[Rev. 11/22/2013 10:31:26 AM--2013]

[NAC-694C Revised Date: 3-12]

CHAPTER 694C - CAPTIVE INSURERS

GENERAL PROVISIONS

694C.010         Definitions.

694C.020         “Accountant,” “certified public accountant” and “independent certified public accountant” defined.

694C.030         “Commissioner” defined.

694C.080         “Work papers” defined.

694C.090         Adoption of certain publications by reference.

694C.092         Periodic review of publications adopted by reference.

LICENSING

694C.100         Qualifying investigation or examination of applicant.

694C.110         Authority of Commissioner to establish review panel for applications.

ADMINISTRATION

694C.200         Annual report of financial condition.

694C.210         Annual audit.

694C.220         Independent certified public accountant: Report of retention by insurer; acknowledgment of applicable requirements.

694C.222         Criteria for recognition as qualified independent certified public accountant by Commissioner.

694C.224         Hearing to determine whether independent certified public accountant is qualified; determination that accountant is not qualified.

694C.226         Reporting of determination that insurer misstated its financial condition or does not meet minimum requirements for capital and surplus; procedure upon discovery of additional facts.

694C.228         Reporting of significant deficiency in insurer’s structure for internal control.

694C.230         Availability and maintenance of work papers of independent certified public accountant.

694C.235         Procedure upon dismissal or resignation of independent certified public accountant.

694C.240         Security deposit or letter of credit.

694C.245         Requirements for material service provider contract.

694C.250         Reinsurance and excess insurance.

694C.260         Notification of certain changes in operations or organizational structure.

694C.270         Prior approval required for change in nature of business; filing of certain changes in application information with Commissioner.

694C.280         Officers and directors.

694C.290         Conflict of interest: Statement; disclosure.

694C.295         Reasonable and proper expenses incurred in examination conducted pursuant to NRS 694C.410.

MISCELLANEOUS PROVISIONS

694C.300         Acting as manager, broker or agent without authorization of Commissioner prohibited.

694C.310         Acquisition of control of or merger with captive insurer.

 

 

 

GENERAL PROVISIONS

      NAC 694C.010  Definitions. (NRS 679B.130, 694C.170)  As used in this chapter, unless the context otherwise requires, the words and terms defined in NAC 694C.020, 694C.030 and 694C.080 have the meanings ascribed to them in those sections.

     (Supplied in codification; A by Comm’r of Insurance by R064-06, 9-18-2006)

      NAC 694C.020  “Accountant,” “certified public accountant” and “independent certified public accountant” defined. (NRS 679B.130, 694C.170)  “Accountant,” “certified public accountant” or “independent certified public accountant” means an independent certified public accountant or accounting firm in good standing with the American Institute of Certified Public Accountants and with all states in which the accountant or accounting firm is licensed to practice.

     (Added to NAC by Comm’r of Insurance by R064-06, eff. 9-18-2006)

      NAC 694C.030  “Commissioner” defined.  “Commissioner” means the Commissioner of Insurance.

     (Supplied in codification)

      NAC 694C.080  “Work papers” defined. (NRS 679B.130, 694C.170)  “Work papers” includes, without limitation, schedules, analyses, reconciliations, abstracts, memoranda, narratives, flow charts, copies of records of a captive insurer and any other documents prepared or obtained by an independent certified public accountant and his or her employees in the conduct of their examination of a captive insurer.

     (Added to NAC by Comm’r of Insurance by R125-99, eff. 1-27-2000)

      NAC 694C.090  Adoption of certain publications by reference. (NRS 679B.130, 694C.170)  The Commissioner hereby adopts the following publications by reference:

     1.  The Property/Casualty Insurance Annual Statement Blanks (ASB-PU) and the Annual Statement Instructions for the Property/Casualty Manual (ASI-PU), published by the National Association of Insurance Commissioners. A copy of these publications may be purchased from NAIC Insurance Products and Services Division, 2301 McGee Street, Suite 800, Kansas City, Missouri 64108-2662, by telephone at (816) 783-8300, by fax at (816) 460-7593 or by electronic mail at prodserv@naic.org, at a cost of $200 for ASB-PU and $225 for ASI-PU.

