[Rev. 11/21/2013 1:17:16 PM--2013]

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.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.143        “Sponsor” defined.

NRS 694C.147        “Sponsored captive insurer” 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        Formation of sponsored captive insurer.

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        Sponsored captive insurer required to file certain information with Commissioner.

NRS 694C.220        Fees for application; Commissioner authorized to retain professional services; cost of services.

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

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

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

NRS 694C.270        Suspension or revocation of license; 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.

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

NRS 694C.330        Payment of dividends.

NRS 694C.340        Investments; loan to parent or affiliated company 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 risk-sharing plan, 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; registration.

NRS 694C.388        Reports and statements of alien captive insurer.

ADMINISTRATION

NRS 694C.400        Annual report of financial condition to Commissioner; regulations designating form; alternative date to file annual report; penalty.

NRS 694C.410        Examination by Commissioner; Commissioner authorized to obtain professional services; cost of examination.

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

TAXATION, REGULATION AND SUPERVISION

NRS 694C.450        Taxes on premiums; deposit of portion of taxes in Account for Regulation and Supervision of Captive Insurers; deposit of remainder of taxes in State General Fund.

NRS 694C.455        Tax on premiums of branch captive insurer.

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

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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)

      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, including groups formed pursuant to the Product Liability Risk Retention Act of 1981, as amended, 15 U.S.C. §§ 3901 et seq., if:

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

      (a) Own, control or hold with 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)

      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 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.

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

      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.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.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.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.  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.

      (Added to NRS by 1999, 3217)

      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 must be formed as a:

      (a) Stock insurer;

      (b) Mutual insurer; or

      (c) Reciprocal insurer, except that its attorney-in-fact must be a corporation incorporated in this State.

      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)

      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  Formation of sponsored captive insurer.

      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 March 1 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

      (c) Must not be a risk retention group.

      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)

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;

      (c) The overall soundness of the plan of operation of the captive insurer; and

      (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  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  Fees for application; Commissioner authorized to retain professional services; 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 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 required: Amount; form; Commissioner authorized to prescribe additional requirements; letter of credit.

      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;

      (c) For an agency captive insurer, not less than $600,000;

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

      (e) For a sponsored captive insurer, 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.

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

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

      1.  The Commissioner may suspend or revoke the license of a captive insurer if, after an examination and 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 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)

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.  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.

      6.  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.

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

      8.  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)

      NRS 694C.310  Meetings of board of directors; additional requirements to transact insurance.

      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 a bank located in this State 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 of competence and experience satisfactory to 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; and

      (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.

      (Added to NRS by 1999, 3209; A 2005, 2155)

      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.  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. A captive insurer shall not pay dividends out of, or make any other 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.

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

      NRS 694C.340  Investments; loan to parent or affiliated company 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 or a sponsored captive insurer 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 or sponsored captive insurer, 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)

      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 risk-sharing plan, risk pool or insurance insolvency guaranty fund.  A captive insurer shall not join or contribute financially to any risk-sharing plan, 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 plan, pool or fund for claims arising out of the operations of the captive insurer.

      (Added to NRS by 1999, 3215)

      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; 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  Reports and statements of alien captive insurer.  Before March 1 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)

ADMINISTRATION

      NRS 694C.400  Annual report of financial condition to Commissioner; regulations designating form; alternative date to file annual report; penalty.

      1.  On or before March 1 of each year, a captive insurer 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 form required by NRS 680A.270. The Commissioner shall adopt regulations designating the form in which pure captive insurers must report.

      2.  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.

      3.  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.

      4.  Any captive insurer failing, without just cause beyond the reasonable control of the captive insurer, to file its annual statement as required by subsection 1 shall pay a penalty of $100 for each day the captive insurer fails to file the report, 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.

      5.  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)

      NRS 694C.410  Examination by Commissioner; Commissioner authorized to obtain professional services; cost of examination.

      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; deposit of portion of taxes in Account for Regulation and Supervision of Captive Insurers; deposit of remainder of taxes in State General Fund.

      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

      (c) Seventy-five thousandths of 1 percent on each additional dollar of its net direct premiums.

      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

      (c) Twenty-five thousandths of 1 percent on each additional dollar of revenue from assumed reinsurance premiums.

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 or 363B 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)

      NRS 694C.455  Tax on premiums 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)

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

      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)