NRS: CHAPTER 694C - CAPTIVE INSURERS

[Rev. 6/29/2024 5:01:55 PM--2023]

CHAPTER 694C - CAPTIVE INSURERS

GENERAL PROVISIONS

NRS 694C.010 Definitions.

NRS 694C.020 “Affiliated company” defined.

NRS 694C.030 “Agency captive insurer” defined.

NRS 694C.035 “Alien captive insurer” defined.

NRS 694C.040 “Association” defined.

NRS 694C.050 “Association captive insurer” defined.

NRS 694C.053 “Branch business” defined.

NRS 694C.055 “Branch captive insurer” defined.

NRS 694C.057 “Branch operations” defined.

NRS 694C.060 “Captive insurer” defined.

NRS 694C.070 “Commissioner” defined.

NRS 694C.075 “Controlled unaffiliated business” defined.

NRS 694C.080 “Division” defined.

NRS 694C.085 “Dormant captive insurer” defined.

NRS 694C.090 “Member organization” defined.

NRS 694C.100 “Mutual insurer” defined.

NRS 694C.110 “Parent” defined.

NRS 694C.113 “Participant” defined.

NRS 694C.115 “Participant contract” defined.

NRS 694C.117 “Protected cell” defined.

NRS 694C.120 “Pure captive insurer” defined.

NRS 694C.130 “Reciprocal insurer” defined.

NRS 694C.140 “Rental captive insurer” defined.

NRS 694C.141 “Risk retention group” defined.

NRS 694C.143 “Sponsor” defined.

NRS 694C.147 “Sponsored captive insurer” defined.

NRS 694C.149 “State-chartered risk retention group” defined.

NRS 694C.150 “Stock insurer” defined.

NRS 694C.155 Applicability of chapter 696B of NRS to sponsored captive insurer.

NRS 694C.160 Applicability of other provisions.

NRS 694C.170 Regulations.

NRS 694C.180 Formation of captive insurer.

NRS 694C.190 Name.

NRS 694C.195 Sponsored captive insurer: Formation; conditions for formation and licensure; requirements for sponsor and participants.

LICENSING

NRS 694C.200 Authorization to apply for license in certain circumstances; license required to transact insurance; penalty.

NRS 694C.210 Application: Requirement; contents.

NRS 694C.215 Application: Sponsored captive insurer required to file certain information with Commissioner.

NRS 694C.220 Application: Fees; Commissioner authorized to retain professional services relating to examination of applicant; cost of services.

NRS 694C.230 Issuance of license; annual renewal; fees.

NRS 694C.240 Insurer required to include business plan with application for issuance and renewal of license; updates to business plan.

NRS 694C.250 Capital or surplus required: Amount; form; Commissioner authorized to prescribe additional requirements; letter of credit; use of surplus note.

NRS 694C.259 Certificate of dormancy: Application; powers and duties of certificate holder; renewal; expiration; surrender; revocation; regulations.

NRS 694C.270 Suspension or revocation of license: Grounds; hearings.

MISCELLANEOUS PROVISIONS

NRS 694C.300 Authorized and prohibited types of insurance.

NRS 694C.310 Meetings of board of directors; additional requirements to transact insurance; review by Commissioner of qualifications of manager.

NRS 694C.320 Plan for payment of dividends; regulations.

NRS 694C.330 Payment of dividends and extraordinary dividends.

NRS 694C.340 Compliance with requirements relating to investments; loan to parent or affiliated company by pure captive insurer in certain circumstances.

NRS 694C.350 Reinsurance; credit for reserves on risks or portions of risks in certain circumstances; plan for workers’ compensation deemed reinsurance in certain circumstances.

NRS 694C.360 Use of insurance of captive insurer to satisfy requirements relating to insurance on vehicles subject to Nevada Transportation Authority or Taxicab Authority prohibited; exception.

NRS 694C.370 Insurer not required to join rating organization.

NRS 694C.380 Insurer prohibited from joining or contributing to or receiving benefit for claims from assigned risk pool or insurance insolvency guaranty fund.

NRS 694C.382 Combining assets for investment.

NRS 694C.384 Security for branch operations.

NRS 694C.386 Alien captive insurer: Issuance of certificate related to branch operations; registration.

NRS 694C.388 Alien captive insurer: Reports and statements.

NRS 694C.389 State-chartered risk retention group: Compliance with laws and requirements applicable to liability insurers.

NRS 694C.390 State-chartered risk retention group: Required filings.

NRS 694C.392 State-chartered risk retention group: Board of directors; material service provider contracts; audit committee; written policies, governance standards and code of business conduct; duty to notify domestic regulator of material noncompliance.

ADMINISTRATION

NRS 694C.400 Submission of annual report of financial condition, audit and financial statement to Commissioner; regulations designating form; alternative date to file annual report; penalties for failing to comply or making false statement.

NRS 694C.410 Examinations: Conducted by Commissioner; frequency; Commissioner authorized to obtain professional services; cost.

NRS 694C.415 Examinations: Branch captive insurer; alien captive insurer.

TAXATION, REGULATION AND SUPERVISION

NRS 694C.450 Taxes on premiums: Imposition; deposit; nonrefundable credit.

NRS 694C.455 Tax on premiums: Applicable only to branch business of branch captive insurer.

NRS 694C.460 Account for the Regulation and Supervision of Captive Insurers: Creation; uses; deposits; transfers to agency for economic development; administrative expenses; transfers to State General Fund; warrants by State Controller on receipts.

_________

GENERAL PROVISIONS

NRS 694C.010 Definitions. As used in this chapter, unless the context otherwise requires, the words and terms defined in NRS 694C.020 to 694C.150, inclusive, have the meanings ascribed to them in those sections.

(Added to NRS by 1999, 3207; A 2005, 2151; 2015, 3508; 2017, 73; 2019, 1709)

NRS 694C.020 “Affiliated company” defined. “Affiliated company” means a company in the same corporate system as its parent or a member organization by virtue of common ownership, control, operation or management.

(Added to NRS by 1999, 3207)

NRS 694C.030 “Agency captive insurer” defined. “Agency captive insurer” means a captive insurer that is owned or directly or indirectly controlled by an insurance agency or brokerage and that only insures risks of policies which are placed by or through the agency or brokerage.

(Added to NRS by 1999, 3207; A 2005, 2151)

NRS 694C.035 “Alien captive insurer” defined. “Alien captive insurer” means any insurer that is formed to write insurance business for its parents and affiliates and is licensed pursuant to the laws of an alien jurisdiction which imposes statutory or regulatory standards acceptable to the Commissioner on companies transacting the business of insurance in such jurisdiction.

(Added to NRS by 2005, 2147)

NRS 694C.040 “Association” defined. “Association” means a legal entity consisting of two or more corporations, limited-liability companies, partnerships, associations or other forms of business organizations.

(Added to NRS by 1999, 3207; A 2005, 2151)

NRS 694C.050 “Association captive insurer” defined. “Association captive insurer” means a captive insurer that only insures risks of the member organizations of an association and the affiliated companies of those members if:

1. The association or the member organizations of the association:

(a) Have complete control over the power to vote all the outstanding voting securities of the association captive insurer, if the association captive insurer is incorporated as a stock insurer; or

(b) Have complete voting control over the captive insurer, if the captive insurer is formed as a mutual insurer; and

2. The member organizations of the association collectively constitute all the subscribers of the captive insurer, if the captive insurer is formed as a reciprocal insurer.

(Added to NRS by 1999, 3207; A 2003, 3331; 2019, 1709)

NRS 694C.053 “Branch business” defined. “Branch business” means any insurance business transacted by a branch captive insurer in this State.

(Added to NRS by 2005, 2147)

NRS 694C.055 “Branch captive insurer” defined. “Branch captive insurer” means an alien captive insurer licensed pursuant to this chapter to transact the business of insurance through a business unit with a principal place of business in this State.

(Added to NRS by 2005, 2147)

NRS 694C.057 “Branch operations” defined. “Branch operations” means any business operations of a branch captive insurer in this State.