     2.  The AICPA Professional Standards, 2007 edition, published by the American Institute of Certified Public Accountants. A copy of this publication may be obtained from the American Institute of Certified Public Accountants, Order Department, P.O. Box 2209, Jersey City, New Jersey 07303-2209, by telephone at (888) 777-7077, by fax at (800) 362-5066 or at the Internet address https://www.cpa2biz.com/default.htm, at a cost of $119 for members of the AICPA or $148.75 for nonmembers.

     3.  Original Pronouncements As Amended, 2007-2008 edition, and Current Text, 2007-2008 edition, published by the Financial Accounting Standards Board. A copy of each of these publications may be obtained at the Internet address http://www.fasb.org or by telephone at (800) 748-0659. The cost of:

     (a) The Original Pronouncements As Amended is $140.

     (b) The Current Text is $125.

     (c) Both publications purchased as a set is $240.

     4.  The Domestic Per Diem Rates, published by the General Services Administration. A copy of this publication may be obtained, free of charge, from the General Services Administration at the Internet address http://www.gsa.gov/perdiem.

     (Added to NAC by Comm’r of Insurance by R125-99, eff. 1-27-2000; A by R064-06, 9-18-2006; R069-07, 12-4-2007)

      NAC 694C.092  Periodic review of publications adopted by reference. (NRS 679B.130, 694C.170)  The Commissioner will periodically review:

     1.  The Property/Casualty Insurance Annual Statement Blanks (ASB-PU) and the Annual Statement Instructions for the Property/Casualty Manual (ASI-PU), as adopted by reference in subsection 1 of NAC 694C.090;

     2.  The AICPA Professional Standards, as adopted by reference in subsection 2 of NAC 694C.090;

     3.  The Original Pronouncements As Amended, and the Current Text, as adopted by reference in subsection 3 of NAC 694C.090; and

     4.  The Domestic Per Diem Rates, as adopted by reference in subsection 4 of NAC 694C.090,

Ê and determine within 30 days after the review whether any change made to a publication listed in subsections 1 to 4, inclusive, is appropriate for application in this State. If the Commissioner does not disapprove a change to an adopted publication within 30 days after the review, the change is deemed to be approved by the Commissioner.

     (Added to NAC by Comm’r of Insurance by R069-07, eff. 12-4-2007)

LICENSING

      NAC 694C.100  Qualifying investigation or examination of applicant. (NRS 679B.130, 694C.170)  The Commissioner may perform a qualifying investigation or examination of an applicant either before or after the applicant is issued a certificate of authority. Such an investigation or examination may consist of a general survey of the corporate records of the applicant, including:

     1.  The charter, bylaws and minute books of the applicant;

     2.  Verification of the principal place of business of the applicant;

     3.  A determination of the assets and liabilities of the applicant;

     4.  A review of the accounting systems and rules for underwriting of the applicant; and

     5.  A review of such other factors as the Commissioner deems necessary.

     (Added to NAC by Comm’r of Insurance by R125-99, eff. 1-27-2000; A by R064-06, 9-18-2006)

      NAC 694C.110  Authority of Commissioner to establish review panel for applications. (NRS 679B.130, 694C.170, 694C.220)  In contracting with outside resources, including attorneys, accountants and actuaries, for the review of the applications for licenses for captive insurers pursuant to NRS 694C.220, the Commissioner may establish a review panel from a pool of qualified members as determined by the Commissioner.

     (Added to NAC by Comm’r of Insurance by R125-99, eff. 1-27-2000)

ADMINISTRATION

      NAC 694C.200  Annual report of financial condition. (NRS 679B.130, 694C.170, 694C.400)

     1.  A report of financial condition filed by an association captive insurer, an agency captive insurer or a rental captive insurer pursuant to NRS 694C.400 must be verified by the oath of two executive officers of the captive insurer.

     2.  A captive insurer shall file with the Commissioner an audited statement of its financial condition. The audited statement must be:

     (a) Prepared in accordance with generally accepted accounting principles in the United States and stated in United States dollars, and must contain the footnotes and opinions of the independent certified public accountant who prepared the statement; and

     (b) Accompanied by a statement, prepared by the independent certified public accountant who prepared the audited statement, certifying that all financial requirements established by law and the articles of incorporation, bylaws and the business plan of the captive insurer have been met.

