, or delayed payment of, claims arising under its policies, whether the claims are in favor of an insured or in favor of a third person with respect to the liability of an insured to the third person; or (2) Without just cause compels insureds or claimants to accept less than the amount due them or to employ attorneys or to bring suit against the insurer or such an insured to secure full payment or settlement of such claims. (c) Refuses to be examined, or its directors, officers, employees or representatives refuse to submit to examination relative to its affairs, or to produce its books, papers, records, contracts, correspondence or other documents for examination by the commissioner when required, or refuse to perform any legal obligation relative to the examination. (d) Except as otherwise provided in NRS 681A.110, has reinsured all its risks in their entirety in another insurer. (e) Has failed to pay any final judgment rendered against it in this state upon any policy, bond, recognizance or undertaking as issued or guaranteed by it, within 30 days after the judgment became final or within 30 days after dismissal of an appeal before final determination, whichever date is the later. 3. The commissioner may, without advance notice or a hearing thereon, immediately suspend the certificate of authority of any insurer as to which proceedings for receivership, conservatorship, rehabilitation or other delinquency proceedings have been commenced in any state by the public officer who supervises insurance for that state. Sec. 12. NRS 680A.265 is hereby amended to read as follows: 680A.265 1. Except as otherwise provided in subsection 5, every: (a) Domestic insurer; (b) Fraternal benefit society authorized to do business in this state pursuant to chapter 695A of NRS; and (c) Corporation subject to the provisions of chapter 695B of NRS, shall file with the commissioner, on or before June 1 of each year, a financial statement as of December 31 of the preceding calendar year that is certified by a certified public accountant who is not an employee of the insurer. The commissioner may request a financial statement from a foreign or alien insurer. 2. A certified public accountant shall immediately report to the commissioner any violation of the laws of this state found during any audit he conducts pursuant to subsection 1. 3. An insurer who does not file a report pursuant to subsection 1 on or before June 1 of each year is subject to the penalty imposed pursuant to NRS 680A.280. 4. A statement filed with the commissioner must not be a consolidated report with any other subsidiary, affiliate or parent company. 5. The provisions of this section do not apply to a domestic insurer who: (a) Is not licensed or authorized to do business in any state other than Nevada; or (b) Is exempted from the requirements of this section by order of the commissioner for good cause shown.\ 6. The commissioner may adopt reasonable regulations relating to annual audited financial reports to administer the provisions of this section.\\ Sec. 13. NRS 680A.270 is hereby amended to read as follows: 680A.270 1. Each authorized insurer shall annually on or before March 1, or within any reasonable extension of time therefor which the commissioner for good cause may have granted on or before [such] \that\\ date, file with the commissioner a full and true statement of its financial condition, transactions and affairs as of December 31 preceding. The statement [shall] \must\\ be in the general form and context of, and require information as called for by, the form of annual statement as currently in general and customary use in the United States [of America] for the type of insurer and kinds of insurance to be reported upon, with any useful or necessary modification or adaptation thereof, supplemented by additional information required by the commissioner. The statement [shall] \must\\ be verified by the oath of the insurer's president or vice president and secretary or actuary, as applicable, or, in the absence of the foregoing, by two other principal officers \,\\ [;] or if a reciprocal insurer, by the oath of the attorney-in-fact, or its like officers if a corporation. 2. The statement of an alien insurer [shall] \must\\ be verified by its United States manager or other officer duly authorized, and [shall] \may\\ relate only to the insurer's transactions and affairs in the United States [of America] unless the commissioner requires otherwise. If the commissioner requires a statement as to such an insurer's affairs throughout the world, the insurer shall file [such] \the\\ statement with the commissioner as soon as reasonably possible. 3. The commissioner may refuse to continue, or may suspend or revoke, the certificate of authority of any insurer failing to file its annual statement when due. 4. At the time of filing, the insurer shall pay the fee for filing its annual statement as prescribed by NRS 680B.010 \.\\ [(fee schedule).]\ 5. The commissioner may adopt regulations requiring each domestic, foreign and alien insurer which is authorized to transact insurance in this state to file the insurer's annual statement with the National Association of Insurance Commissioners or its successor organization. 6. All ratios of financial analyses and synopses of examinations concerning insurers that are submitted to the division by the National Association of Insurance Commissioners' Insurance Regulatory Information System are confidential and may not be disclosed by the division.\\ Sec. 14. Chapter 681A of NRS is hereby amended by adding thereto the provisions set forth as sections 15 to 61, inclusive, of this act. Sec. 15. \As used in NRS 681A.110 and sections 15 to 27, inclusive, of this act, "qualified financial institution in the United States" means an institution that: 1. Is organized, or in the case of a branch or agency of a foreign banking organization in the United States licensed, under the laws of the United States or any state thereof and has been granted authority to operate with fiduciary powers; and 2. Is regulated, supervised and examined by federal or state authorities having regulatory authority over banks and trust companies.\\ Sec. 16. \No credit may be taken as an asset or as a deduction from liability on account of reinsurance unless the reinsurer is authorized to transact insurance or reinsurance in this state or the requirements of section 17, 18, 19 or 20 of this act, and in any of these cases the requirements of sections 21 and 22 of this act also, are met.\\ Sec. 17. \1. Except as otherwise provided in subsection 2, credit must be allowed if reinsurance is ceded to an assuming insurer which is accredited as a reinsurer in this state. An accredited reinsurer is one which: (a) Files with the commissioner evidence of its submission to this state's jurisdiction; (b) Submits to this state's authority to examine its books and records; (c) Is licensed to transact insurance or reinsurance in at least one state, or in the case of a branch in the United States of an alien assuming insurer is entered through and licensed to transact insurance or reinsurance in at least one state; (d) Files annually with the commissioner a copy of its annual statement filed with the division of its state of domicile or entry and a copy of its most recent audited financial statement; and (e) Maintains a surplus as regards policyholders in an amount which is not less than $20,000,000 and whose accreditation: (1) Has not been denied by the commissioner within 90 days after its submission; or (2) Has been approved by the commissioner. 2. No credit may be allowed a domestic ceding insurer if the assuming insurer's accreditation has been revoked by the commissioner after notice and hearing.\\ Sec. 18. \1. Except as otherwise provided in subsection 2, credit must be allowed if reinsurance is ceded to an assuming insurer which is domiciled and licensed in, or in the case of a branch in the United States of an alien assuming insurer is entered through, a state which employs standards regarding credit for reinsurance substantially similar to those applicable under this chapter and the assuming insurer or branch in the United States of an alien assuming insurer: (a) Maintains a surplus as regards policyholders in an amount not less than $20,000,000; and (b) Submits to the authority of this state to examine its books and records. 2. The requirement of paragraph (a) of subsection 1 does not apply to reinsurance ceded and assumed pursuant to pooling among insurers affiliated with the same holding company.\\ Sec. 19. \1. Credit must be allowed if reinsurance is ceded to an assuming insurer which maintains a trust fund in a qualified financial institution in the United States for the payment of the valid claims of its policyholders and ceding insurers in the United States, their assigns and successors in interest. The assuming insurer shall report annually to the commissioner information substantially the same as that required to be reported on the National Association of Insurance Commissioners' form of annual statement by licensed insurers to enable the commissioner to determine the sufficiency of the trust fund. 2. In the case of a single assuming insurer, the trust must consist of an account in trust equal to the assuming insurer's liabilities attributable to business written in the United States and the assuming insurer shall maintain a surplus in trust of not less than $20,000,000. 3. In the case of a group of incorporated and individual unincorporated underwriters, the trust must consist of an account in trust equal to the group's liabilities attributable to business written in the United States and the group shall maintain a surplus in trust of which $100,000,000 must be held jointly for the benefit of ceding insurers in the United States to any member of the group, and the group shall make available to the commissioner an annual certification of the solvency of each underwriter by the group's domiciliary regulator and its independent public accountants. \\Sec. 20. \1. Credit must be allowed if reinsurance is ceded to a group of incorporated insurers under common administration which: (a) Reports annually to the commissioner the information required by subsection 1 of section 19 of this act; (b) Has continuously transacted insurance outside the United States for at least 3 years immediately before making application for accreditation; (c) Submits to this state's authority to examine its books and records and bears the expense of the examination; (d) Has aggregate policyholders' surplus of $10,000,000,000; and (e) Maintains a trust pursuant to subsection 2. 2. The trust must be in an amount equal to the group's several liabilities attributable to business ceded by ceding insurers in the United States to any member of the group pursuant to contracts of reinsurance issued in the name of the group, and the group shall maintain a joint surplus in trust of which $100,000,000 must be held jointly for the benefit of ceding insurers in the United States to any member of the group as additional security for any such liabilities. 3. Each member of the group shall make available to the commissioner an annual certification of the member's solvency by the member's domiciliary regulator and its independent public accountant. \\Sec. 21. \1. A trust for the purposes of section 19 or 20 of this act must be established in a form approved by the commissioner. The trust instrument must provide that contested claims become valid and enforceable upon the final order of any court of competent jurisdiction in the United States. The trust must vest legal title to its assets in the trustees of the trust for its policyholders and ceding insurers in the United States, their assigns and successors in interest. The trust and the assuming insurer are subject to examination as determined by the commissioner. The trust must remain in effect for as long as the assuming insurer has outstanding obligations due under the agreements for reinsurance subject to the trust. 