(Added to NRS by 2005, 2147)

NRS 694C.060 “Captive insurer” defined. “Captive insurer” means:

1. Any pure captive insurer, association captive insurer, agency captive insurer, rental captive insurer and sponsored captive insurer licensed pursuant to this chapter. The term includes a pure captive insurer who, unless otherwise provided by the Commissioner, is a branch captive insurer with respect to operations in this State.

2. Any state-chartered risk retention group.

(Added to NRS by 1999, 3208; A 2005, 2152; 2019, 1709)

NRS 694C.070 “Commissioner” defined. “Commissioner” means the Commissioner of Insurance.

(Added to NRS by 1999, 3208)

NRS 694C.075 “Controlled unaffiliated business” defined. “Controlled unaffiliated business” means any company:

1. That is not in the corporate system of a parent and affiliated companies;

2. That has an existing contractual relationship with a parent or affiliated company; and

3. Whose risks are managed by a captive insurer pursuant to this chapter.

(Added to NRS by 2005, 2147)

NRS 694C.080 “Division” defined. “Division” means the Division of Insurance of the Department of Business and Industry.

(Added to NRS by 1999, 3208)

NRS 694C.085 “Dormant captive insurer” defined. “Dormant captive insurer” means any captive insurer that has been issued a certificate of dormancy by the Commissioner pursuant to NRS 694C.259.

(Added to NRS by 2019, 1708)

NRS 694C.090 “Member organization” defined. “Member organization” means any individual or corporation, limited-liability company, partnership, association or other form of business organization that belongs to an association.

(Added to NRS by 1999, 3208; A 2005, 2152)

NRS 694C.100 “Mutual insurer” defined. “Mutual insurer” has the meaning ascribed to it in NRS 680A.030.

(Added to NRS by 1999, 3208)

NRS 694C.110 “Parent” defined. “Parent” means a corporation, limited-liability company, partnership, association or other form of business organization that directly or indirectly owns, controls or holds with power to vote more than 50 percent of the outstanding voting securities of:

1. A pure captive insurer organized as a stock corporation; or

2. The membership of a pure captive insurer organized as a nonprofit corporation.

(Added to NRS by 1999, 3208; A 2005, 2152)

NRS 694C.113 “Participant” defined. “Participant” means a corporation, association, limited-liability company, partnership, trust, sponsor or other business organization, and any affiliate thereof, that is insured by a sponsored captive insurer, where the losses of the participant are limited by a participant contract to the participant’s pro rata share of the assets of one or more protected cells identified in such participant contract.

(Added to NRS by 2005, 2147)

NRS 694C.115 “Participant contract” defined. “Participant contract” means a contract by which a sponsored captive insurer insures the risks of a participant and limits the losses of each such participant to its pro rata share of the assets of one or more protected cells identified in the participant contract.

(Added to NRS by 2005, 2148)

NRS 694C.117 “Protected cell” defined. “Protected cell” means a separate account established by a sponsored captive insurer in which assets are maintained for one or more participants in accordance with the terms of one or more participant contracts that fund the liability of the sponsored captive insurer assumed on behalf of the participants as set forth in the participant contracts.

(Added to NRS by 2005, 2148)

NRS 694C.120 “Pure captive insurer” defined. “Pure captive insurer” means a captive insurer that only insures risks of its parent and affiliated companies or controlled unaffiliated businesses and, unless otherwise provided by the Commissioner, includes a branch captive insurer.

(Added to NRS by 1999, 3208; A 2005, 2152)

NRS 694C.130 “Reciprocal insurer” defined. “Reciprocal insurer” has the meaning ascribed to it in NRS 680A.040.

(Added to NRS by 1999, 3208)

NRS 694C.140 “Rental captive insurer” defined. “Rental captive insurer” means a captive insurer formed to enter into contractual agreements with policyholders or associations to offer some or all of the benefits of a program of captive insurance and that only insures risks of such policyholders or associations.

(Added to NRS by 1999, 3208)

NRS 694C.141 “Risk retention group” defined. “Risk retention group” has the meaning ascribed to it in NRS 695E.110.

(Added to NRS by 2017, 73)

NRS 694C.143 “Sponsor” defined. “Sponsor” means an insurer licensed pursuant to the laws of any state, a reinsurer authorized or approved under the laws of any state, a captive insurer formed or licensed pursuant to this chapter or a person that:

1. Meets the requirements of subsection 3 of NRS 694C.180 or is approved as a sponsor by the Commissioner; and

2. Is approved by the Commissioner to provide all or part of the capital and surplus required by applicable law and to organize and operate a sponsored captive insurer.

(Added to NRS by 2005, 2148; A 2013, 3371)

NRS 694C.147 “Sponsored captive insurer” defined. “Sponsored captive insurer” means any captive insurer:

1. In which the minimum capital and surplus required by applicable law is provided by one or more sponsors;

2. That is formed or licensed pursuant to this chapter;

3. That only insures the risks of its participants through separate participant contracts; and

4. That funds the liability for each participant through one or more protected cells where the assets of each protected cell are segregated from the assets of other protected cells and the assets of the general account of the sponsored captive insurer.

(Added to NRS by 2005, 2148)

NRS 694C.149 “State-chartered risk retention group” defined. “State-chartered risk retention group” means any risk retention group that is formed in accordance with the laws of this State.

(Added to NRS by 2015, 3504; A 2017, 73; 2019, 1709)

NRS 694C.150 “Stock insurer” defined. “Stock insurer” has the meaning ascribed to it in NRS 680A.050.

(Added to NRS by 1999, 3208)

NRS 694C.155 Applicability of chapter 696B of NRS to sponsored captive insurer. The provisions of chapter 696B of NRS apply to a sponsored captive insurer if:

1. The assets of a protected cell are not used to pay any expense or claim other than those that are attributable to the protected cell; and

2. The capital and surplus of the sponsored captive insurer are available at all times to pay any expenses of or claims against the sponsored captive insurer.

(Added to NRS by 2005, 2150)

NRS 694C.160 Applicability of other provisions.

1. The terms and conditions set forth in chapter 696B of NRS pertaining to insurance reorganization, receiverships and injunctions apply to captive insurers incorporated pursuant to this chapter.

2. The provisions of NRS 679B.285 pertaining to the confidentiality and disclosure of certain records and information relating to an insurer apply to such records and information relating to a captive insurer incorporated pursuant to this chapter.

3. An agency captive insurer, a rental captive insurer and an association captive insurer are subject to those provisions of chapter 686A of NRS which are applicable to insurers.

4. A state-chartered risk retention group is subject to the following:

(a) The provisions of NRS 681A.250 to 681A.580, inclusive, regarding intermediaries;

(b) The provisions of NRS 681B.550 regarding risk-based capital;

(d) The provisions of chapter 686A of NRS which are applicable to insurers; and

(e) The provisions of NRS 693A.110 and any regulations adopted pursuant thereto regarding management and agency contracts of insurers.

(Added to NRS by 1999, 3217; A 2017, 73; 2019, 1709; 2023, 2640)

NRS 694C.170 Regulations. The Commissioner may establish such regulations as are necessary to carry out the provisions of this chapter.

(Added to NRS by 1999, 3217)

NRS 694C.180 Formation of captive insurer.

1. Unless otherwise approved by the Commissioner, a pure captive insurer, an agency captive insurer, a rental captive insurer or a sponsored captive insurer must be incorporated as a stock insurer.

2. An association captive insurer or a state-chartered risk retention group must be formed as a:

(a) Stock insurer;

(b) Mutual insurer; or

3. A captive insurer shall have not less than three incorporators or organizers, at least one of whom must be a resident of this State.