     3.  In addition to any other statements and schedules which the captive insurer is required by law to file, the captive insurer shall submit to the Commissioner the following exhibits and schedules from the Property/Casualty Insurance Annual Statements Blanks, published by the National Association of Insurance Commissioners, which is adopted by reference in NAC 694C.090:

     (a) Exhibit 1 - Analysis of Nonadmitted Assets and Related Items;

     (b) Schedule A - Real Estate;

     (c) Schedule B - Mortgage Loans;

     (d) Schedule BA - Other Long-Term Invested Assets;

     (e) Schedule D - Bonds and Stocks;

     (f) Schedule DA - Short-Term Investments; and

     (g) Schedule P - Parts 1 through 4 - Analysis of Losses and Loss Expenses.

Ê The exhibits and schedules must be prepared in accordance with the Annual Statement Instructions for Property/Casualty Manual, published by the National Association of Insurance Commissioners, which is adopted by reference in NAC 694C.090.

     4.  A report of financial condition filed by a pure captive insurer pursuant to NRS 694C.400 must be verified by the oath of two executive officers of the pure captive insurer. The report must be on the form prescribed by the Commissioner known as “Captive Annual Statement: Pure.”

     (Added to NAC by Comm’r of Insurance by R125-99, eff. 1-27-2000)

      NAC 694C.210  Annual audit. (NRS 679B.130, 694C.170, 694C.400)

     1.  A captive insurer shall have an annual audit by an independent certified public accountant who is authorized by the Commissioner to conduct the audit. The captive insurer shall file the audited financial report with the Commissioner on or before June 30 for the year ending on the immediately preceding December 31.

     2.  The Commissioner will deem the annual audit conducted pursuant to this section to be a part of the annual report of financial condition of the captive insurer which is filed pursuant to NRS 694C.400.

     3.  The annual audit required by this section must include:

     (a) The opinion of the independent certified public accountant who conducted the audit which states that the financial statements of the captive insurer were examined in accordance with generally accepted auditing standards, as determined by the American Institute of Certified Public Accountants and included in the publication AICPA Professional Standards, which is adopted by reference in NAC 694C.090. The opinion must:

          (1) Cover all years presented in the audit;

          (2) Be addressed to the captive insurer on stationery of the accountant; and

          (3) Include the address of the accountant issuing the opinion, original manual signatures and the date on which the opinion was issued.

     (b) A report of an evaluation of the internal controls of the captive insurer relating to:

          (1) The methods and procedures used in the securing of assets; and

          (2) The reliability of the financial records of the captive insurer, including, without limitation, the controls for the system of authorization and approval, and the separation of duties.

     (c) A letter from the independent certified public accountant which includes:

          (1) A statement that the accountant is independent with respect to the captive insurer and that he or she conforms to the standards of his or her profession as set forth in the AICPA Professional Standards, published by the American Institute of Certified Public Accountants, and adopted by reference in NAC 694C.090, and the pronouncements of the Financial Accounting Standards Board;

          (2) A general description of the background and experience of the staff of the accountant engaged in the audit, including the experience of the staff in auditing captive insurers and other insurance companies;

          (3) A statement that the accountant understands that the audited annual report and his or her opinions thereon will be filed with the Commissioner pursuant to this section;

          (4) A statement that the accountant will comply with NAC 694C.230 and consents and agrees to make his or her work papers available for review by the Commissioner or a designee thereof; and

          (5) A statement that the accountant is properly licensed by the appropriate state licensing authority and is a member in good standing of the American Institute of Certified Public Accountants.

     (d) Financial statements, including:

          (1) A balance sheet;

          (2) A statement of gain or loss from operations;

          (3) A statement of changes in financial position;

          (4) A statement of changes in paid-up capital, gross paid-in contributed surplus and unassigned money or assets; and

          (5) Notes to financial statements required by generally accepted accounting principles, including:

               (I) A reconciliation of differences, if any, between the audited financial report and the report filed with the Commissioner pursuant to NRS 694C.400, if the captive insurer is reporting on a statutory accounting basis;

               (II) A summary of ownership and relationships of the company and all affiliated corporations or companies insured by the captive insurer; and

               (III) A narrative explanation of all material transactions and balances with the captive insurer.