2. No later than February 28 of each year the trustees of the trust shall report to the commissioner in writing setting forth the balance of the trust and listing the trust's investments at the end of the preceding year and shall certify the date of termination of the trust, if so planned, or certify that the trust will not expire before the next following December 31. \\Sec. 22. \1. Except as otherwise provided in subsection 2, if the assuming insurer is not licensed or accredited to transact insurance or reinsurance in this state, the credit permitted by section 18 or 19 of this act must not be allowed unless the assuming insurer agrees in the agreements for reinsurance: (a) That in the event of the failure of the assuming insurer to perform its obligations under the terms of the agreement, the assuming insurer, at the request of the ceding insurer, will submit to the jurisdiction of any court of competent jurisdiction in any state of the United States, will comply with all requirements necessary to give the court jurisdiction, and will abide by the final decision of the court or of any appellate court in the event of an appeal; and (b) To designate the commissioner or a designated attorney as its true and lawful attorney upon whom may be served any lawful process in an action, suit or proceeding instituted by or on behalf of the ceding company. 2. This section does not conflict with or override the obligation of the parties to an agreement for reinsurance to arbitrate their disputes, if such an obligation is created in the agreement. \\Sec. 23. \Credit must be allowed if reinsurance is ceded to an assuming insurer not meeting the requirements of NRS 681A.110 or section 16, 17, 18, 19 or 20 of this act, but only with respect to the insurance of risks located in jurisdictions where such reinsurance is required by applicable law or regulation of that jurisdiction. \\Sec. 24. \Credit must be allowed as an asset or as a deduction from liability to any ceding insurer for reinsurance lawfully ceded to an assuming insurer qualified therefor under NRS 681A.110 or section 16, 17, 18, 19 or 20 of this act, but no such credit may be allowed unless the reinsurance is payable by the assuming insurer on the basis of the liability of the ceding insurer under the contracts reinsured without diminution because of insolvency of the ceding insurer. \\Sec. 25. \A reduction from liability for the reinsurance ceded by a domestic insurer to an assuming insurer not meeting the requirements of NRS 681A.110 or the regulations of the commissioner concerning risk-based capital must be allowed in an amount not exceeding the liabilities carried by the ceding insurer and the reduction must be in the amount of assets held by or on behalf of the ceding insurer, including assets held in trust for the ceding insurer, under a contract of reinsurance with the assuming insurer as security for the payment of obligations thereunder, if the security is held in the United States subject to withdrawal solely by, and under the exclusive control of, the ceding insurer, or, in the case of a trust, held in a qualified financial institution in the United States. The security may be in any of the following forms: 1. Cash. 2. Securities listed by the Securities Valuation Office of the National Association of Insurance Commissioners and qualifying as admitted assets. 3. Irrevocable, unconditional letters of credit, each issued or confirmed by a qualified financial institution in the United States which has been determined by the commissioner, or the Securities Valuation Office of the National Association of Insurance Commissioners, to meet such standards of financial condition and standing as are considered necessary or appropriate to regulate the quality of financial institutions whose letters of credit are acceptable to the commissioner, no later than December 31 of the year for which filing is made, and in the possession of the ceding company on or before the date of filing its annual statement. A letter of credit meeting applicable standards of acceptability of its issuer as of the date of its issuance or confirmation, notwithstanding the issuing or confirming institution's subsequent failure to meet applicable standards of acceptability, continues to be acceptable as security until its expiration, extension, renewal, modification or amendment, whichever first occurs. 4. Any other form of security acceptable to the commissioner. \\Sec. 26. \An insurer shall promptly inform the commissioner in writing of the cancellation or any other material change in any of its treaties or arrangements for reinsurance. \\Sec. 27. \The commissioner may adopt regulations to carry out the provisions of NRS 681A.110 and sections 15 to 59, inclusive, of this act. \\Sec. 28. \As used in sections 28 to 61, inclusive, of this act, unless the context otherwise requires, the words and terms defined in sections 29 to 44, inclusive, of this act have the meanings ascribed to them in those sections. \\Sec. 29. \"Actuary" means a person who is a member in good standing of the American Academy of Actuaries or its successor organization. \\Sec. 30. \"Automatic agreement" means an agreement between a reinsured and reinsurer whereby the ceding company is obligated to cede certain risks as provided in the agreement and the reinsurer is obligated to accept. \\Sec. 31. \"Broker for reinsurance" means a person who negotiates a contract of reinsurance between a reinsured and reinsurer on behalf of the reinsured and who receives a commission for placement and other services rendered. The term does not include the ceding insurer. \\Sec. 32. \"Cede" means to pass on to another insurer, who is designated the reinsurer, all or part of the insurance written by an insurer with the object of reducing the possible liability of the ceding insurer. \\Sec. 33. \"Cession" means the unit of insurance passed to a reinsurer by a primary company which issued a policy to the original insured. \\Sec. 34. \"Controlling person" means a person who directly or indirectly has the power to direct, or cause to be directed, the management, control or activities of an intermediary. \\Sec. 35. \A submission is "facultative" if both the primary insurer and the reinsurer have the choice to accept or reject the submission. \\Sec. 36. \"Intermediary" includes a broker for reinsurance or a manager for reinsurance. \\Sec. 37. \"Licensed producer" means an agent, broker or intermediary licensed pursuant to this Title. \\Sec. 38. \"Manager for reinsurance" means a person who has authority to bind or manage all or part of the assumed reinsurance of a reinsurer and acts as an agent for the reinsurer whether known as a manager or other similar term. The term includes the manager of a separate division, department or underwriting office who acts as an agent for a reinsurer. For the purposes of sections 28 to 61, inclusive, of this act, the following persons are not managers with respect to a reinsurer: 1. An employee of the reinsurer; 2. A manager of a branch of an alien reinsurer located in the United States; 3. An underwriting manager who, pursuant to a contract, manages all or part of the reinsurance of the reinsurer, is under common control with the reinsurer within the meaning of chapter 692C of NRS, and whose compensation is not based on the volume of premiums written; or 4. The manager of a group, association, pool or organization of insurers who engage in joint underwriting or joint reinsurance and who are subject to examination by the commissioner of the state in which the principal business office of the manager is located. \\Sec. 39. \"Reinsured" means an insurer that has placed risks with a reinsurer in the process of buying reinsurance. The term includes a ceding insurer. \\Sec. 40. \"Reinsurer" means a person licensed in this state as an insurer with the authority to assume the liability of another by reinsurance. \\Sec. 41. \"Retrocession" means a transaction whereby a reinsurer cedes to another reinsurer all or part of the reinsurance it has previously assumed. \\Sec. 42. \"Retrocessionaire" means the assuming reinsurer in a retrocession. \\Sec. 43. \"Syndicate" means a joint underwriting operation of insurance or reinsurance in which the participants assume a predetermined and fixed interest in the insurance written and the members share equally in the premiums. \\Sec. 44. \"Violation" by an intermediary, insurer or reinsurer for whom the intermediary was acting means failure to comply substantially with the provisions of sections 28 to 61, inclusive, of this act. \\Sec. 45. \1. A person shall not act as a broker for reinsurance if he maintains an office, directly or as a member or employee of a firm or association or as an officer, director or employee of a corporation: (a) In this state, unless he is a licensed producer in this state; or (b) In another state, unless he is a licensed producer in this state or in another state having a law substantially similar to this Title or he is licensed in this state as a nonresident intermediary. 2. A person shall not act as a manager for reinsurance: (a) For a reinsurer domiciled in this state, unless he is a licensed producer in this state; (b) In this state, if he maintains an office individually or as a member or employee of a firm or association or as an officer, director or employee of a corporation in this state, unless he is a licensed producer in this state; or (c) In another state for a foreign insurer, unless he is a licensed producer in this state or in another state having a law substantially similar to this Title or he is licensed in this state as a nonresident intermediary. 3. A manager for reinsurance shall: (a) File a bond from an insurer in an amount that is acceptable to the commissioner for the protection of the reinsurer; and (b) Maintain a policy covering errors and omissions in an amount that is acceptable to the commissioner. \\Sec. 46. \1. The commissioner may issue a license to act as an intermediary to any person who has complied with the requirements of sections 28 to 61, inclusive, of this act. A license issued to a firm or association authorizes all the members of the firm or association and any designated employees to act as intermediaries. All those persons must be named in the application and any supplements thereto. A license issued to a corporation authorizes all of the officers and any designated employees and directors of the corporation to act as intermediaries on behalf of the corporation. All those persons must be named in the application and in any supplements thereto. 2. If an applicant for a license to act as an intermediary is a nonresident, he shall: (a) Designate the commissioner as agent for service of process; (b) Furnish the commissioner with the name and address of a resident of Nevada upon whom notices or orders of the commissioner or process affecting the nonresident reinsurance intermediary may be served; and (c) Promptly notify the commissioner in writing of every change in his designated agent for service of process. The change is not effective until acknowledged by the commissioner. \\Sec. 47. \1. The commissioner may refuse to issue a license to act as an intermediary if, in his judgment: (a) The applicant, anyone named on the application, or any member, principal, officer or director of the applicant, is not trustworthy to act as an intermediary; (b) Any controlling person of the applicant is not trustworthy to act as an intermediary; (c) The applicant, a person named on the application, any member, principal, officer or director of the applicant or any controlling person of the applicant has given cause for the revocation or suspension of a license to act as an intermediary; or (d) The applicant, a person named on the application, any member, principal, officer or director of the applicant or any controlling person of the applicant has failed to comply with any prerequisite for the issuance of a license to act as an intermediary. 