4. Before the articles of incorporation of a captive insurer may be filed with the Secretary of State, the Commissioner must approve the articles of incorporation. In determining whether to grant that approval, the Commissioner shall consider:

(a) The character, reputation, financial standing and purposes of the incorporators or organizers;

(b) The character, reputation, financial responsibility, experience relating to insurance and business qualifications of the officers and directors of the captive insurer;

(c) The competence of any person who, pursuant to a contract with the captive insurer, will manage the affairs of the captive insurer;

(d) The competence, reputation and experience of the legal counsel of the captive insurer relating to the regulation of insurance;

(e) If the captive insurer is a rental captive insurer, the competence, reputation and experience of the underwriter of the captive insurer;

(f) The business plan of the captive insurer; and

(g) Such other aspects of the captive insurer as the Commissioner deems advisable.

5. The capital stock of a captive insurer incorporated as a stock insurer must be issued at not less than par value.

6. At least one member of the board of directors of a captive insurer formed as a corporation, or one member of the subscribers advisory committee or the attorney-in-fact of a captive insurer formed as a reciprocal insurer, must be a resident of this State.

7. A captive insurer formed pursuant to the provisions of this chapter has the privileges of, and is subject to, the provisions of general corporation law set forth in chapter 78 of NRS and, if formed as a nonprofit corporation, the provisions set forth in chapter 82 of NRS, as well as the applicable provisions contained in this chapter. If the provisions of this chapter conflict with the general provisions in chapter 78 or 82 of NRS governing corporations, the provisions of this chapter control. The provisions of chapter 693A of NRS relating to mergers, consolidations, conversions, mutualizations and transfers of domicile to this State apply to determine the procedures to be followed by captive insurers in carrying out any of those transactions in accordance with this chapter.

8. The articles of association, articles of incorporation, charter or bylaws of a captive insurer formed as a corporation must require that a quorum of the board of directors consists of not less than one-third of the number of directors prescribed by the articles of association, articles of incorporation, charter or bylaws.

9. The agreement of the subscribers or other organizing document of a captive insurer formed as a reciprocal insurer must require that a quorum of its subscribers advisory committee consists of not less than one-third of the number of its members.

(Added to NRS by 1999, 3212; A 2005, 2152; 2019, 1710)

NRS 694C.190 Name. A captive insurer shall not use or adopt a name that is the same, deceptively similar or likely to be confused with or mistaken for any other existing business name registered in this state.

(Added to NRS by 1999, 3210)

NRS 694C.195 Sponsored captive insurer: Formation; conditions for formation and licensure; requirements for sponsor and participants.

1. One or more sponsors may form a sponsored captive insurer pursuant to this chapter.

2. A sponsored captive insurer formed or licensed pursuant to this chapter may establish and maintain one or more protected cells to insure the risks of one or more participants, subject to the following conditions:

(a) The shareholders of a sponsored captive insurer must be limited to its participants and sponsors, provided that the sponsored captive insurer may issue nonvoting securities to other persons on terms approved by the Commissioner;

(b) Each protected cell must be accounted for separately on the books and records of the sponsored captive insurer to reflect the financial condition and results of operations of that protected cell, including, but not limited to, the net income or loss, dividends, or other distributions to participants, and such other factors as may be set forth in the participant contract or required by the Commissioner;

(c) The assets of a protected cell must not be chargeable with liabilities arising out of any other insurance business which the sponsored captive insurer may conduct;

(d) A sponsored captive insurer shall not make a sale, exchange, transfer of assets, dividend or distribution between or among any of its protected cells without the consent of any participant for which the protected cells are maintained;

(e) A sponsored captive insurer shall not make a sale, exchange, transfer of assets, dividend or distribution from a protected cell to a sponsor or participant without the prior written approval of the Commissioner, and the Commissioner shall not give written approval if the sale, exchange, transfer, dividend or distribution would result in the insolvency or impairment of the protected cell;

(f) On or before June 30 of each year, a sponsored captive insurer must file with the Commissioner a report of its financial condition, including, but not limited to, accounting statements detailing the financial experience of each protected cell and any other information required by the Commissioner;

(g) A sponsored captive insurer must notify the Commissioner not more than 10 business days after a protected cell becomes insolvent or otherwise unable to meet its claims or expense obligations;

(h) A participant contract must not become effective without the prior written approval of the Commissioner;

(i) The addition of each new protected cell, the withdrawal of any participant of a protected cell or the termination of any existing protected cell constitutes a change in the business plan and requires the prior written approval of the Commissioner; and

(j) The business written by a sponsored captive insurer with respect to each protected cell must be:

(1) Fronted by an insurer licensed pursuant to the laws of any state;

(2) Reinsured by a reinsurer authorized or approved by the Commissioner; or

(3) Secured by a trust fund in the United States for the benefit of policyholders and claimants or funded by an irrevocable letter of credit or other arrangement that is acceptable to the Commissioner. The amount of security provided must not be less than the reserves associated with those liabilities, which are not fronted or reinsured pursuant to subparagraph (1) or (2), including reserves for losses, allocated loss adjustment expenses, incurred but not reported losses and unearned premiums for business written through the protected cell maintained for the participant. The Commissioner may require the sponsored captive insurer to increase the funding of any security arrangement established under this subsection. If the form of security is a letter of credit, the letter of credit must be established, issued or confirmed by a bank chartered in this State, a member of the Federal Reserve System or a bank chartered in another state if the bank is deemed acceptable by the Commissioner. A trust maintained pursuant to this subparagraph must be established in a form and under such terms that are approved by the Commissioner.

3. A sponsor of a sponsored captive insurer must:

(a) Be an insurer licensed pursuant to the laws of any state, a reinsurer authorized or approved under the laws of any state, a captive insurer formed or licensed pursuant to this chapter or a person approved as a sponsor by the Commissioner; and

(b) Not be a risk retention group.

4. A participant in a sponsored captive insurer need not be a shareholder of the sponsored captive insurer or an affiliate of the sponsored captive insurer and:

(a) May be an association, corporation, limited-liability company, partnership, trust or other form of business organization;

(b) May be a sponsor of the sponsored captive insurer; and

5. A participant in a sponsored captive insurer shall insure only its own risks through a sponsored captive insurer.

(Added to NRS by 2005, 2148; A 2013, 3372; 2023, 2640)

LICENSING

NRS 694C.200 Authorization to apply for license in certain circumstances; license required to transact insurance; penalty.

1. A captive insurer, when authorized by its articles of association, articles of incorporation or charter, may apply to the Commissioner for a license to transact insurance.

2. A captive insurer shall not transact insurance in this State unless the captive insurer first obtains a license from the Commissioner.

3. A person who violates this section is subject to the provisions of, and shall be punished pursuant to, the Unauthorized Insurers Act set forth in NRS 685B.020 to 685B.087, inclusive.

(Added to NRS by 1999, 3208)

NRS 694C.210 Application: Requirement; contents. A captive insurer must apply to the Commissioner for a license. The application must include:

1. A certified copy of the charter and bylaws of the captive insurer;

2. A pro forma financial statement for the captive insurer that has been prepared by a certified public accountant or an actuary authorized by the Division to conduct business in this State;

3. Any other statements or documents that the Commissioner requires to be filed with the application;

4. Evidence of:

(a) The amount and liquidity of its assets relative to the risks to be assumed by the captive insurer;

(b) The expertise, experience and character of the persons who will manage the captive insurer;

(d) The adequacy of the programs of the captive insurer providing for loss prevention by its parent or member organizations, as applicable; and

5. Such other information deemed to be relevant by the Commissioner in ascertaining whether the proposed captive insurer will be able to meet its policy obligations.

(Added to NRS by 1999, 3210; A 2011, 3393)

NRS 694C.215 Application: Sponsored captive insurer required to file certain information with Commissioner. In addition to the information required pursuant to NRS 694C.210, each sponsored captive insurer shall file with the Commissioner:

1. Information demonstrating the manner in which the applicant will account for the loss and expense experience of each protected cell, at a level of detail deemed sufficient by the Commissioner, and the method of reporting such information;

2. A written acknowledgment that all financial records of the sponsored captive insurer, including, but not limited to, records pertaining to any protected cells, must be made available for inspection or examination by the Commissioner or a designee of the Commissioner;

3. All contracts entered into between the sponsored captive insurer and any participant, including, but not limited to, participant contracts; and

4. Evidence satisfactory to the Commissioner indicating that expenses will be allocated to each protected cell in a fair and equitable manner.