     (e) An annual actuarial certification of loss reserves and loss expense reserves which includes an opinion of the adequacy of the loss reserves and loss expense reserves of the captive insurer, in a format acceptable to the Commissioner. The person who certifies the adequacy of the reserves must be approved by the Commissioner and must be a Fellow of the Casualty Actuarial Society, a member in good standing of the American Academy of Actuaries or a person who has otherwise demonstrated competence in the evaluation of loss reserves to the Commissioner. The annual actuarial certification must be in such form as the Commissioner determines appropriate.

     (Added to NAC by Comm’r of Insurance by R125-99, eff. 1-27-2000)

      NAC 694C.220  Independent certified public accountant: Report of retention by insurer; acknowledgment of applicable requirements. (NRS 679B.130, 694C.170, 694C.400)

     1.  A captive insurer shall report to the Commissioner in writing the name and address of the independent certified public accountant whom the captive insurer has retained to conduct the annual audit required to be filed pursuant to NAC 694C.210 within 90 days after becoming subject to chapter 694C of NRS.

     2.  The captive insurer shall:

     (a) Obtain a letter from the independent certified public accountant which states that the accountant is aware of the provisions of title 57 of NRS, and the regulations adopted pursuant thereto, that relate to accounting and financial matters, and which affirms that the accountant will express his or her opinion on the financial statements of the captive insurer in terms of their conformity to the accounting practices prescribed or otherwise permitted by NRS 694C.400, and the regulations adopted pursuant thereto, specifying such exceptions as he or she deems appropriate; and

     (b) File a copy of the letter with the Commissioner.

     (Added to NAC by Comm’r of Insurance by R125-99, eff. 1-27-2000; A by R064-06, 9-18-2006)

      NAC 694C.222  Criteria for recognition as qualified independent certified public accountant by Commissioner. (NRS 679B.130, 694C.170, 694C.400)

     1.  Except as otherwise provided in subsection 2, the Commissioner will recognize an independent certified public accountant as a qualified independent certified public accountant if the independent certified public accountant conforms to the standards contained in the Code of Professional Conduct of the American Institute of Certified Public Accountants, and the Rules of Professional Conduct adopted by reference in NAC 628.500 and the regulations of the Nevada State Board of Accountancy, or other similar code.

     2.  The Commissioner will not recognize as a qualified independent certified public accountant an independent certified public accountant who:

     (a) Is not in good standing with the American Institute of Certified Public Accountants and in all states in which the independent certified public accountant is licensed or certified to practice;

     (b) Has either directly or indirectly entered into an agreement of indemnity or release from liability with respect to an audit of a captive insurer if the intent or effect of the agreement or release is to shift or limit in any manner the potential liability of the accountant for failure to adhere to applicable auditing or professional standards, whether or not resulting in part from a knowing or other misrepresentation made by the captive insurer or its representatives;

     (c) Has been convicted of fraud, bribery, a violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961 to 1968, inclusive, or any other dishonest conduct or practices under federal or state law;

     (d) Has been found to have violated any provision of title 57 of NRS, or any regulation adopted pursuant thereto, with respect to any previous annual audited financial report submitted pursuant to NRS 694C.400 and NAC 694C.200 and 694C.210; or

     (e) Has demonstrated a pattern or practice of failing to detect or disclose material information in previous annual audited financial reports filed pursuant to NRS 694C.400 and NAC 694C.200 and 694C.210.