2. Upon receipt of a written request, the commissioner shall furnish a summary of the basis for his refusal to issue a license to act as an intermediary. The summary is confidential. \\Sec. 48. \When acting in his professional capacity, an attorney at law who is licensed in this state need not be licensed as an intermediary. \\Sec. 49. \1. A transaction between a broker for reinsurance and the insurer he represents may only be entered into by written agreement. The agreement must specify the responsibilities of each party. 2. The insurer may terminate the authority of the broker for reinsurance at any time. 3. The broker for reinsurance shall: (a) Render accounts to the insurer accurately detailing all material transactions, including information necessary to support all commissions, charges and other fees received by or owing to the broker for reinsurance; and (b) Remit all money due to the insurer within 30 days after receipt. 4. All money collected for the account of the insurer must be held by the broker for reinsurance in a fiduciary capacity in a bank which is a qualified financial institution. 5. The broker for reinsurance shall comply with the written standards established by the insurer for the cession or retrocession of all risks. 6. The broker for reinsurance shall disclose to the insurer any relationship with any reinsurer to which insurance will be ceded or retroceded. \\Sec. 50. \1. For 10 years after expiration of each contract of reinsurance transacted by the broker for reinsurance, he shall keep a complete record for each transaction, including evidence of: (a) The type of contract, limits, underwriting restrictions, classes or risks and territory; (b) The period of coverage, including effective and expiration dates and the provisions concerning cancellation and notice of cancellation; (c) The requirements for reporting and settling balances; (d) The rate used to compute the reinsurance premium; (e) The names and addresses of assuming reinsurers; (f) The rates of all commissions for reinsurance, including the commissions on any retrocessions handled by the broker for reinsurance; (g) Any related correspondence and memoranda; (h) Proof of placement; (i) Details regarding retrocessions handled by the broker for reinsurance, including the identity of retrocessionaires and the percentage of each contract assumed or ceded; (j) Financial records, including accounts of premium and loss; and (k) If the broker for reinsurance procures a contract of reinsurance on behalf of a licensed ceding insurer: (1) Directly from any assuming reinsurer, written evidence that the assuming reinsurer has agreed to assume the risk; or (2) Through a representative of the assuming reinsurer, other than an employee, written evidence that the reinsurer has delegated binding authority to the representative. 2. A broker for reinsurance shall allow an insurer to have access to and to copy and audit all accounts and records maintained by him related to its contract. \\Sec. 51. \1. An insurer shall not engage the services of any person to act as a broker for reinsurance on its behalf unless he is licensed pursuant to section 46 of this act. 2. An insurer may not employ a person who is employed by a broker for reinsurance with whom it transacts business, unless the broker for reinsurance is under common control with the insurer within the meaning of chapter 692C of NRS. 3. The insurer shall annually obtain a copy of statements of the financial condition of each broker for reinsurance with which it transacts business. \\Sec. 52. \1. Transactions between a manager for reinsurance and the reinsurer he represents must only be entered into pursuant to a written contract which specifies the responsibilities of each party and is approved by the board of directors of the reinsurer. At least 30 days before a reinsurer assumes or cedes insurance, a copy of the contract must be filed with the commissioner for approval. 2. The reinsurer may terminate the contract for cause upon written notice to the manager for reinsurance and the reinsurer may suspend the authority of the manager for reinsurance to assume or cede insurance during the pendency of any dispute regarding the cause for termination. 3. The manager for reinsurance shall: (a) Render accounts to the reinsurer accurately detailing all material transactions, including information necessary to support all commissions, charges and other fees received by or owing to him; and (b) Remit all money due pursuant to the contract to the reinsurer monthly. 4. All money collected for the account of the reinsurer must be held by the manager for reinsurance, in a fiduciary capacity, in a bank which is a qualified financial institution. The manager for reinsurance may retain no more than the total of 3 months' estimated payments on claims and allocated expenses of adjusting losses. The manager for reinsurance shall maintain a separate bank account for each reinsurer that he represents. 5. The contract must not be assigned in whole or in part by the manager for reinsurance. \\Sec. 53. \1. A manager for reinsurance shall comply with the written underwriting and rating standards established by the insurer he represents for the acceptance, rejection or cession of all risks. 2. The contract must set forth the rates, terms and purposes of commissions, charges and other fees which the manager for reinsurance may levy against the reinsurer. 3. The manager for reinsurance shall annually provide the reinsurer with a statement of his financial condition prepared by an independent certified public accountant. 4. The reinsurer shall conduct a review of underwriting and the handling of claims by the manager for reinsurance at the location of his operations at least twice each calendar year. 5. The manager for reinsurance shall disclose to the reinsurer any relationship he has with an insurer before ceding or assuming insurance to or from the insurer pursuant to the contract. 6. The acts of the manager for reinsurance shall be deemed to be the acts of the reinsurer on whose behalf he is acting. \\Sec. 54. \1. If a contract between a manager for reinsurance and the reinsurer he represents permits him to settle claims on behalf of the reinsurer: (a) All claims must be reported to the reinsurer in a timely manner; and (b) A copy of the claim file must be sent to the reinsurer at its request or as soon as it becomes known that the claim: (1) Potentially exceeds the amount determined by the commissioner or the limit set by the reinsurer, whichever is the lesser amount; (2) Involves a dispute over coverage; (3) May exceed the authority of the manager for reinsurance to settle claims; (4) Has been open for more than 6 months; or (5) Is closed by payment of the lesser of an amount set by the commissioner or an amount set by the reinsurer. 2. All claims files are the joint property of the reinsurer and the manager for reinsurance. Upon an order of liquidation of the reinsurer, the files become the sole property of the reinsurer or its estate. The reinsurer or its estate shall allow the manager for reinsurance to have reasonable access to and to copy the files on a timely basis. 3. The reinsurer may terminate any authority to make settlements granted to the manager for reinsurance for cause upon written notice to him or upon the termination of the contract. The reinsurer may suspend the authority of the manager for reinsurance to make settlements during the pendency of the dispute regarding the cause of termination. \\Sec. 55. \If a contract between a manager for reinsurance and the reinsurer he represents provides for a sharing of interim profits by the manager for reinsurance, the interim profits must not be paid until 1 year after the end of each underwriting period for property insurance and 5 years after the end of each underwriting period for casualty insurance, and not until the adequacy of reserves on remaining claims has been verified pursuant to section 58 of this act. \\Sec. 56. \1. For at least 10 years after expiration of each contract of reinsurance transacted by a manager for reinsurance, he shall keep a complete record for each transaction, including evidence of: (a) The type of contract, limits, underwriting restrictions, classes or risks and territory; (b) The period of coverage, including effective and expiration dates, provisions concerning cancellation and notice of cancellation, and disposition of outstanding reserves on covered risks; (c) The requirements for reporting and settling balances; (d) The rate used to compute the reinsurance premium; (e) The names and addresses of reinsurers; (f) The rates of all commissions for reinsurance, including the commissions on any retrocessions handled by the manager for reinsurance; (g) Any related correspondence and memoranda; (h) Proof of placement; (i) Any details regarding retrocessions handled by the manager for reinsurance, including the identity of retrocessionaires and percentage of each contract assumed or ceded; (j) Financial records, including accounts of premium and loss; and (k) If the manager for reinsurance places a contract of reinsurance on behalf of a ceding insurer: (1) Directly from any assuming reinsurer, written evidence that the assuming reinsurer has agreed to assume the risk; or (2) Through a representative of the assuming reinsurer, other than an employee, written evidence that the reinsurer has delegated binding authority to the representative. 2. The manager for reinsurance shall allow a reinsurer to have access and to copy all accounts and records maintained by him related to its business in a form usable by the reinsurer. \\Sec. 57. \A manager for reinsurance shall not: 1. Except as otherwise provided in this section, bind retrocessions on behalf of the reinsurer. A manager for reinsurance may bind facultative retrocessions pursuant to facultative agreements if the contract with the reinsurer contains guidelines for underwriting the retrocessions. The guidelines must include a list of reinsurers with which automatic agreements are in effect, and for each reinsurer, the coverages and amounts or percentages that may be reinsured, and commission schedules. 2. Commit the reinsurer to participate in syndicates for reinsurance. 3. Appoint any producer without verifying that the producer is licensed to transact the type of reinsurance for which he is appointed. 4. Without approval of the reinsurer, pay or commit the reinsurer to pay a claim, net of retrocessions, that exceeds the lesser of an amount specified by the reinsurer or 1 percent of the policyholder's surplus of the reinsurer as of December 31 of the last complete calendar year. 5. Collect any payment from a retrocessionaire or commit the reinsurer to any settlement of a claim with a retrocessionaire, without the approval of the reinsurer. If approval is given, the manager for reinsurance shall promptly forward a report to the reinsurer. 