(Added to NRS by 2005, 2151)

NRS 694C.220 Application: Fees; Commissioner authorized to retain professional services relating to examination of applicant; cost of services. An application by a captive insurer for licensure must include a nonrefundable application fee of $500. The Commissioner may retain legal, financial and examination services from outside the Division to review and make recommendations regarding the qualifying examination of the applicant. The cost of those services must be paid by the applicant. The provisions of NRS 679B.230 to 679B.287, inclusive, apply to examinations, investigations and processing conducted pursuant to this section.

(Added to NRS by 1999, 3210)

NRS 694C.230 Issuance of license; annual renewal; fees.

1. If the Commissioner determines that the documents and statements filed by the captive insurer satisfy the requirements for licensure, the Commissioner shall issue a license to the captive insurer. The license may be renewed annually upon the satisfaction of all requirements imposed by the Commissioner and payment of all applicable renewal fees.

2. A captive insurer must pay a fee of $300 for the issuance of a license and, on or before March 1 of each year, an annual fee of $300 and, in addition to any other fee or charge, all applicable fees required pursuant to NRS 680C.110 for the renewal of a license.

(Added to NRS by 1999, 3210; A 2005, 2153; 2009, 1814)

NRS 694C.240 Insurer required to include business plan with application for issuance and renewal of license; updates to business plan. A captive insurer shall include its business plan with its application for the issuance and renewal of a license. If the captive insurer makes any changes to the business plan, the captive insurer shall, as soon as practicable, file a copy of the updated business plan with the Commissioner.

(Added to NRS by 1999, 3210)

NRS 694C.250 Capital or surplus required: Amount; form; Commissioner authorized to prescribe additional requirements; letter of credit; use of surplus note.

1. A captive insurer must not be issued a license, and shall not hold a license, unless the captive insurer has and maintains, in addition to any other capital or surplus required to be maintained pursuant to subsection 3, unimpaired paid-in capital and unencumbered surplus of:

(a) For a pure captive insurer, not less than $200,000;

(b) For an association captive insurer, not less than $500,000;

(d) For a rental captive insurer, not less than $800,000;

(e) For a sponsored captive insurer, not less than $500,000; and

(f) For a state-chartered risk retention group, not less than $500,000.

2. Except as otherwise provided by the Commissioner pursuant to subsection 3, the capital and surplus required to be maintained pursuant to this section must be in the form of cash or an irrevocable letter of credit.

3. The Commissioner may prescribe additional requirements relating to capital or surplus based on the type, volume and nature of the insurance business that is transacted by the captive insurer and requirements regarding which capital and surplus, if any, may be in the form of an irrevocable letter of credit.

4. A letter of credit used by a captive insurer as evidence of capital and surplus required pursuant to this section must:

(a) Be issued by a bank chartered by this State or a bank that is a member of the United States Federal Reserve System and has been approved by the Commissioner; and

(b) Include a provision pursuant to which the letter of credit is automatically renewable each year, unless the issuer gives written notice to the Commissioner and the captive insurer at least 90 days before the expiration date.

5. A surplus note used by a captive insurer as evidence of capital and surplus required pursuant to this section must:

(a) Be subject to strict control by the Commissioner and have been approved by the Commissioner as to form and content.

(b) Be subordinate to:

(1) Policyholders;

(2) Claims by claimants and beneficiaries under policies; and

(3) All other classes of creditors pursuant to paragraph (k) of subsection 1 of NRS 696B.420.

(1) Payment of interest; and

(2) Repayment of principal.

(d) Be accompanied by proceeds which are received by the captive insurer in the form of:

(1) Cash; or

(2) Other assets that:

(I) Are acceptable to the Commissioner;

(II) Have values that are readily determined; and

(III) Have liquidity that is satisfactory to the Commissioner.

(e) Be accounted for in such a manner that interest shall not be recorded as a liability or an expense until approval for payment of such interest has been granted by the Commissioner.

(Added to NRS by 1999, 3211; A 2005, 2153; 2007, 3328; 2019, 1711)

NRS 694C.259 Certificate of dormancy: Application; powers and duties of certificate holder; renewal; expiration; surrender; revocation; regulations.

1. A captive insurer which is not transacting the business of insurance, including, without limitation, the issuance of insurance policies and the assumption of reinsurance, may apply to the Commissioner for a certificate of dormancy.

2. Upon application by a captive insurer pursuant to subsection 1, the Commissioner may issue a certificate of dormancy to the captive insurer. The Commissioner may issue a certificate of dormancy to a captive insurer even if the captive insurer retains liabilities that are associated with policies that were written or assumed by the captive insurer provided that the captive insurer otherwise is not transacting the business of insurance.

3. A dormant captive insurer shall:

(a) Possess and thereafter maintain unimpaired paid-in capital and surplus of not less than $25,000.

(b) Pursuant to NRS 694C.230, pay an annual fee and, in addition to any other fee or charge, all applicable fees required pursuant to NRS 680C.110 for the renewal of a license.

(c) Be subject to examination for any year for which the dormant captive insurer is not in compliance with the provisions of this section.

4. A dormant captive insurer may:

(a) At the discretion of the Commissioner, be subject to examination for any year for which the dormant captive insurer is in compliance with the provisions of this section.

(b) Continue to adjudicate and settle insurance claims under any contract of insurance or reinsurance that the captive insurer issued during any period in which the captive insurer was not a dormant captive insurer. The effective date of such a contract of insurance or reinsurance must be before the date on which the Commissioner issued a certificate of dormancy to the captive insurer.

5. After being issued a certificate of dormancy, and until the certificate of dormancy expires or is revoked, a dormant captive insurer is not:

(a) Subject to or liable for the payment of any tax pursuant to NRS 694C.450.

(b) Required to:

(1) Prepare audited financial statements;

(2) Obtain actuarial certifications or opinions; or

(3) File annual reports with the Commissioner pursuant to NRS 694C.400.

6. A certificate of dormancy is subject to renewal after 5 years. If not timely renewed, the certificate of dormancy expires. Immediately upon the expiration of the certificate of dormancy, the captive insurer must be in compliance with all provisions of this chapter applicable to a captive insurer which holds an active license to transact the business of insurance issued pursuant to this chapter.

7. Except as otherwise provided by this section, before issuing any insurance policy or otherwise transacting the business of insurance, a dormant captive insurer must apply to the Commissioner for approval to surrender its certificate of dormancy and resume transacting the business of insurance.

8. The Commissioner shall revoke the certificate of dormancy of a dormant captive insurer that is not in compliance with the provisions of this section.

9. The Commissioner may adopt regulations necessary to carry out the provisions of this section.

(Added to NRS by 2019, 1708; A 2021, 2991)

NRS 694C.270 Suspension or revocation of license: Grounds; hearings.

1. The Commissioner may suspend or revoke the license of a captive insurer if, after a hearing, the Commissioner determines that:

(a) The captive insurer:

(1) Is insolvent or has impaired its required capital or surplus;

(2) Has failed to meet a requirement of NRS 694C.250, 694C.320 or 694C.330;

(3) Has refused or failed to submit an annual report, as required by NRS 694C.400, or any other report or statement required by law or by order of the Commissioner;

(4) Has failed to comply with the provisions of its charter or bylaws;

(5) Has failed to submit to an examination required pursuant to NRS 694C.410;

(6) Has refused or failed to pay the cost of an examination required pursuant to NRS 694C.410;

(7) Has used any method in transacting insurance pursuant to this chapter which is detrimental to the operation of the captive insurer or would make its condition unsound with respect to its policyholders or the general public; or

(8) Has failed to pay taxes on premiums as required by NRS 694C.450 or otherwise to comply with the laws of this State; and

(b) The suspension or revocation of the license of the captive insurer is in the best interest of its policyholders or the general public.