     (Added to NAC by Comm’r of Insurance by R064-06, eff. 9-18-2006)

      NAC 694C.224  Hearing to determine whether independent certified public accountant is qualified; determination that accountant is not qualified. (NRS 679B.130, 694C.170, 694C.400)

     1.  The Commissioner will, if he or she deems it necessary, hold a hearing to determine whether an independent certified public accountant is qualified for the purposes of NRS 694C.400 and NAC 694C.200 and 694C.210. If, based on the evidence presented, the Commissioner determines that the accountant is not qualified, the Commissioner will:

     (a) Rule that the accountant is not qualified for purposes of expressing his or her opinion on the financial statements in the annual audited financial report to be made pursuant to NRS 694C.400 and NAC 694C.200 and 694C.210, and require the captive insurer to replace the accountant with an independent certified public accountant who is so qualified; or

     (b) Take any other action determined to be necessary by the Commissioner.

     2.  If the Commissioner determines, without a hearing, that the accountant is not qualified, the accountant may request a hearing pursuant to NRS 679B.310.

     (Added to NAC by Comm’r of Insurance by R064-06, eff. 9-18-2006)

      NAC 694C.226  Reporting of determination that insurer misstated its financial condition or does not meet minimum requirements for capital and surplus; procedure upon discovery of additional facts. (NRS 679B.130, 694C.170, 694C.400)

     1.  An independent certified public accountant of a captive insurer required to furnish an annual audited financial report shall report to the board of directors or audit committee of the captive insurer each determination by the accountant that the captive insurer:

     (a) Has materially misstated its financial condition as reported to the Commissioner as of the date of the balance sheet currently under examination; or

     (b) Does not, as of that date, meet the minimum requirements for capital and surplus as set forth in chapter 694C of NRS.

Ê The report must be in writing and provided to the captive insurer not later than 5 business days after the accountant makes such a determination.

     2.  A captive insurer who receives a report from its independent certified public accountant pursuant to this section shall, not later than 5 business days after the date on which it receives the report from the accountant:

     (a) Forward a copy of the report to the Commissioner; and

     (b) Provide the independent certified public accountant who made the report with evidence that the captive insurer has forwarded a copy of the report to the Commissioner. If the independent certified public accountant does not, within the 5-business-day period, receive evidence from the captive insurer that the captive insurer has forwarded a copy of the report to the Commissioner in accordance with this section, the independent certified public accountant shall file with the Commissioner a copy of its report within the next 5 business days.

     3.  If the independent certified public accountant, after the annual audited financial report reviewed by the accountant has been filed pursuant to NRS 694C.400 and NAC 694C.200 and 694C.210, becomes aware of any facts which affect his or her report, the accountant shall take such action as prescribed in Volume 1, Section AU 561 of the AICPA Professional Standards, which is adopted by reference in NAC 694C.090.

     (Added to NAC by Comm’r of Insurance by R064-06, eff. 9-18-2006)

      NAC 694C.228  Reporting of significant deficiency in insurer’s structure for internal control. (NRS 679B.130, 694C.170, 694C.400)  If, following the audit of the financial statements of a captive insurer, an independent certified public accountant notes any significant deficiency in the captive insurer’s structure for internal control, the captive insurer shall, not later than 60 days after the date on which the annual audited financial report is filed with the Commissioner, file a written report which provides a description of the deficiency and of the remedial actions taken or proposed to correct the significant deficiency, if those actions are not otherwise described in the accountant’s report filed with the annual audited financial report.

     (Added to NAC by Comm’r of Insurance by R064-06, eff. 9-18-2006)

      NAC 694C.230  Availability and maintenance of work papers of independent certified public accountant. (NRS 679B.130, 694C.170, 694C.400)

     1.  A captive insurer shall ensure that its independent certified public accountant makes available for review by the Commissioner or a designee thereof the work papers of the accountant prepared in the conduct of the audit of the captive insurer. The captive insurer shall ensure that the accountant retains the audit work papers for not less than 5 years after the period reported upon in the audit.

     2.  A review by the Commissioner of the work papers of an independent certified public accountant is considered to be an examination of the captive insurer, and all work papers obtained during the course of such an examination are confidential. The captive insurer shall ensure that the independent certified public accountant provides to the Division of Insurance of the Department of Business and Industry photocopies of any of the work papers which the Division considers relevant. The Division may retain any copies of work papers provided to it pursuant to this subsection.