6. Employ a person who is employed by the reinsurer unless the manager for reinsurance is under common control with the reinsurer within the meaning of chapter 692C of NRS. 7. Appoint another person to act as a manager for reinsurance. \\Sec. 58. \1. A reinsurer shall not engage the services of any person to act as a manager for reinsurance on its behalf unless he is licensed as required by section 46 of this act. 2. A reinsurer shall annually obtain a copy of statements of the financial condition of each manager for reinsurance whom the reinsurer has engaged. The statements must be prepared by an independent certified public accountant in a form approved by the commissioner. 3. If a manager for reinsurance establishes reserves for losses, the reinsurer shall annually obtain the opinion of an actuary attesting to the adequacy of reserves established for losses incurred and outstanding on the business produced by the manager for reinsurance. The opinion of the actuary must be in addition to any other required certification. 4. An officer of the reinsurer must have authority to bind a reinsurer for all retrocessional contracts and for participation in syndicates for reinsurance. The officer must not be affiliated with the manager for reinsurance. 5. At least 30 days before termination of a contract with a manager for reinsurance, the reinsurer shall provide written notification of the termination to the commissioner. 6. Except as otherwise provided in chapter 692C of NRS, a reinsurer shall not appoint to its board of directors any officer, director, employee, controlling shareholder or subproducer of its manager for reinsurance. \\Sec. 59. \1. An intermediary is subject to examination by the commissioner. The intermediary shall allow the commissioner to have access to all of his books, bank accounts and records in a form usable to the commissioner. 2. A manager for reinsurance may be examined as if he were the reinsurer. \\Sec. 60. \1. If the commissioner believes that the reinsurance intermediary or any other person has not materially complied with sections 28 to 59, inclusive, of this act, or any regulation adopted or order issued pursuant thereto, the commissioner may, after a hearing conducted in accordance with NRS 679B.310 to 679B.370, inclusive, order: (a) For each separate violation, the payment of a penalty in an amount not exceeding $5,000; and (b) The revocation or suspension of the license of the reinsurance intermediary. 2. If the commissioner finds that the noncompliance of the reinsurance intermediary has caused the insurer any loss or damage, the commissioner may initiate a civil action against the intermediary on behalf of the insurer to recover compensatory damages or other appropriate relief. 3. If an order of rehabilitation or liquidation of the insurer has been entered and the receiver appointed by that order determines that: (a) The reinsurance intermediary or any other person has not materially complied with sections 28 to 59, inclusive, of this act, or any regulation adopted or order issued pursuant thereto; and (b) The insurer has suffered any loss or damage as a result of that noncompliance, the receiver may bring a civil action for the recovery of damages or for any other appropriate sanctions on behalf of the insurer.\\ Sec. 61. \Sections 28 to 61, inclusive, of this act do not limit or restrict the rights of policyholders, claimants, creditors or other third parties or confer any rights on such persons. \\Sec. 62. NRS 681A.100 is hereby amended to read as follows: 681A.100 1. [An] \Except as otherwise provided for domestic mutual insurers in NRS 692B.200, an\\ insurer shall not retain any risk on any one subject of insurance, whether located or to be performed in this state or elsewhere, in an amount exceeding 10 percent of its surplus to policyholders. 2. A "subject of insurance" for the purposes of this section, as to insurance against fire and hazard other than windstorm, earthquake and other catastrophic hazards, includes all properties insured by the same insurer which are customarily considered by underwriters to be subject to loss or damage from the same fire or the same occurrence of any other hazard insured against. 3. Reinsurance ceded as authorized by NRS 681A.110 [shall] \must\\ be deducted in determining the risk retained [; but] \except that\\ as to surety risks, reinsurance [shall] \must\\ be allowed as a deduction only if [such] \the\\ reinsurance is with an insurer authorized to transact such insurance in this state, and is in such form as to enable the obligee or beneficiary to maintain an action thereon against the reinsured jointly with the reinsurer, and upon recovering judgment against the reinsured to have recovery against the reinsurer for payment to the extent [in] \to\\ which it may be liable under [such] \the\\ reinsurance and in discharge thereof. As to surety risks, deduction [shall] \must\\ also be made of the amount assumed by any authorized cosurety and the value of any security deposited, pledged or held subject to the surety's consent and for the surety's protection. 4. As to alien insurers, this section relates only to risks and surplus to policyholders of the insurer's [United States branch.] \branch in the United States.\\ 5. "Surplus to policyholders" for the purposes of this section, in addition to the insurer's capital and surplus, includes any voluntary reserves which are not required pursuant to law, and [shall] \must\\ be determined from the last sworn statement of the insurer on file with the commissioner, or by the last report of examination of the insurer, whichever is the more recent at time of assumption of risk. 6. This section does not apply to life or health insurance, annuities, title insurance, insurance of wet marine and transportation risks, workmen's compensation insurance, [employers' liability coverages, liability insurance,] surety \, financial guaranty insurance,\\ or to any policy or type of coverage as to which the maximum possible loss to the insurer is not readily ascertainable on issuance of the policy. [7. Limits of risk as to newly formed domestic mutual insurers shall be as provided in NRS 692B.200.] Sec. 63. NRS 681A.110 is hereby amended to read as follows: 681A.110 [1.] An insurer may reinsure all or any part of an individual risk or of a particular class of risks in any other insurer or, with the approval of the commissioner, all its risks in an authorized insurer, or may accept such reinsurance from any other insurer. No domestic insurer may reinsure with an insurer which is not authorized to transact insurance or reinsurance unless: [(a)] \1. \\The domestic insurer has the commissioner's written approval; or [(b)] \2. \\The insurer accepting the reinsurance [is a group of insurers which includes individual, unincorporated insurers, having assets held in trust for the benefit of its United States policyholders in a sum not less than $50,000,000 and is authorized to transact insurance in at least one state. If reinsurance is authorized pursuant to this section, a domestic insurer may reinsure all or substantially all its risks as provided in NRS 693A.370. 2. No credit may be taken for the reserve or unearned premium liability on account of any such reinsurance unless: (a) The insurer accepting the reinsurance is authorized to transact insurance in this state or in another state conforming to the same standards of solvency as would be required of it if, at the time the reinsurance is effected, it were so authorized in this state; or (b) The insurer accepting the reinsurance is a group of insurers which includes individual, unincorporated insurers, having assets held in trust for the benefit of its United States policyholders in a sum not less than $50,000,000 and is authorized to transact insurance in at least one state. 3. Credit must be allowed as an asset or as a deduction from liability to any ceding insurer for reinsurance lawfully ceded to an assuming insurer qualified therefor under subsection 2, but no such credit may be allowed unless the reinsurance is payable by the assuming insurer on the basis of the liability of the ceding insurer under the contracts reinsured without diminution because of the insolvency of the ceding insurer. 4. Upon request of the commissioner an insurer shall promptly inform him in writing of the cancellation or any other material change in any of its reinsurance treaties or arrangements. 5. This section does not apply to wet marine and transportation insurance.] \meets the requirements for credit provided in sections 16 to 20, inclusive, of this act. \\Sec. 64. Chapter 681B of NRS is hereby amended by adding thereto the provisions set forth as sections 65 to 74, inclusive, of this act. Sec. 65. \As used in sections 65 to 72, inclusive, of this act, "qualified actuary" means a member in good standing of the American Academy of Actuaries, or a successor organization approved by the commissioner who meets the requirements set forth in the organization's regulations. \\Sec. 66. \Every insurer offering life insurance doing business in this state shall annually submit the opinion of a qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the commissioner by regulation are computed appropriately, are based on assumptions which satisfy contractual provisions, are consistent with prior reported amounts, and company with applicable laws of this state. The commissioner by regulation may further define or enlarge the scope of this opinion. \\Sec. 67. \1. Every such insurer, unless exempted by or pursuant to regulation, shall also annually submit an opinion of the same qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the commissioner by regulation, when considered in light of the assets held by the insurer with respect to the reserves and related actuarial items, including the earnings on the assets invested and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision for the insurer's obligations under the policies and contracts, including the benefits under and expenses associated with the policies and contracts. 2. The commissioner may provide by regulation for a period of transition for establishing any higher reserves which the qualified actuary may deem necessary in order to render the opinion required by this section and section 66 of this act. 3. The holding of additional reserves determined by a qualified actuary to be necessary to render the opinion required by this section or section 66 of this act, shall not be deemed to be the adoption of a higher standard of valuation for the purposes of NRS 681B.120 or 681B.140. \\Sec. 68. \1. Each opinion required by section 67 of this act must be supported by memorandum, in form and substance acceptable to the commissioner as specified by regulation. 2. If an insurer fails to provide a supporting memorandum at the request of the commissioner within a period specified by regulation, or the commissioner determines that the supporting memorandum provided by the insurer fails to meet the standards prescribed by the regulations or is otherwise unacceptable to him, he may engage a qualified actuary at the expense of the insurer to review the opinion and the basis for the opinion and prepare such supporting memorandum as is required by the commissioner. \\Sec. 69. \1. Every opinion must: (a) Be submitted with the annual statement reflecting the valuation of reserve liabilities for each year ending on or before December 31, 1996. (b) Apply to all business in force including individual and group health insurance plans, in form and substance acceptable to the commissioner as specified by regulation. (c) Be based on standards adopted from time to time by the Actuarial Standards Board or a successor organization approved by the commissioner and on such additional standards as the commissioner may by regulation prescribe. 