2. The provisions of NRS 679B.310 to 679B.370, inclusive, apply to hearings conducted pursuant to this section.

(Added to NRS by 1999, 3214; A 2007, 3329; 2019, 1712)

MISCELLANEOUS PROVISIONS

NRS 694C.300 Authorized and prohibited types of insurance.

1. Except as otherwise provided in this section, a captive insurer licensed pursuant to this chapter may transact any form of insurance described in NRS 681A.020 to 681A.080, inclusive.

2. A captive insurer licensed pursuant to this chapter:

(a) Shall not directly provide personal motor vehicle or homeowners’ insurance coverage, or any component thereof.

(b) Shall not accept or cede reinsurance, except as otherwise provided in NRS 694C.350.

(c) May provide excess workers’ compensation insurance to its parent and affiliated companies, unless otherwise prohibited by the laws of the state in which the insurance is transacted.

(d) May reinsure workers’ compensation insurance provided pursuant to a program of self-funded insurance of its parent and affiliated companies if:

(1) The parent or affiliated company which is providing the self-funded insurance is certified as a self-insured employer by the Commissioner, if the insurance is being transacted in this State; or

(2) The program of self-funded insurance is otherwise qualified pursuant to, or in compliance with, the laws of the state in which the insurance is transacted.

3. A pure captive insurer shall not insure any risks other than those of its parent and affiliated companies or controlled unaffiliated businesses.

4. An association captive insurer shall not insure any risks other than those of the member organizations of its association and the affiliated companies of the member organizations.

5. A state-chartered risk retention group shall not insure any risks other than those of the members of its association.

6. An agency captive insurer shall not insure any risks other than those of the policies that are placed by or through the insurance agency or brokerage that owns the captive insurer.

7. A rental captive insurer shall not insure any risks other than those of the policyholders or associations that have entered into agreements with the rental captive insurer for the insurance of those risks. Such agreements must be in a form which has been approved by the Commissioner.

8. A sponsored captive insurer shall not insure any risks other than those of its participants.

9. As used in this section, “excess workers’ compensation insurance” means insurance in excess of the specified per-incident or aggregate limit, if any, established by:

(a) The Commissioner, if the insurance is being transacted in this State; or

(b) The chief regulatory officer for insurance in the state in which the insurance is being transacted.

(Added to NRS by 1999, 3208; A 2005, 2154; 2019, 1712)

NRS 694C.310 Meetings of board of directors; additional requirements to transact insurance; review by Commissioner of qualifications of manager.

1. The board of directors of a captive insurer shall meet at least once each year in this State. The captive insurer shall:

(a) Maintain its principal place of business in this State; and

(b) Appoint a resident of this State as a registered agent to accept service of process and otherwise act on behalf of the captive insurer in this State. If the registered agent cannot be located with reasonable diligence for the purpose of serving a notice or demand on the captive insurer, the notice or demand may be served on the Secretary of State who shall be deemed to be the agent for the captive insurer.

2. A captive insurer shall not transact insurance in this State unless:

(a) The captive insurer has made adequate arrangements with:

(1) A state-chartered bank, a state-chartered credit union or a thrift company licensed pursuant to chapter 677 of NRS that is located in this State; or

(2) A federally chartered bank or federally chartered credit union that has a branch which is located in this State,

Ê that is authorized pursuant to state or federal law to transfer money.

(b) If the captive insurer employs or has entered into a contract with a natural person or business organization to manage the affairs of the captive insurer, the natural person or business organization meets the standards described in paragraph (b) of subsection 4 of NRS 694C.210 to the satisfaction of the Commissioner.

(c) The captive insurer employs or has entered into a contract with a qualified and experienced certified public accountant who is approved by the Commissioner or a firm of certified public accountants that is nationally recognized.

(d) The captive insurer employs or has entered into a contract with qualified, experienced actuaries who are approved by the Commissioner to perform reviews and evaluations of the operations of the captive insurer.

(e) The captive insurer employs or has entered into a contract with an attorney who is licensed to practice law in this State and who meets the standards of competence and experience in matters concerning the regulation of insurance in this State established by the Commissioner by regulation.

3. The Commissioner may periodically review the qualifications of a natural person or business organization described in paragraph (b) of subsection 2 and, if appropriate:

(a) Disqualify the manager pursuant to the authority of the Commissioner under NRS 679B.125; or

(b) Suspend or revoke the license of the captive insurer pursuant to NRS 694C.270.

(Added to NRS by 1999, 3209; A 2005, 2155; 2019, 1713; 2021, 2992)

NRS 694C.320 Plan for payment of dividends; regulations. The Commissioner may approve an ongoing plan for the payment of dividends or other distributions by a captive insurer if, at the time of each payment or distribution, the retention of capital by the captive insurer is in excess of the amounts required by the Commissioner. The Commissioner shall adopt by regulation:

1. A specific amount that a captive insurer must have in excess capital for the approval of an ongoing plan for the payment of dividends or other distributions; or

2. A formula pursuant to which the specific amount of required excess capital may be calculated.

(Added to NRS by 1999, 3211)

NRS 694C.330 Payment of dividends and extraordinary dividends.

1. Except as otherwise provided in this section, a captive insurer shall pay dividends out of, or make any other distributions from, its capital or surplus, or both, in accordance with the provisions set forth in NRS 692C.370, 693A.140, 693A.150 and 693A.160.

2. A captive insurer other than a state-chartered risk retention group shall not pay extraordinary dividends out of, or make any other extraordinary distribution with respect to, its capital or surplus, or both, in violation of this section unless the captive insurer has obtained the prior approval of the Commissioner to make such a payment or distribution. As used in this subsection, “extraordinary dividend” and “extraordinary distribution” mean any dividend or distribution of cash or other property, the fair market value of which, together with that of other dividends or distributions within the preceding 12 months, exceeds the greater of:

(a) Ten percent of the surplus of the captive insurer as of December 31 next preceding the date of the dividend or distribution; or

(b) The net income of the captive insurer for the 12-month period ending December 31 next preceding the date of the dividend or distribution.

3. A state-chartered risk retention group shall not pay any dividend or distribution without prior approval of the Commissioner.

(Added to NRS by 1999, 3212; A 2011, 3393; 2019, 1714)

NRS 694C.340 Compliance with requirements relating to investments; loan to parent or affiliated company by pure captive insurer in certain circumstances.

1. Except as otherwise provided in this section and NRS 694C.382, an association captive insurer, an agency captive insurer, a rental captive insurer, a sponsored captive insurer or a state-chartered risk retention group shall comply with the requirements relating to investments set forth in chapter 682A of NRS. Upon the request of the association captive insurer, agency captive insurer, rental captive insurer, sponsored captive insurer or state-chartered risk retention group, the Commissioner may approve the use of reliable, alternative methods of valuation and rating.

2. A pure captive insurer is not subject to any restrictions on allowable investments, except that the Commissioner may prohibit or limit any investment that threatens the solvency or liquidity of the pure captive insurer.

3. A pure captive insurer may make a loan to its parent or affiliated company if the loan:

(a) Is first approved in writing by the Commissioner;

(b) Is evidenced by a note that is in a form that is approved by the Commissioner; and

(c) Does not include any money that has been set aside as capital or surplus as required by subsection 1 of NRS 694C.250.

(Added to NRS by 1999, 3214; A 2005, 2156; 2007, 3329; 2019, 1714)

NRS 694C.350 Reinsurance; credit for reserves on risks or portions of risks in certain circumstances; plan for workers’ compensation deemed reinsurance in certain circumstances.

1. A captive insurer may provide reinsurance on risks ceded by any other insurer.

2. A captive insurer may take credit for reserves on risks or portions of risks ceded to a reinsurer that is in compliance with NRS 681A.140 to 681A.240, inclusive. A captive insurer shall not take credit for reserves on risks or portions of risks ceded to a reinsurer if the reinsurer is not in compliance with NRS 681A.140 to 681A.240, inclusive.