     (Added to NAC by Comm’r of Insurance by R125-99, eff. 1-27-2000)

      NAC 694C.235  Procedure upon dismissal or resignation of independent certified public accountant. (NRS 679B.130, 694C.170, 694C.400)

     1.  If the independent certified public accountant who was the accountant for the most recent filing of the annual audited financial report of a captive insurer is dismissed or resigns, the captive insurer shall:

     (a) Not later than 5 business days after the dismissal or resignation, notify the Commissioner of the dismissal or resignation; and

     (b) Not later than 10 business days after notifying the Commissioner of the dismissal or resignation of the accountant, file with the Commissioner a separate letter which sets forth:

          (1) Each disagreement which occurred during the 24 months immediately preceding the dismissal or resignation between the accountant and the captive insurer on any matter of accounting principles or practices, disclosure on a financial statement or the scope or procedure of the audit; and

          (2) Which disagreements, if not resolved to the satisfaction of the accountant, caused him or her to make a reference to the subject matter of the disagreement in his or her opinion filed with the annual audited financial report of the captive insurer.

     2.  The disagreements required to be reported pursuant to this section include both those resolved to the former accountant’s satisfaction and those which have not been resolved to the former accountant’s satisfaction.

     3.  The captive insurer shall request in writing that the former accountant furnish a letter addressed to the captive insurer stating whether the accountant agrees with the statements contained in the captive insurer’s letter filed pursuant to subsection 1 and, if not, stating the reasons he or she does not agree.

     4.  Upon receipt of the accountant’s response letter, the captive insurer shall file with the Commissioner a copy of the response letter from the former accountant and any written response of the captive insurer to the accountant’s response letter.

     5.  For the purposes of this section, a disagreement between the captive insurer and its accountant is a disagreement which occurs between the captive insurer and the accountant at the decision-making level and includes, without limitation, a disagreement between the personnel of the captive insurer responsible for preparation of the financial statements of the captive insurer and the personnel of the independent certified public accountant responsible for rendering its opinion on those statements.

     (Added to NAC by Comm’r of Insurance by R064-06, eff. 9-18-2006)

      NAC 694C.240  Security deposit or letter of credit. (NRS 679B.130, 694C.170)

     1.  If the Commissioner determines that the financial condition of a captive insurer warrants additional security, the Commissioner may require the captive insurer to:

     (a) Deposit with the State Treasurer:

          (1) Cash; or

          (2) Securities which have been approved by the Commissioner; or

     (b) Furnish the Commissioner a clean irrevocable letter of credit issued by a bank chartered by the State of Nevada, or a bank that is a member of the United States Federal Reserve System, on a form approved by the Commissioner.

     2.  A captive insurer may:

     (a) Receive interest or dividends from the security deposit; or

     (b) With the approval of the Commissioner, exchange the deposit for other deposits of equal value.

     3.  If the captive insurer discontinues business, the Commissioner will return the deposit to the captive insurer only after being satisfied that all obligations of the captive insurer have been discharged.

     (Added to NAC by Comm’r of Insurance by R125-99, eff. 1-27-2000)

      NAC 694C.245  Requirements for material service provider contract. (NRS 679B.130, 694C.170)

     1.  A material service provider contract between a captive insurer and a service provider:

     (a) Must be for a period of not more than 5 years;

     (b) Requires the approval of the majority of the captive insurer’s directors or subscribers’ advisory committee members for its initial term and for all renewals; and

     (c) Must be filed with the Division within 30 days after the effective date of the contract.

     2.  As used in this section:

     (a) “Material service provider contract” means any contract between a captive insurer and a service provider under the terms of which the amount to be paid to the service provider by the captive insurer is greater than $15,000 during any one 12-month period.

     (b) “Service provider” means a captive manager, auditor, accountant, actuary, investment adviser, attorney, managing general underwriter, managing general agent, attorney-in-fact or any other party responsible for underwriting, the determination of rates, the collection of premiums, adjusting and settling claims or the preparation of financial statements.