2. In the case of an opinion required to be submitted by a foreign or alien company, the commissioner may accept the opinion filed by that company with the commissioner of insurance of another state if he determines that the opinion reasonably meets the requirements applicable to an insurer domiciled in this state. \\Sec. 70. \1. Except in a case of fraud or willful misconduct, a qualified actuary is not liable for damages to any person other than an affected insurer or the commissioner for any act, error, omission, decision or conduct with respect to the actuary's opinion. 2. Disciplinary action by the commissioner against an actuary must be prescribed by regulation by the commissioner. \\Sec. 71. \1. Except as otherwise provided in this section, an opinion, and any other material provided by an insurer to the commissioner in connection therewith, must be kept confidential by the commissioner, is not open to the public, and is not subject to subpoena, except for the purpose of defending an action seeking damages from any person by reason of any action required by sections 65 to 71, inclusive, of this act or by regulation adopted under those sections. 2. A memorandum or other material may be released by the commissioner with the written consent of the insurer or to the American Academy of Actuaries or its successor organization upon request stating that the memorandum or other material is required for the purpose of professional disciplinary proceedings and setting forth procedures satisfactory to the commissioner for preserving the confidentiality of the memorandum or other material. 3. If any portion of a confidential memorandum is cited by the insurer in its marketing or is cited before any governmental agency other than a state commissioner of insurance or is released by an insurer to the public, all portions of the memorandum are no longer confidential. \\Sec. 72. \The commissioner shall adopt by regulation minimum standards for the valuation of reserves of other insurers offering health insurance of any kind, corporations for hospital, medical and dental service, health maintenance organizations, and plans for dental care. \\Sec. 73. \Each insurer shall report to the commissioner every material acquisition or disposition of assets within 15 days after the end of the month in which the transaction occurs. The commissioner shall define by regulation what transactions are material, prescribe what information must be reported and specify any person to whom a copy must be sent. Such a report is confidential and is not subject to subpoena.\\ Sec. 74. \1. The commissioner shall adopt regulations concerning the amount of capital required to be maintained by each insurer transacting property, casualty, life or health insurance organized and licensed in this state or licensed to do business in this state. 2. The regulations must be consistent with the instructions for risk-based capital adopted by the National Association of Insurance Commissioners as last amended before January 1, 1995. Each domestic insurer described in this section shall, on or before March 15 of each year, prepare and submit to the commissioner, and to any other person specified by him, a report of its risk-based capital as of the end of the preceding calendar year, in the form and containing the information required by the regulations.\\ Sec. 75. NRS 681B.130 is hereby amended to read as follows: 681B.130 1. Except as otherwise provided in subsection 4 and in NRS 681B.150, reserves, according to the [Commissioners] \commissioners'\\ reserve valuation method, for the life insurance and endowment benefits of policies providing for a uniform amount of insurance and requiring the payment of uniform premiums must be the excess, if any, of the present value, at the date of valuation, of the future guaranteed benefits provided for by the policies over the then present value of any future modified net premiums therefor. The modified net premiums for the policy must be such a uniform percentage of the respective contract premiums for those benefits that the present value, at the date of issue of the policy, of all the modified net premiums are equal to the sum of the then present value of the benefits provided for by the policy and the excess of the premium set forth in paragraph (a) over that set forth in paragraph (b), as follows: (a) A net level annual premium equal to the present value, at the date of issue, of such benefits provided for after the first policy year, divided by the present value, at the date of issue, of an annuity of one per annum payable on the first and each subsequent anniversary of such policy on which a premium falls due. The net level annual premium must not exceed the net level annual premium on the 19-year premium whole life plan for insurance of the same amount at an age 1 year higher than the age at the time the policy is issued. (b) A net 1-year term premium for such benefits provided for in the first policy year. 2. If any life insurance policy issued on or after January 1, 1987, for which the contract premium in the first policy year exceeds that of the second year, and for which no comparable additional benefit is provided in the first year in return for the excess premium and which provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than the excess premium, the reserve according to the [Commissioners] \commissioners'\\ reserve valuation method as of any policy anniversary occurring on or before the assumed ending date, which is the first policy anniversary on which the sum of any endowment benefit and any cash surrender value then available is greater than the excess premium, must, except as otherwise provided in NRS 681B.150, be the greater of: (a) The reserve as of the policy anniversary calculated as described in subsection 1; and (b) The reserve as of the policy anniversary calculated as described in subsection 1, but with: (1) The value defined in paragraph (a) of subsection 1 being reduced by 15 percent of the amount of the excess first-year premium; (2) All present values of benefits and premiums being determined without reference to premiums or benefits provided for by the policy after the assumed ending date; (3) The policy being assumed to mature on such date as an endowment; and (4) The cash surrender value provided on that date being considered as an endowment benefit. In making the above comparison, the mortality and interest bases stated in NRS 681B.120 and 681B.125 must be used. 3. Reserves according to the [Commissioners] \commissioners'\\ reserve valuation method for: (a) Life insurance policies providing for a varying amount of insurance or requiring the payment of varying premiums; (b) Group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer (including a partnership or sole proprietorship), by an employee organization or by both \,\\ other than a plan providing individual retirement accounts or individual retirement annuities under section 408 of the Internal Revenue Code, as amended; (c) Disability and accidental death benefits in all policies and contracts; and (d) All other benefits, except life insurance and endowment benefits in life insurance policies and benefits provided by all other annuity and pure endowment contracts, must be calculated by a method consistent with the principles of subsection 1 and this subsection, except that any extra premiums charged because of impairments or special hazards must be disregarded in the determination of modified net premiums. 4. This subsection applies to all annuity and pure endowment contracts except those group annuity and pure endowment contracts for which reserves according to the [Commissioners] \commissioners'\\ reserve valuation method are to be calculated by a method consistent with the principles of subsections 1, 2 and 3. Reserves according to the [Commissioners] \commissioners'\\ annuity reserve method for benefits under annuity or pure endowment contracts, excluding any disability and accidental death benefits in those contracts must be the greatest of the respective excesses of the present values, at the date of valuation, of the future guaranteed benefits, including guaranteed nonforfeiture benefits, provided for by those contracts at the end of each respective contract year, over the present value, at the date of valuation, of any future valuation considerations derived from future gross considerations, required by the terms of the contract, which become payable before the end of such respective contract year. The future guaranteed benefits must be determined by using the mortality table, if any, and the interest rate or rates specified in such contracts for determining guaranteed benefits. The valuation considerations are the portions of the respective gross considerations applied under the terms of the contracts to determine nonforfeiture values. 5. An insurer's aggregate reserves for all life insurance policies, excluding disability and accidental death benefits, issued on or after January 1, 1972, must not be less than the aggregate reserves calculated in accordance with the methods set forth in this section, NRS 681B.145 and 681B.150, and the mortality table or tables and rate or rates of interest used in calculating nonforfeiture benefits for those policies. \6. An insurer's aggregate reserves for all policies, contracts and benefits must not be less than the aggregate reserves determined by a qualified actuary to be necessary for a favorable opinion under sections 66 and 67 of this act. \\Sec. 76. NRS 681B.140 is hereby amended to read as follows: 681B.140 1. Reserves for any category of policies, contracts or benefits as established by the commissioner, issued on or after January 1, 1972, may be calculated, at the option of the insurer, according to any standards which produce greater aggregate reserves for the category than those calculated according to the minimum standards provided by subsections 2 and 3 of NRS 681B.120 and 681B.125, but the rate or rates of interest used for policies and contracts other than the annuity and pure endowment contracts must not be higher than the corresponding rate or rates of interest used in calculating any nonforfeiture benefits provided for in such policies. \2. Any insurer which has adopted a standard of valuation producing greater aggregate reserves as described in subsection 1 may, with the approval of the commissioner, adopt a lower standard of valuation, but not lower than the minimum described in subsection 1. \\Sec. 77. NRS 681B.180 is hereby amended to read as follows: 681B.180 1. Real property acquired pursuant to a mortgage loan or contract for sale, in the absence of a recent appraisal deemed by the commissioner to be reliable, [shall] \must\\ not be valued at an amount greater than the unpaid principal of the defaulted loan or contract plus interest due and accrued at the date of [such] acquisition, together with any taxes and expenses paid or incurred in connection with [such] \the\\ acquisition, and the cost of improvements thereafter made by the insurer and any amounts thereafter paid by the insurer on assessments levied for improvements in connection with the property. 2. Other real property held by an insurer [shall] \must\\ not be valued at an amount in excess of \the lesser of the\\ fair value as determined by recent appraisal [.] \or the actual cost, plus capitalized improvements, less normal depreciation.\\ If valuation is based on an appraisal more than 3 years old, the commissioner may, at his discretion, call for and require a new appraisal in order to determine fair value. Sec. 78. NRS 686A.410 is hereby amended to read as follows: 686A.410 The commissioner may conduct an examination of a company at any time in accordance with NRS 679B.250 to 679B.280, inclusive [.] \, and sections 2, 3 and 4 of this act.