3. The Commissioner may authorize a captive insurer to take credit for reserves on risks or portions of risks ceded to a pool, an exchange or an association acting as a reinsurer. The Commissioner may require such documents, financial information or other evidence as the Commissioner determines necessary to show that the pool, exchange or association will be able to provide adequate security for its financial obligations. The Commissioner may deny authorization or impose any limitations on the activities of a reinsurance pool, exchange or association that, in the judgment of the Commissioner, are necessary and proper to provide adequate security for the ceding captive insurer and for the protection and benefit of the general public.

4. For the purposes of this chapter, insurance provided by a captive insurer of any plan for workers’ compensation of its parent and affiliated companies which is certified or otherwise qualified in the state in which the insurance is provided as a self-insurance plan shall be deemed to be reinsurance.

(Added to NRS by 1999, 3215)

NRS 694C.360 Use of insurance of captive insurer to satisfy requirements relating to insurance on vehicles subject to Nevada Transportation Authority or Taxicab Authority prohibited; exception. Insurance provided by a captive insurer in accordance with this chapter may not be used to satisfy the requirements set forth in chapter 706 of NRS relating to the insurance required to be maintained by vehicles subject to the jurisdiction of the Nevada Transportation Authority or Taxicab Authority, unless the Nevada Transportation Authority or Taxicab Authority, as appropriate, specifically approves the use of insurance provided by a captive insurer for that purpose.

(Added to NRS by 1999, 3215)

NRS 694C.370 Insurer not required to join rating organization. A captive insurer is not required to join a rating organization.

(Added to NRS by 1999, 3215)

NRS 694C.380 Insurer prohibited from joining or contributing to or receiving benefit for claims from assigned risk pool or insurance insolvency guaranty fund. A captive insurer shall not join or contribute financially to an assigned risk pool or insurance insolvency guaranty fund in this state. A captive insurer or its insured, its parent or an affiliated company, or any member organization of its association shall not receive any benefit from such a pool or fund for claims arising out of the operations of the captive insurer.

(Added to NRS by 1999, 3215; A 2017, 73)

NRS 694C.382 Combining assets for investment. Notwithstanding the provisions of this chapter, the assets of two or more protected cells may be combined for the purpose of investment, and such combination must not be construed as defeating the separation of the assets for accounting or other purposes. Sponsored captive insurers shall comply with the investment requirements set forth in NRS 694C.340, if applicable, except to the extent that credit for reinsurance ceded to reinsurers is allowed pursuant to NRS 694C.350 or to the extent otherwise deemed reasonable and appropriate by the Commissioner. Notwithstanding the provisions of this chapter, the Commissioner may approve the use of alternative reliable methods of valuation and rating.

(Added to NRS by 2005, 2150)

NRS 694C.384 Security for branch operations.

1. As security for the payment of liabilities attributable to the branch operations of a branch captive insurer, the Commissioner shall require that a trust fund, funded by an irrevocable letter of credit or other acceptable asset, be established and maintained in the United States for the benefit of United States policyholders and ceding United States insurers under insurance policies or reinsurance contracts issued or assumed by the branch captive insurer through its branch operations.

2. The amount of the security must be not less than the total amount required by NRS 694C.250, and any reserves on such insurance policies or reinsurance contracts, including reserves for losses, allocated loss adjustment expenses, incurred but not reported losses and unearned premiums with regard to business written through the branch operations. The Commissioner may authorize a branch captive insurer that is required to post security for loss reserves on branch business by its reinsurer to reduce the funds in the trust account required by this section by that same amount as long as the security remains posted with the reinsurer.

3. If the form of the security is a letter of credit, the letter of credit must be established, issued or confirmed by a bank chartered in this State or a bank that is a member of the Federal Reserve System.

(Added to NRS by 2005, 2150; A 2007, 3330)

NRS 694C.386 Alien captive insurer: Issuance of certificate related to branch operations; registration. An alien captive insurer licensed as a branch captive insurer shall petition the Commissioner to issue a certificate setting forth the finding of the Commissioner that, after considering the character, reputation, financial responsibility, insurance experience and business qualifications of the officers and directors of the alien captive insurer, the licensing and maintenance of the branch operations will promote the general welfare of the State. The alien captive insurer may register to do business in this State after the certificate is issued by the Commissioner.

(Added to NRS by 2005, 2150)

NRS 694C.388 Alien captive insurer: Reports and statements. Before June 30 of each year or, if approved by the Commissioner, not more than 60 days after the expiration of the fiscal year of the branch captive insurer, the branch captive insurer shall file with the Commissioner a copy of all reports and statements required to be filed under the laws of the jurisdiction in which the alien captive insurer is domiciled. The reports and statements must be verified by oath of two of the executive officers of the alien captive insurer. If the Commissioner is satisfied that the annual report filed by the alien captive insurer in the jurisdiction in which it is domiciled provides adequate information concerning the financial condition of the alien captive insurer, the Commissioner may waive the requirement for completion of the captive annual statement for business written in the alien jurisdiction.

(Added to NRS by 2005, 2150; A 2023, 2642)

NRS 694C.389 State-chartered risk retention group: Compliance with laws and requirements applicable to liability insurers. A state-chartered risk retention group must comply with all of the laws, regulations and requirements applicable to liability insurers in this State, unless otherwise approved by the Commissioner.

(Added to NRS by 2017, 73)

NRS 694C.390 State-chartered risk retention group: Required filings.

1. In addition to the information required pursuant to NRS 694C.210, a state-chartered risk retention group must submit to the Commissioner in summary form:

(a) The identities of:

(1) All members of the group;

(2) All organizers of the group;

(3) Those persons who will provide administrative services to the group; and

(4) Any person who will influence or control the activities of the group;

(b) The amount and nature of initial capitalization of the group;

(d) Each state in which the group intends to operate.

2. Before it may transact insurance in any state, the state-chartered risk retention group must submit to the Commissioner, for approval by the Commissioner, a plan of operation. 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 state-chartered risk retention group chartered in this State must file with the Commissioner on or before March 1 of each year a statement containing information concerning the immediately preceding year which must:

(a) Be submitted in a form prescribed by the National Association of Insurance Commissioners;

(b) Be prepared in accordance with the Annual Statement Instructions for the type of insurer to be reported on as adopted by the National Association of Insurance Commissioners for the year in which the insurer files the statement;

(c) Utilize accounting principles in a manner that remains consistent among financial statements submitted each year and that are substantively identical to:

(1) Generally accepted accounting principles, including any useful or necessary modifications or adaptations thereof that have been approved or accepted by the Commissioner for the type of insurance and kinds of insurers to be reported upon, and as supplemented by additional information required by the Commissioner; or

(2) Statutory accounting principles, as described in the Accounting Practices and Procedures Manual adopted by the National Association of Insurance Commissioners effective on January 1, 2001, and as amended by the National Association of Insurance Commissioners after that date; and

(d) Be submitted electronically, if required by the Commissioner.

4. The Commissioner shall transmit to the National Association of Insurance Commissioners a copy of:

(a) All information submitted by a state-chartered risk retention group to the Commissioner pursuant to subsections 1 and 3; and

(b) Any revisions to a plan of operation submitted to the Commissioner pursuant to subsection 2.

(Added to NRS by 2015, 3504; A 2019, 1715)

1. The board of directors of a risk retention group must have a majority of independent directors. If the risk retention group is a reciprocal risk retention group, the attorney-in-fact is required to adhere to the same standards regarding independence of operation and governance as imposed on the risk retention group’s board of directors or subscribers advisory committee under this section, and, to the extent permissible by state law, service providers of a reciprocal risk retention group must contract with the risk retention group and not the attorney-in-fact.

2. No director qualifies as independent unless the board of directors affirmatively determines that the director has no material relationship with the risk retention group. Each risk retention group shall disclose these determinations to its domestic regulator at least annually. For the purposes of this subsection, any person that is a direct or indirect owner of or subscriber in the risk retention group, or is an officer, director or employee of such an owner or insured, unless some other position of such officer, director or employee constitutes a material relationship, as contemplated by 15 U.S.C. § 3901(a)(4)(E)(ii), is considered to be independent.