     (Added to NAC by Comm’r of Insurance by R071-09, eff. 10-27-2009)

      NAC 694C.250  Reinsurance and excess insurance. (NRS 679B.130, 694C.170)

     1.  A captive insurer shall give at least 90 days’ advance notice to the insured and the Commissioner of the termination or modification of any reinsurance treaty or agreement held by the captive insurer. Upon notification of termination or modification of a reinsurance treaty or agreement held by a captive insurer, the Commissioner may order the captive insurer to cease writing any new business until the Commissioner approves the modification of the existing reinsurance treaty or agreement, or any replacement reinsurance treaty or agreement obtained by the captive insurer.

     2.  Reinsurance and excess insurance must be effected through a written agreement of reinsurance, or a written contract setting forth the terms, provisions and conditions governing the reinsurance.

     3.  The Commissioner may require that complete copies of all reinsurance treaties, agreements and contracts entered into by a captive insurer be:

     (a) Filed by the captive insurer with the Commissioner;

     (b) Approved by the Commissioner; or

     (c) Filed by the captive insurer with, and approved by, the Commissioner.

     (Added to NAC by Comm’r of Insurance by R125-99, eff. 1-27-2000)

      NAC 694C.260  Notification of certain changes in operations or organizational structure. (NRS 679B.130, 694C.170)  If any material change occurs in the operations of a captive insurer or in the organizational structure within the captive insurer, the manager, certified public accountant or actuary of the captive insurer shall notify the board of directors of the captive insurer of the material change within 60 days after the material change occurs.

     (Added to NAC by Comm’r of Insurance by R125-99, eff. 1-27-2000)

      NAC 694C.270  Prior approval required for change in nature of business; filing of certain changes in application information with Commissioner. (NRS 679B.130, 694C.170, 694C.240)

     1.  A captive insurer shall not, without the prior approval of the Commissioner, make any material change in the nature of its business from that stated in its plan of operation filed with the Commissioner.

     2.  Any change in any other information filed with the application must be filed with the Commissioner as soon as practicable, but does not require the prior approval of the Commissioner to make the change.

     (Added to NAC by Comm’r of Insurance by R125-99, eff. 1-27-2000)

      NAC 694C.280  Officers and directors. (NRS 679B.130, 694C.170)

     1.  Within 30 days after any change in the executive officers and directors of a captive insurer, the captive insurer shall report the change to the Commissioner. The report must include a statement of the business and professional affiliations of the new executive officer or director. The new executive officer or director must meet the same standards that were indicated in the initial application of the captive insurer for that officer or director position.

     2.  A director, an officer or an employee of a captive insurer shall not, except on behalf of the captive insurer, accept or be the beneficiary of any fee, brokerage, gift or other emolument because of any investment, loan, deposit, purchase, sale, payment or exchange made by or for the captive insurer, but such a person may receive reasonable compensation for necessary services rendered to the captive insurer in his or her usual private, professional or business capacity. Prior to receiving compensation pursuant to this subsection, the person performing necessary services must obtain the consent of the board of directors or subscribers’ advisory committee for the performance of and compensation for such necessary services.

     3.  Any profit or gain received by or on behalf of any person in violation of this section is recoverable by the captive insurer.

     (Added to NAC by Comm’r of Insurance by R125-99, eff. 1-27-2000; A by R070-09, 10-27-2009)

      NAC 694C.290  Conflict of interest: Statement; disclosure. (NRS 679B.130, 694C.170)

     1.  A captive insurer chartered in this State shall adopt a conflict of interest policy for its attorneys-in-fact, trustees, managers, officers and directors. The policy must contain:

     (a) A requirement that the attorney-in-fact, trustee, manager, officer or director must annually disclose that he or she has no outside commitments, personal or otherwise, that would divert him or her from the duty to further the interests of the captive insurer that he or she represents;

     (b) A clear expression that the attorney-in-fact, trustee, manager, officer or director has a duty of care to protect the interests of the captive insurer above those of any person including, but not limited to, the attorney-in-fact, trustee, manager, officer or director or any service provider; and

     (c) A requirement that each attorney-in-fact, trustee, manager, officer or director must provide a complete annual disclosure of each material relationship that he or she has with the captive insurer.

     2.  Each attorney-in-fact, trustee, manager, officer or director of a captive insurer shall file a disclosure of his or her conflicts of interest with the board of directors or subscribers’ advisory committee of the captive insurer annually.