\\ The expense of the examination must be borne by the company in accordance with NRS 679B.290 as if the company [was] \were\\ an insurer. Sec. 79. NRS 687A.020 is hereby amended to read as follows: 687A.020 Except as otherwise provided in subsection [4] \5\\ of NRS 695E.200, this chapter applies to all direct insurance, except: 1. Life, annuity, health or disability insurance; 2. Mortgage guaranty, financial guaranty or other forms of insurance offering protection against investment risks; 3. Fidelity or surety bonds or any other bonding obligations; 4. Credit insurance as defined in NRS 690A.015; 5. Insurance of warranties or service contracts; 6. Title insurance; 7. Ocean marine insurance; 8. Any transaction or combination of transactions between a person, including affiliates of the person, and an insurer, including affiliates of the insurer, which involves the transfer of investment or credit risk unaccompanied by transfer of insurance risk; or 9. Any insurance provided by or guaranteed by a governmental entity. Sec. 80. Chapter 692C of NRS is hereby amended by adding thereto the provisions set forth as sections 81 to 84, inclusive, of this act. Sec. 81. \1. A domestic insurer shall not enter into any of the following transactions with an affiliate unless the insurer has notified the commissioner in writing of its intention to enter into the transaction at least 30 days previously, or such shorter period as the commissioner may permit, and the commissioner has not disapproved it within that period: (a) A sale, purchase, exchange, loan or extension of credit, guaranty or investment if the transaction equals at least: (1) With respect to an insurer other than a life insurer, the greater of 5 percent of the insurer's admitted assets or 25 percent of surplus as regards policyholders; or (2) With respect to a life insurer, 5 percent of the insurer's admitted assets, computed as of December 31 next preceding the transaction. (b) A loan or extension of credit to any person who is not an affiliate, if the insurer makes the loan or extension of credit with the agreement or understanding that the proceeds of the transaction, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in, any affiliate of the insurer if the transaction equals at least: (1) With respect to insurers other than life insurers, the greater of 5 percent of the insurer's admitted assets or 25 percent of surplus as regards policyholders; or (2) With respect to life insurers, 5 percent of the insurer's admitted assets, computed as of December 31 next preceding the transaction. (c) An agreement for reinsurance or a modification thereto in which the premium for reinsurance or a change in the insurer's liabilities equals at least 5 percent of the insurer's surplus as regards policyholders as of December 31 next preceding the transaction, including an agreement which requires as consideration the transfer of assets from an insurer to a nonaffiliate, if an agreement or understanding exists between the insurer and nonaffiliate that any portion of those assets will be transferred to an affiliate of the insurer. (d) An agreement for management, contract for service, or cost-sharing arrangement. (e) A material transaction, specified by regulation, which the commissioner determines may adversely affect the interest of the insurer's policyholders. 2. This section does not authorize or permit any transaction which, in the case of an insurer not an affiliate, would be contrary to law.\\ Sec. 82. \1. A domestic insurer may not intentionally enter into transactions which are part of a plan or series of like transactions with affiliates if the purpose of those separate transactions is to avoid the threshold provided in section 81 of this act and thus avoid the review that would otherwise occur. If the commissioner determines that such separate transactions were entered into over any 12-month period for that purpose, he may exercise his authority pursuant to NRS 692C.410 to 692C.490, inclusive. 2. The commissioner, in reviewing transactions pursuant to this section and section 81 of this act, shall consider whether the transactions comply with the standards set forth in NRS 692C.360 and 692C.370 and whether the transactions may adversely affect the interests of policyholders. 3. A domestic insurer shall notify the commissioner within 30 days after it makes an investment in any corporation if the total investment in that corporation by it and its affiliates exceeds 10 percent of the corporation's voting securities.\\ Sec. 83. \1. If an order for liquidation or rehabilitation of a domestic insurer has been entered, the receiver appointed under the order may recover on behalf of the insurer: (a) From any parent corporation or holding company, or person or affiliate who otherwise controlled the insurer, the amount of distributions, other than distributions of shares of the same class of stock, paid by the insurer on its capital stock; or (b) Any payment in the form of a bonus, settlement on termination, or extraordinary adjustment of salary in a lump sum made by the insurer or a subsidiary to a director, officer or employee, if the distribution or payment is made at any time during the year preceding the petition for liquidation, conservation or rehabilitation, as the case may be, subject to the limitations of subsection 2 and of section 84 of this act. 2. Such a distribution is not recoverable if the parent or affiliate shows that, when paid, the distribution was lawful and reasonable, and that the insurer did not know and could not reasonably have known that the distribution might adversely affect its ability to fulfill its contractual obligations.\\ Sec. 84. \1. A person who was a parent corporation or holding company, or a person who otherwise controlled the insurer or affiliate, at the time the distributions were paid is liable up to the amount of distributions or payments he received. Any person who otherwise controlled the insurer at the time the distributions were declared is liable up to the amount of distributions he would have received if they had been paid immediately. If two or more persons are liable with respect to the same distributions, they are jointly and severally liable. 2. The maximum amount recoverable under this section and section 83 of this act is the amount needed in excess of all other available assets of the impaired or insolvent insurer to pay the contractual obligations of the impaired or insolvent insurer and to reimburse any guaranty funds. 3. To the extent that any person liable under this section is insolvent or otherwise fails to pay claims due from it pursuant to this section, its parent corporation or holding company, or person who otherwise controlled it, at the time the distribution was paid is jointly and severally liable for any resulting deficiency in the amount recovered from the parent corporation or holding company, or person who otherwise controlled the insurer.\\ Sec. 85. NRS 692C.210 is hereby amended to read as follows: 692C.210 1. The commissioner shall approve any merger or other acquisition of control referred to in NRS 692C.180 unless, after a public hearing thereon, he finds that: (a) After the change of control the domestic insurer referred to in NRS 692C.180 would not be able to satisfy the requirements for the issuance of a license to write the line or lines of insurance for which it is presently licensed; (b) The effect of the merger or other acquisition of control would be substantially to lessen competition in insurance in this state or tend to create a monopoly therein; (c) The financial condition of any acquiring party is such as might jeopardize the financial stability of the insurer, or prejudice the interest of its policyholders or buyers of insurance, or the interests of any remaining security holders who are unaffiliated with the acquiring party; (d) The terms of the offer, request, invitation, agreement or acquisition referred to in NRS 692C.180 are unfair and unreasonable to the security holders of the insurer; (e) The plans or proposals which the acquiring party has to liquidate the insurer, sell its assets or consolidate or merge it with any person, or to make any other material change in its business or corporate structure or management, are unfair and unreasonable to policyholders of the insurer and not in the public interest; or (f) The competence, experience and integrity of those persons who would control the operation of the insurer are such that it would not be in the interest of policyholders of the insurer and of the public to permit the merger or other acquisition of control. 2. The public hearing referred to in subsection 1 must be held within a reasonable time after the statement required by NRS 692C.180 has been filed, and at least 20 days' notice thereof must be given by the commissioner to the person filing the statement. Not less than 7 days' notice of the public hearing must be given by the person filing the statement to the insurer and to such other persons as may be designated by the commissioner. The insurer shall give such notice to its security holders. The commissioner shall make a determination within 30 days after the conclusion of the hearing. At the hearing, the person filing the statement, the insurer, any person to whom notice of hearing was sent, and any other person whose interests may be affected thereby may present evidence, examine and cross-examine witnesses, and offer oral and written arguments and in connection therewith may conduct discovery proceedings in the same manner as is presently allowed in the district court of this state. All discovery proceedings must be concluded not later than 3 days before the commencement of the public hearing. \3. The commissioner may retain at the acquiring party's expense attorneys, actuaries, accountants and other experts not otherwise a part of his staff as may be reasonably necessary to assist him in reviewing the proposed acquisition of control.\\ Sec. 86. NRS 692C.230 is hereby amended to read as follows: 692C.230 The provisions of NRS 692C.180 to 692C.250, inclusive, [shall] \do\\ not apply to: 1. [Any offers, requests, invitations, agreements or acquisitions by the person referred to in NRS 692C.180, of any voting security referred to in such section which, immediately prior to the consummation of such offer, request, invitation, agreement or acquisition, was not issued and outstanding. 2. Any] \A\\ transaction which is subject to the provisions of NRS 693A.290 to 693A.370, inclusive, dealing with the merger or consolidation of two or more insurers. [3. Any] \2. An\\ offer, request, invitation, agreement or acquisition which the commissioner by order [shall exempt] \exempts\\ therefrom as not having been made or entered into for the purpose and not having the effect of changing or influencing the control of a domestic insurer, or as otherwise not comprehended within the purposes of NRS 692C.180 to 692C.250, inclusive. Sec. 87. NRS 692C.290 is hereby amended to read as follows: 692C.290 Each registered insurer shall keep current the information required to be disclosed in its registration statement by reporting all material changes or additions on [amendment] forms provided by the commissioner within 15 days after the end of the month in which it learns of each such change or addition, \and not less often than annually,\\ except that, subject to the provisions of NRS 692C.390, each registered insurer shall report all dividends and other distributions to shareholders within [2] \5\\ business days following the declaration [thereof.] \and 10 days before payment.