3. The term of any material service provider contract with a risk retention group must not exceed 5 years. Any such contract, or its renewal, must require the approval of the majority of the risk retention group’s independent directors. The risk retention group’s board of directors shall have the right to terminate any service provider, audit or actuarial contracts at any time for cause after providing adequate notice as defined in the contract. The service provider contract is deemed material if the amount to be paid for such contract is greater than, or equal to, 5 percent of the risk retention group’s annual gross written premium or 2 percent of its surplus, whichever is greater. No service provider contract which creates a material relationship may be entered into unless the risk retention group has notified the Commissioner, in writing, of its intention to enter into such a transaction at least 30 days before and the Commissioner has not disapproved it within such period. For the purposes of this subsection:

(a) “Lawyer” does not include defense counsel retained by the risk retention group to defend claims, unless the amount of fees paid to such lawyer creates a material relationship.

(b) “Service provider” includes, without limitation, a captive manager, auditor, accountant, actuary, investment advisor, lawyer, managing general underwriter or other party responsible for underwriting, determination of rates, collection of premium, adjusting and settling claims or the preparation of financial statements.

4. The board of directors shall adopt a written policy in the plan of operation as approved by the board that requires the board to:

(a) Ensure that all owners and insureds of the risk retention group receive evidence of ownership interest;

(b) Develop a set of governance standards applicable to the risk retention group;

(c) Oversee the evaluation of the risk retention group’s management, including, without limitation, the performance of the captive manager, managing general underwriter or other party or parties responsible for underwriting, determination of rates, collection of premium, adjusting or settling claims or the preparation of financial statements;

(d) Review and approve the amount to be paid for all material service providers; and

(e) At least annually, review and approve:

(1) The risk retention group’s goals and objectives relevant to the compensation of officers and service providers;

(2) The officer’s and service provider’s performance in light of those goals and objectives; and

(3) The continued engagement of the officers and material service providers.

5. A risk retention group must have an audit committee composed of at least three independent board members. A board member that is not independent may participate in the activities of the audit committee if invited by the members, but cannot be a member of such committee.

6. An audit committee established pursuant to subsection 5 must have a written charter that defines the committee’s purpose, which must include, without limitation:

(a) Assisting the board of directors with oversight of:

(1) The integrity of financial statements;

(2) Compliance with legal and regulatory requirements; and

(3) The qualifications, independence and performance of the independent auditor and actuary;

(b) Discussing the annual audited financial statements and quarterly financial statements with management;

(c) Discussing the annual audited financial statements and, if advisable, its quarterly financial statements with its independent auditor;

(d) Discussing policies with respect to risk assessment and risk management;

(e) Meeting separately and periodically, either directly or through a designated representative of the committee, with management and independent auditors;

(f) Reviewing with the independent auditor any audit problems or difficulties and management’s response;

(g) Setting clear hiring policies of the risk retention group as to the hiring of employees or former employees of the independent auditor;

(h) Requiring the external auditor to rotate the lead, or coordinating, audit partner having primary responsibility for the risk retention group’s audit as well as the audit partner responsible for reviewing that audit so that one such person does not perform audit services for more than 5 consecutive fiscal years; and

(i) Reporting regularly to the board of directors.

7. The domestic regulator may waive the requirement to establish an audit committee composed of independent board members if the risk retention group is able to demonstrate to the domestic regulator that it is impracticable to do so and the board of directors itself is otherwise able to accomplish the purposes of the audit committee.

8. The board of directors shall adopt and disclose governance standards which must include:

(a) A process by which the directors are elected by the owners and insureds;

(b) Qualification standards;

(d) Access to management and, as necessary and appropriate, independent advisors;

(e) Compensation;

(f) Orientation and continuing education;

(g) The policies and procedures to be followed for management succession; and

(h) The policies and procedures to be followed for annual performance evaluation of the board.

Ê As used in this subsection, “disclose” means making information available through electronic or other means, including, without limitation, posting such information on the risk retention group’s Internet website and providing such information to its members and insureds upon request.

9. The board of directors shall adopt and disclose a code of business conduct and ethics for directors, officers and employees which must include, without limitation:

(a) Conflicts of interest;

(b) Matters covered under the corporate opportunities doctrine within the state of domicile;

(d) Fair dealing;

(e) Protection and proper use of assets of the risk retention group;

(f) Compliance with all applicable laws, rules and regulations; and

(g) Requiring the reporting of any illegal or unethical behavior which affects the operation of the risk retention group.

Ê The board shall promptly disclose any waivers of the code for directors or executive officers.

10. The captive manager, president or chief executive officer of a risk retention group shall promptly notify the domestic regulator, in writing, if he or she becomes aware of any material noncompliance with this section.

11. As used in this section:

(a) “Board of directors” or “board” means the governing body of a risk retention group elected by the shareholders or members to establish policy, elect or appoint officers and committees and make other governing decisions.

(b) “Director” means a natural person designated in the articles of the risk retention group, or designated, elected or appointed by any other manner, name or title to act on the board.

(1) The receipt in any one 12-month period of compensation or payment of any other item of value by such person, a member of such person’s immediate family or any business with which such person is affiliated from the risk retention group or a consultant or service provider to the risk retention group that is greater than or equal to 5 percent of the risk retention group’s gross written premium for such 12-month period or 2 percent of its surplus, whichever is greater, as measured at the end of any fiscal quarter falling in such a 12-month period. Such person or immediate family member of such a person is not considered to be independent until 1 year after his or her compensation or payment from the risk retention group falls below the threshold set forth in this subparagraph.

(2) A director or an immediate family member of a director who is affiliated with or employed in a professional capacity by a present or former internal or external auditor of the risk retention group is not considered to be independent until 1 year after the end of the affiliation, employment or auditing relationship.

(3) A director or immediate family member of a director who is employed as an executive officer of another company where any of the risk retention group’s present executives serve on that company’s board of directors is not considered to be independent until 1 year after the end of such service or the employment relationship.

(Added to NRS by 2015, 3505)

ADMINISTRATION

1. On or before June 30 of each year, a captive insurer, other than a state-chartered risk retention group, shall submit to the Commissioner a report of its financial condition. A captive insurer shall use generally accepted accounting principles and include any useful or necessary modifications or adaptations thereof that have been approved or accepted by the Commissioner for the type of insurance and kinds of insurers to be reported upon, and as supplemented by additional information required by the Commissioner. Except as otherwise provided in this section, each association captive insurer, agency captive insurer, rental captive insurer or sponsored captive insurer shall file its report in the time and form required by the Commissioner. Each state-chartered risk retention group shall file its report in the time and form required by NRS 680A.270. The Commissioner shall adopt regulations designating the form in which pure captive insurers must report.

2. Each captive insurer, other than a state-chartered risk retention group, shall submit to the Commissioner, on or before June 30 of each year, an annual audit 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. An annual audit submitted pursuant to this subsection must comply with the requirements set forth in regulations adopted by the Commissioner which govern such an annual audit, including, without limitation, criteria for extensions and exemptions.

3. Each state-chartered risk retention group shall file a financial statement pursuant to NRS 680A.265.

4. A pure captive insurer may apply, in writing, for authorization to file its annual report based on a fiscal year that is consistent with the fiscal year of the parent company of the pure captive insurer. If an alternative date is granted, the annual report is due not later than 60 days after the end of each such fiscal year.

5. A pure captive insurer shall file on or before March 1 of each year such forms as required by the Commissioner by regulation to provide sufficient detail to support its premium tax return filed pursuant to NRS 694C.450.

6. Any captive insurer failing, without just cause beyond the reasonable control of the captive insurer, to file its annual report of financial condition as required by subsection 1, its annual audit as required by subsection 2 or its financial statement as required by subsection 3 shall pay a penalty of $100 for each day the captive insurer fails to file the report of financial condition, the annual audit or the financial statement, but not to exceed an aggregate amount of $3,000, to be recovered in the name of the State of Nevada by the Attorney General.