     3.  Nothing in this section shall be construed to prevent an attorney-in-fact, trustee, manager, officer or director of a captive insurer from being a director or officer in more than one insurance company or captive insurer.

     4.  As used in this section:

     (a) “Material relationship” means any relationship in which an attorney-in-fact, trustee, manager, officer or director of a captive insurer, any member of such a person’s immediate family or any business with which such a person is affiliated receives compensation or payment of any other items of value from the captive insurer or a consultant or service provider to the captive insurer of an amount greater than $15,000 within any one 12-month period.

     (b) “Service provider” means a captive manager, auditor, accountant, actuary, investment adviser, attorney, managing general underwriter, managing general agent, attorney-in-fact or any other party responsible for underwriting, the determination of rates, the collection of premiums, adjusting and settling claims or the preparation of financial statements.

     (Added to NAC by Comm’r of Insurance by R125-99, eff. 1-27-2000; A by R071-09, 10-27-2009)

      NAC 694C.295  Reasonable and proper expenses incurred in examination conducted pursuant to NRS 694C.410. (NRS 679B.130, 694C.170, 694C.410)  Reasonable and proper expenses incurred in an examination conducted pursuant to NRS 694C.410 may include, without limitation:

     1.  For a financial examiner or market conduct examiner, a daily salary as defined in the Examiners Handbook, which is adopted by reference in NAC 679B.033.

     2.  For expert assistants, a daily salary based upon the rate established in the contract approved by the State Board of Examiners.

     3.  The maximum per diem rate for the location of the examination established by the Administrator of General Services in the Federal Trade Regulation System of the General Services Administration, 41 C.F.R. Chapters 300 to 304, inclusive, and set forth in Domestic Per Diem Rates, which is adopted by reference in NAC 694C.090.

     4.  Expenses for transportation, including, without limitation, the cost of airfare, rail fare, taxicab fare and automobile rental and the reimbursement of any personal automobile expenses necessary to reach the location of the examination. The calculation of expenses for transportation may include expenses for transportation incurred by virtue of the length of time necessary to complete the examination.

     5.  Upon approval of the Commissioner, miscellaneous expenses incurred by the examiner and assistants while performing an examination. Miscellaneous expenses may include, without limitation, expenses for telephone calls, facsimile transmissions and postal charges relating to the examination.

     6.  An administrative charge, expressed as a percentage of the daily salary of the examiner or assistant, as provided in subsections 1 and 2 and as provided in the division budget approved by the Nevada Legislature.

     (Added to NAC by Comm’r of Insurance by R069-07, eff. 12-4-2007)

MISCELLANEOUS PROVISIONS

      NAC 694C.300  Acting as manager, broker or agent without authorization of Commissioner prohibited. (NRS 679B.130, 694C.170)  A person shall not act as a manager, a broker or an agent in this State for a captive insurer without authorization of the Commissioner. An application for authorization to act as a manager, a broker or an agent must be made to the Commissioner on a form prescribed by the Commissioner.

     (Added to NAC by Comm’r of Insurance by R125-99, eff. 1-27-2000)

      NAC 694C.310  Acquisition of control of or merger with captive insurer. (NRS 679B.130, 694C.170)

     1.  A person other than an issuer shall not:

     (a) Make a tender offer for, make a request or invitation for tenders of, or enter into any agreement to exchange securities for, any voting security of a domestic captive insurer; or

     (b) Seek to acquire, or acquire in the open market or otherwise, any voting security of a domestic captive insurer,

Ê if, after the consummation thereof, the person would, directly or indirectly, or by conversion or exercise of any right acquired, be in control of the captive insurer.

     2.  A person shall not enter into an agreement to merge with, or otherwise acquire control of, a domestic captive insurer without the prior written approval of the Commissioner.

     3.  In considering an application for the acquisition of control or merger with a domestic captive insurer, the Commissioner will consider all the facts and circumstances surrounding the application as well as the criteria for the establishment of a captive insurer set forth in this chapter and chapter 694C of NRS.

     (Added to NAC by Comm’r of Insurance by R125-99, eff. 1-27-2000)