\\ Sec. 88. NRS 692C.360 is hereby amended to read as follows: 692C.360 Material transactions by registered insurers with their affiliates [shall be] \are\\ subject to \all of\\ the following standards: 1. The terms [shall] \must\\ be fair and reasonable. 2. \Charges or fees for services performed must be reasonable. 3. Expenses incurred and payment received must be allocated to the insurer in conformity with customary accounting practices concerning insurance consistently applied. 4. \\The books, accounts and records of each party [shall] \must\\ be so maintained as to \disclose\\ clearly and accurately [disclose] the precise nature and details of the transactions [. 3.] \, including such information as is necessary to support the reasonableness of the charges or fees to the respective parties. 5. \\The insurer's surplus as regards policyholders following any dividends or distributions to shareholder affiliates [shall] \must\\ be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs. Sec. 89. NRS 692C.370 is hereby amended to read as follows: 692C.370 For \the\\ purposes of this chapter, in determining whether or not an insurer's surplus as regards policyholders is reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs, the following factors among others [shall] \must\\ be considered: 1. The size of the insurer as measured by its assets, capital and surplus, reserves, premium writings, insurance in force and other appropriate criteria. 2. The extent to which the insurer's business is diversified among the several lines of insurance. 3. The number and size of risks insured in each line of business. 4. The extent of the geographical dispersion of the insurer's insured risks. 5. The nature and extent of the insurer's reinsurance program. 6. The quality, diversification and liquidity of the insurer's investment portfolio. 7. The recent past and projected future trend in the size of the insurer's surplus as regards policyholders. 8. The surplus as regards policyholders maintained by other comparable insurers. 9. The adequacy of the insurer's reserves. 10. The quality and liquidity of investments in subsidiaries made pursuant to NRS 692C.180 to 692C.250, inclusive. The commissioner may treat any such investment as a disallowed asset for purposes of determining the adequacy of surplus as regards policyholders whenever in his judgment such investment so warrants. \11. The quality of the insurer's earnings and the extent to which the reported earnings of the insurer include extraordinary items. As used in this subsection, the term "extraordinary item" means a nonrecurring occurrence or event.\\ Sec. 90. NRS 692C.380 is hereby amended to read as follows: 692C.380 For purposes of NRS 692C.360 to 692C.400, inclusive, an extraordinary dividend or distribution includes any dividend or distribution of cash or other property, whose fair market value together with that of other dividends or distributions made within the preceding 12 months exceeds the greater of: 1. Ten percent of [such] \the\\ insurer's surplus as regards policyholders as of [the 31st of] December \31\\ next preceding [;] \the dividend or distribution;\\ or 2. The net gain from operations of [such] \the\\ insurer, if [such] \the\\ insurer is a life insurer, or the net [investment] income, \including unrealized capital gains\\ if [such] \the\\ insurer is not a life insurer, for the 12-month period ending [the 31st of] December \31\\ next preceding [, but shall] \the dividend or distribution, but does not include pro rata distributions of any class of the insurer's own securities. \\Sec. 91. NRS 693A.110 is hereby amended to read as follows: 693A.110 1. After January 1, 1972, [no] \a\\ domestic insurer shall \not\\ make any contract whereby any person is granted or is to enjoy in fact the management of the insurer to the material exclusion of its board of directors or to have the controlling or preemptive right to produce substantially all insurance business for the insurer, or, if an officer, director or otherwise part of the insurer's management, is to receive any commission, bonus or compensation based upon the volume of the insurer's business or transactions, unless the contract is filed with and not disapproved by the commissioner. The contract [shall] \must\\ become effective in accordance with its terms unless disapproved by the commissioner within 20 days after the date of filing, subject to such reasonable extension of time as the commissioner may require by notice given within such 20 days. Any disapproval [shall] \must\\ be delivered to the insurer in writing stating the grounds therefor. 2. Any such contract [shall] \must\\ provide that any such manager, producer of its business or contract holder shall within 90 days after expiration of each calendar year furnish the insurer's board of directors a written statement of amounts received under or on account of the contract and amounts expended thereunder during [such] \the previous\\ calendar year, with specification of the emoluments received therefrom by the respective directors, officers and other principal management personnel of the manager or producer, and with such classification of items and further detail as the insurer's board of directors may reasonably require. 3. The commissioner shall disapprove any such contract if he finds that it: (a) Subjects the insurer to excessive charges; (b) Is to extend for an unreasonable length of time; (c) Does not contain fair and adequate standards of performance; or (d) Contains other inequitable provision or provisions which impair the proper interests of stockholders or members of the insurer. 4. The commissioner may, after a hearing held thereon, disapprove any such contract theretofore permitted to become effective, if he finds that the contract should be disapproved on any of the grounds specified in subsection 3. 5. This section does not apply to contracts entered into [prior to] \before\\ January 1, 1972, or to extensions or amendments of such contracts. \6. The commissioner may adopt regulations governing the management and agency contracts of insurers.\\ Sec. 92. NRS 693A.140 is hereby amended to read as follows: 693A.140 1. A domestic stock insurer shall not pay any cash dividend to stockholders except out of that part of its available and accumulated surplus [funds] \money\\ otherwise unrestricted and derived from realized net operating profits and realized \and unrealized\\ capital gains. 2. [A cash dividend otherwise lawful may be so paid out of the insurer's earned surplus even though its total surplus is then less than the aggregate of its past contributed or paid-in surplus. 3.] A stock dividend may be paid out of any available surplus. Upon payment of such a dividend the insurer shall transfer to its paid-in capital stock accounts [funds] \money\\ equal to the aggregate of the par values of the shares so distributed.\ 3. A domestic stock insurer may declare and distribute a dividend otherwise prohibited by this section if: (a) Following the payment of the dividend, the insurer's surplus as regards policyholders is reasonable in relation to its outstanding liabilities and adequate to its financial needs, as determined pursuant to NRS 692C.370; and (b) The commissioner approves the dividend before its payment.\\ Sec. 93. NRS 693A.320 is hereby amended to read as follows: 693A.320 1. Any person proposing to acquire the controlling capital stock of any domestic stock insurer and thereby to change the control of the insurer, other than through merger or consolidation or affiliation as provided for in NRS 693A.310 and 693A.330, [shall] \must\\ first apply to the commissioner in writing for approval of such proposed change of control. The application [shall] \must\\ state the names and addresses of the proposed new owners of the controlling stock and contain such additional information as the commissioner may reasonably require. 2. The commissioner shall not approve the proposed change of control if he finds that: (a) The proposed new owners are not qualified by character, experience and financial responsibility to control and operate the insurer, or cause the insurer to be operated, in a lawful and proper manner; (b) As a result of the proposed change of control the insurer may not be qualified for a certificate of authority under the provisions of NRS 680A.090 \;\\ [(ownership, management);] (c) The interests of the insurer or other stockholders of the insurer or policyholder would be materially harmed through the proposed change of control; or (d) The proposed change of control would tend materially to lessen competition, or to create any monopoly, in a business of insurance in this state or elsewhere. 3. If the commissioner does not by affirmative action approve or disapprove the proposed change of control within 30 days after the date [such] \the\\ application was so filed with him, the proposed change may be made without [such approval;] \his approval,\\ but if the commissioner gives notice to the parties of a hearing to be held by him with respect to the proposed change of control, and the hearing is held within [such] \the\\ 30 days or on a date mutually acceptable to the commissioner and the parties, the commissioner [shall have] \has\\ 10 days after the conclusion of the hearing within which to so approve or disapprove the proposed change. If not so approved or disapproved, the change may thereafter be made without the commissioner's approval. 4. If the commissioner disapproves the proposed change he shall give written notice thereof to the parties, setting forth in detail the reasons for disapproval. 5. The commissioner shall suspend or revoke the certificate of authority of any insurer the control of which has been changed in violation of this section. \6. The commissioner may retain at the acquiring party's expense attorneys, actuaries, accountants and other experts not otherwise a part of his staff as may be necessary only for the review of the proposed acquisition of control. Such a review may be conducted only if the parties fail to provide sufficient information to the commissioner. Expenses chargeable to the acquiring party pursuant to this subsection must not exceed 1 percent of the acquired insurer's net revenue during the year immediately preceding the year in which the application for change of control is filed with the commissioner pursuant to subsection 1. \\Sec. 94. Chapter 695E of NRS is hereby amended by adding thereto the provisions set forth as sections 95 and 96 of this act. Sec. 95. \A purchasing group shall notify the commissioner of any change in any of the information required pursuant to subsection 1 of NRS 695E.120, within 10 days after the information ceases to be accurate.\\ Sec. 96. \All premiums paid by a purchasing group or any member of the purchasing group for insurance on risks resident, located or to be performed in this state are subject to the payment of premium taxes and any related fines or penalties pursuant to chapters 680A, 680B and 685A of NRS. To the extent that premiums are paid by a purchasing group or any member of the purchasing group: 1. To an authorized insurer, the insurer shall pay the premium taxes and any related fines or penalties pursuant to chapters 680A and 680B of NRS; 2. To a surplus lines broker for insurance procured as surplus lines coverage, the surplus lines broker shall pay the premium taxes and any related fines or penalties pursuant to chapter 685A of NRS; or 3. To an unauthorized insurer for insurance independently procured by the purchasing group or any member of the group, premium taxes and any related fines and penalties are payable first by the purchasing group, and if not paid by the purchasing group, then by each of its members, pursuant to NRS 680B.040.