7. Any director, officer, agent or employee of a captive insurer who subscribes to, makes or concurs in making or publishing, any annual or other statement required by law, knowing the same to contain any material statement which is false, is guilty of a gross misdemeanor.

(Added to NRS by 1999, 3213; A 2007, 3330; 2011, 3393; 2013, 3373; 2017, 74; 2019, 1716; 2023, 2642)

NRS 694C.410 Examinations: Conducted by Commissioner; frequency; Commissioner authorized to obtain professional services; cost.

1. Except as otherwise provided in this section, at least once every 3 years, and at such other times as the Commissioner determines necessary, the Commissioner, or a designee of the Commissioner, shall visit each captive insurer and thoroughly inspect and examine the affairs of the captive insurer to ascertain:

(a) The financial condition of the captive insurer;

(b) The ability of the captive insurer to fulfill its obligations; and

(c) Whether the captive insurer has complied with the provisions of this chapter and the regulations adopted pursuant thereto.

2. Upon the application of a captive insurer, the Commissioner may conduct the visits required pursuant to subsection 1 every 5 years if the captive insurer conducts comprehensive annual audits:

(a) The scope of which is satisfactory to the Commissioner; and

(b) Which are conducted by an independent auditor appointed by the Commissioner.

3. The provisions of subsections 1 and 2 do not apply to a pure captive insurer. The Commissioner may conduct an examination of a pure captive insurer at any reasonable time to ascertain:

(a) The financial condition of the pure captive insurer;

(b) The ability of the pure captive insurer to fulfill its obligations; and

(c) Whether the pure captive insurer has complied with the provisions of this chapter and the regulations adopted pursuant thereto.

4. The Commissioner may contract to obtain legal, financial and examination services from outside the Division to conduct the examination and make recommendations to the Commissioner. The cost of the examination must be paid to the Commissioner by the captive insurer.

5. The provisions of NRS 679B.230 to 679B.287, inclusive, apply to examinations conducted pursuant to this section.

(Added to NRS by 1999, 3213; A 2011, 3394)

NRS 694C.415 Examinations: Branch captive insurer; alien captive insurer.

1. The examination of a branch captive insurer pursuant to NRS 694C.410 must be of branch business and branch operations only, so long as the branch captive insurer provides to the Commissioner on an annual basis a certificate of compliance, or equivalent documentation, issued by or filed with the licensing authority of the jurisdiction in which the branch captive insurer is formed, and demonstrates to the satisfaction of the Commissioner that it is operating in a sound financial condition and in accordance with all applicable laws and regulations of that jurisdiction.

2. As a condition of licensure, the alien captive insurer must authorize the Commissioner to examine the affairs of the alien captive insurer in the jurisdiction in which the alien captive insurer is formed.

(Added to NRS by 2005, 2151)

TAXATION, REGULATION AND SUPERVISION

NRS 694C.450 Taxes on premiums: Imposition; deposit; nonrefundable credit.

1. Except as otherwise provided in this section, a captive insurer shall pay to the Division, not later than March 1 of each year, a tax at the rate of:

(a) Two-fifths of 1 percent on the first $20,000,000 of its net direct premiums;

(b) One-fifth of 1 percent on the next $20,000,000 of its net direct premiums; and

2. Except as otherwise provided in this section, a captive insurer shall pay to the Division, not later than March 1 of each year, a tax at a rate of:

(a) Two hundred twenty-five thousandths of 1 percent on the first $20,000,000 of revenue from assumed reinsurance premiums;

(b) One hundred fifty thousandths of 1 percent on the next $20,000,000 of revenue from assumed reinsurance premiums; and

Ê The tax on reinsurance premiums pursuant to this subsection must not be levied on premiums for risks or portions of risks which are subject to taxation on a direct basis pursuant to subsection 1. A captive insurer is not required to pay any reinsurance premium tax pursuant to this subsection on revenue related to the receipt of assets by the captive insurer in exchange for the assumption of loss reserves and other liabilities of another insurer that is under common ownership and control with the captive insurer, if the transaction is part of a plan to discontinue the operation of the other insurer and the intent of the parties to the transaction is to renew or maintain such business with the captive insurer.

3. If the sum of the taxes to be paid by a captive insurer calculated pursuant to subsections 1 and 2 is less than $5,000 in any given year, the captive insurer shall pay a tax of $5,000 for that year. The maximum aggregate tax for any year must not exceed $175,000. The maximum aggregate tax to be paid by a sponsored captive insurer applies only to each protected cell and does not apply to the sponsored captive insurer as a whole.

4. Two or more captive insurers under common ownership and control must be taxed as if they were a single captive insurer.

5. Notwithstanding any specific statute to the contrary and except as otherwise provided in this subsection, the tax provided for by this section constitutes all the taxes collectible pursuant to the laws of this State from a captive insurer, and no occupation tax or other taxes may be levied or collected from a captive insurer by this State or by any county, city or municipality within this State, except for taxes imposed pursuant to chapter 363A, 363B or 363C of NRS and ad valorem taxes on real or personal property located in this State used in the production of income by the captive insurer.

6. Twenty-five percent of the revenues collected from the tax imposed pursuant to this section must be deposited with the State Treasurer for credit to the Account for the Regulation and Supervision of Captive Insurers created pursuant to NRS 694C.460. The remaining 75 percent of the revenues collected must be deposited with the State Treasurer for credit to the State General Fund.

7. A captive insurer that is issued a license pursuant to this chapter after July 1, 2003, is entitled to receive a nonrefundable credit of $5,000 applied against the aggregate taxes owed by the captive insurer for the first year in which the captive insurer incurs any liability for the payment of taxes pursuant to this section. A captive insurer is entitled to a nonrefundable credit pursuant to this section not more than once after the captive insurer is initially licensed pursuant to this chapter.

8. As used in this section, unless the context otherwise requires:

(a) “Common ownership and control” means:

(1) In the case of a stock insurer, the direct or indirect ownership of 80 percent or more of the outstanding voting stock of two or more corporations by the same member or members.

(2) In the case of a mutual insurer, the direct or indirect ownership of 80 percent or more of the surplus and the voting power of two or more corporations by the same member or members.

(b) “Net direct premiums” means the direct premiums collected or contracted for on policies or contracts of insurance written by a captive insurer during the preceding calendar year, less the amounts paid to policyholders as return premiums, including dividends on unabsorbed premiums or premium deposits returned or credited to policyholders.

(Added to NRS by 1999, 3215; A 2003, 3332; 2003, 20th Special Session, 228; 2005, 2156; 2015, 2952)

NRS 694C.455 Tax on premiums: Applicable only to branch business of branch captive insurer. The tax required pursuant to NRS 694C.450 applies only to the branch business of the branch captive insurer.

(Added to NRS by 2005, 2151)

1. There is hereby created in the Fund for Insurance Administration and Enforcement created by NRS 680C.100 an Account for the Regulation and Supervision of Captive Insurers. Money in the Account must be used only to carry out the provisions of this chapter or for any other purpose authorized by the Legislature. Except as otherwise provided in NRS 680C.110 and 694C.450, all fees and assessments received by the Commissioner or Division pursuant to this chapter must be credited to the Account. Not more than 2 percent of the tax collected and deposited in the Account pursuant to NRS 694C.450, may, upon application by the Division or an agency for economic development to, and with the approval of, the Interim Finance Committee, be transferred to an agency for economic development to be used by that agency to promote the industry of captive insurance in this State.

2. Except as otherwise provided in this section, all payments from the Account for the maintenance of staff and associated expenses, including contractual services, as necessary, must be disbursed from the State Treasury only upon warrants issued by the State Controller, after receipt of proper documentation of the services rendered and expenses incurred.

3. At the end of each fiscal year, that portion of the balance in the Account which exceeds $500,000 must be transferred to the State General Fund.

4. The State Controller may anticipate receipts to the Account and issue warrants based thereon.

(Added to NRS by 1999, 3217; A 2005, 2158; 2009, 1814; 2010, 26th Special Session, 25; 2011, 982)