\\ Sec. 97. NRS 695E.110 is hereby amended to read as follows: 695E.110 "Risk retention group" means any corporation or association with limited liability that is formed under the laws of any state, Bermuda or the Cayman Islands: 1. Whose primary activity consists of assuming and spreading all or any portion of the [liability] exposure of its members [;] \to liability;\\ 2. Which is organized primarily to conduct the activity described in subsection 1; 3. Which: (a) Is chartered and licensed as a liability insurer and authorized to transact insurance under the laws of any state; or (b) Before January 1, 1985, was chartered or licensed and authorized to transact 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 state's requirements for capitalization, except that such a group is 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; 4. Which does not exclude any person from membership in the group solely to provide for members of the group a competitive advantage over an excluded person; 5. Which has as its: (a) Members only persons who have an ownership interest in the group and who are provided insurance by the risk retention group; or (b) Sole [member and sole] owner an organization which [is owned by persons who are provided insurance by the risk retention group;] \has as its: (1) Members only persons who comprise the membership of the risk retention group; and (2) Owners only persons who comprise the membership of the risk retention group and who are provided insurance by the group;\\ 6. Whose members are engaged in businesses or activities similar or related with respect to the liability to which they are exposed by virtue of any related, similar or common business, trade, product, services, premises or operations; 7. Whose activities do not include the provision of insurance other than: (a) Liability insurance for assuming and spreading all or any portion of the liability of the members of the group; and (b) Reinsurance with respect to the liability of any other risk retention group, or any member of such a group, that is engaged in a business or activity such that the other group or member meets the requirements of subsection 6 for membership in the risk retention group that provides reinsurance; and 8. The name of which includes the phrase "risk retention group." Sec. 98. NRS 695E.120 is hereby amended to read as follows: 695E.120 A purchasing group that intends to conduct business in this state shall [:] \register with the commissioner and:\\ 1. Furnish notice to the commissioner that: (a) Identifies the state in which the group is domiciled; (b) Specifies the lines and classifications of liability insurance that the purchasing group intends to purchase; (c) Identifies the insurer from which the group intends to purchase its insurance and the domicile of the insurer; (d) Identifies the principal place of business of the group; [and] (e) \Identifies all other states in which the group intends to do business; and (f) \\Provides such other information as the commissioner requires to verify [its] \and determine: (1) Its\\ qualification as a purchasing group;\ (2) Where the purchasing group is located; and (3) The appropriate tax treatment of the purchasing group;\\ and 2. Appoint the commissioner as its agent solely to receive service of legal process, \and pay the fee for filing a power of attorney required by subsection 4 of NRS 680B.010,\\ except that this subsection does not apply to a purchasing group that: (a) Was domiciled before April 1, 1986, and on and after October 27, 1986, in any state; (b) Before and after October 27, 1986, purchased its insurance from an insurer licensed in any state; (c) Was a purchasing group under the requirements of the Product Liability Risk Retention Act of 1981 before October 27, 1986; and (d) Does not purchase insurance that was not authorized for an exemption under that act, as in effect before October 27, 1986. Sec. 99. NRS 695E.130 is hereby amended to read as follows: 695E.130 1. Except as otherwise provided in chapter 685A of NRS, a purchasing group shall not purchase insurance from an unauthorized insurer or a risk retention group that is not chartered \or registered\\ in this state. 2. A purchasing group is exempt from any law of this state that relates to the formation or prohibition of groups for the purchase of insurance, and any law that would discriminate against a purchasing group or its members. 3. An insurer is exempt from any law of this state that prohibits providing, or offering to provide, to a purchasing group or its members advantages based on their loss and expense experiences not afforded to other persons with respect to rates, policy forms, coverages or other matters.\ 4. A purchasing group and its insurer are exempt from any law of this state which requires that an insurance policy issued to a purchasing group or any of its members be countersigned by an insurance agent residing in this state. 5. A purchasing group that obtains liability insurance from a surplus lines insurer or a risk retention group shall inform each of the members of the purchasing group which have a risk resident or located in this state that the risk is not protected by an insurance insolvency guaranty fund in this state, and that the risk retention group or insurer may not be subject to all insurance laws and regulations of this state. 6. No purchasing group may purchase insurance providing for a deductible or self-insured retention applicable to the group as a whole, but the coverage may provide for a deductible or self-insured retention applicable to individual members of the group. 7. Purchases of insurance by purchasing groups are subject to the same standards regarding aggregate limits which are applicable to all purchases of group insurance.\\ Sec. 100. NRS 695E.140 is hereby amended to read as follows: 695E.140 1. A risk retention group seeking to be chartered in this state must obtain a certificate of authority pursuant to chapter 680A of NRS to transact liability insurance and, except as otherwise provided in this chapter, must comply with: (a) All of the laws, regulations and requirements applicable to liability insurers in this state; and (b) The provisions of NRS 695E.150 to 695E.210, inclusive, to the extent that those provisions do not limit or conflict with the provisions with which the group is required to comply pursuant to paragraph (a). \2. \\Before it may transact insurance in any state, the risk retention group [shall] \must\\ submit to the commissioner for his approval a plan of operation \.\\ [, and any revisions of the plan if the group intends to offer any additional lines of liability insurance. 2.] \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 within 10 days after 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 is approved by the commissioner. 3. \\A risk retention group chartered in a state other than Nevada that is seeking to transact insurance as a risk retention group in this state must comply with the provisions of NRS 695E.150 to 695E.210, inclusive. Sec. 101. NRS 695E.150 is hereby amended to read as follows: 695E.150 Before transacting insurance in this state, a risk retention group [shall] \must\\ submit to the commissioner: 1. A statement \of registration\\ identifying: (a) Each state in which the risk retention group is chartered or licensed as a liability insurer; (b) The date of its charter; (c) Its principal place of business; and (d) Such other information, including information concerning its membership, as the commissioner requires to verify its qualification as a risk retention group; 2. A copy of its plan of operation and any revisions of the plan submitted to its state of domicile, except with respect to any line or classification of liability that was: (a) Defined in the Product Liability Risk Retention Act of 1981 before October 27, 1986; and (b) Offered before that date by a risk retention group that had been chartered and operating for not less than 3 years before that date; and 3. A statement appointing the commissioner as its agent for service of process pursuant to NRS 680A.250 [.] \, together with the fee for filing a power of attorney required by subsection 4 of NRS 680B.010.\\ Sec. 102. NRS 695E.170 is hereby amended to read as follows: 695E.170 1. A risk retention group and its agents and representatives are subject to the provisions of NRS 686A.010 to 686A.310, inclusive. Any injunction obtained pursuant to those sections must be obtained from a court of competent jurisdiction. 2. All premiums paid for coverages within this state to a risk retention group are subject to the provisions of chapter 680B of NRS \.\\ [and NRS 685A.180.] Each risk retention group shall report all premiums paid to it [for risks insured within the state, and to the extent that agents or brokers are not utilized or do not pay the taxes, each risk retention group] \and\\ shall pay the taxes on premiums \and any related fines or penalties\\ for risks [insured within] \resident, located or to be performed in\\ the state. [To the extent that agents or brokers are utilized, they shall report and pay the taxes on the premiums for risks that they have placed with or on behalf of a risk retention group not chartered in this state.] Sec. 103. NRS 695E.200 is hereby amended to read as follows: 695E.200 A risk retention group shall not: 1. Transact insurance with any person who is not eligible for membership in the risk retention group; 2. Conduct any business in this state if an insurer is directly or indirectly a member or owner of the group, unless all the members of the group are insurers; 3. Transact insurance or otherwise operate while financially impaired or in a hazardous financial condition; [or] 4. \Issue any insurance policy with terms providing, or which have been construed as providing, coverage prohibited by a specific statute of this state or declared unlawful by the highest court of this state which has rendered a judgment concerning the legality of that coverage; or 5. \\Join or contribute financially to the Nevada insurance guaranty association, or to any similar organization or fund in this state, and the provisions of chapter 687A of NRS do not apply to a risk retention group. A risk retention group and its insureds shall not accept any benefit from such an organization or fund for claims arising out of the operation of the risk retention group.\ \\Sec. 104. NRS 695E.210 is hereby amended to read as follows: 695E.210 1. Any person acting, or offering to act, as an agent or broker for a purchasing group \, a member of a purchasing group under the group policy,\\ or \a\\ risk retention group transacting insurance in this state is subject to the provisions of [chapter] \chapters\\ 683A \and 685A\\ of NRS. 2. Except as otherwise provided in this chapter, the provisions of chapter 679B of NRS apply to purchasing groups and risk retention groups, and to the provisions of this chapter, to the extent that the provisions of chapter 679B of NRS are not specifically preempted by the Product Liability Risk Retention Act of 1981, as amended by the Risk Retention Amendments of 1986.\ 3. A risk retention group that violates any provision of this chapter is subject to the fines and penalties, including revocation of its right to do business in this state, applicable to licensed insurers under this Title.\\ Sec. 105. 1. This section and sections 1 to 13, inclusive, 28 to 62, inclusive, and 64 to 104, inclusive, of this act become effective on October 1, 1995. 2. Sections 14 to 27, inclusive, and section 63 of this act become effective on October 1, 1995, for the adoption of regulations by the commissioner of insurance and on April 1, 1996, for all other purposes. -30-