[Rev. 10/12/2015 2:16:15 PM]

Link to Page 3416

 

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ê2015 Statutes of Nevada, Page 3417 (Chapter 522, SB 67)ê

 

      Sec. 50. “Asset-backed security” means a security or other instrument, excluding a mutual fund, evidencing an interest in, or the right to receive payments from, or payable from distributions on, an asset, a pool of assets or specifically divisible cash flows which are legally transferred to a trust, or another special purpose bankruptcy-remote business entity, which meets the conditions set forth in section 131 of this act.

      Sec. 51. “Business entity” includes, without limitation, a sole proprietorship, corporation, limited-liability company, association, partnership, joint-stock company, joint venture, mutual fund, trust, joint tenancy or other similar form of business organization, whether organized for-profit or not-for-profit.

      Sec. 52. “Cap” means an agreement obligating the seller to make payments to the buyer, with each payment based on the amount by which a reference price or level, or the performance or value of one or more underlying interests, exceeds a predetermined number, sometimes referred to as the strike rate or strike price.

      Sec. 53. “Capital and surplus” means the sum of the capital and surplus of the insurer which is required to be shown on the statutory financial statement of the insurer most recently required to be filed with the Commissioner.

      Sec. 54. “Cash equivalents” means short-term, highly rated and highly liquid investments or securities that are readily convertible to known amounts of cash without penalty and so near maturity that they present insignificant risk of change in value. The term includes, without limitation, government money market mutual funds and class one money market mutual funds. As used in this section:

      1.  “Highly rated” means an investment rated:

      (a) “P-1” by Moody’s Investor Service, Inc., or its successor organization;

      (b) “A-1” by Standard and Poor’s division of The McGraw Hill Companies, Inc., or its successor organization; or

      (c) An equivalent rating by a nationally recognized statistical rating organization recognized by the SVO.

      2.  “Short-term” means investments with a remaining term to maturity of 90 days or less.

      Sec. 55. “Class one bond mutual fund” means a mutual fund that at all times qualifies for investment using the bond class one reserve factor contained in the Purposes and Procedures Manual of the SVO.

      Sec. 56. “Class one money market mutual fund” means a money market mutual fund that at all times qualifies for investment using the bond class one reserve factor under the Purposes and Procedures Manual of the SVO.

      Sec. 57. “Collar” means an agreement to receive payments as the buyer of an option, cap or floor and to make payments as the seller of a different option, cap or floor.

      Sec. 58. “Commercial mortgage loan” means any mortgage loan other than a residential mortgage loan.

      Sec. 59.  “Construction loan” means a loan of less than 3 years in term, made for financing the costs of construction of a building or other improvement to real estate and that is secured by the real estate.

      Sec. 60. “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through ownership of voting securities, by contract, other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person.

 


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ê2015 Statutes of Nevada, Page 3418 (Chapter 522, SB 67)ê

 

person, whether through ownership of voting securities, by contract, other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person.

      Sec. 61. “Counterparty exposure amount” means the amount calculated pursuant to section 133 of this act.

      Sec. 62. “Covered” means that an insurer owns or can immediately acquire, through the exercise of options, warrants or conversion rights already owned, the underlying interest to fulfill or secure its obligations under a call option, cap or floor it has written, or has set aside in accordance with a custodial or escrow agreement, cash or cash equivalents with a market value equal to the amount required to fulfill its obligations in accordance with a put option it has written, in an income generation transaction.

      Sec. 63. “Credit tenant loan” means a mortgage loan which is made primarily in reliance on the credit standing of a major tenant, structured with an assignment of the rental payments to the lender with real estate pledged as collateral in the form of a first position lien.

      Sec. 64. 1.  “Derivative instrument” means an agreement, option or instrument, or a series or combination thereof:

      (a) To make or take delivery of, or assume or relinquish, a specified amount of one or more underlying interests, or to make a cash settlement in lieu thereof; or

      (b) That has a price, performance, value or cash flow based primarily upon the actual or expected price, level, performance, value or cash flow of one or more underlying interests.

      2.  The term includes, without limitation, options, warrants used in a hedging transaction and not attached to another financial instrument, caps, floors, collars, swaps, forwards, futures and any other agreements, options or instruments substantially similar thereto, or any series or combination thereof, and any agreements, options or instruments allowed pursuant to the regulations adopted under section 158 of this act.

      3.  The term does not include an investment authorized by sections 163 to 183, inclusive, 189, and 203 to 223, inclusive, of this act.

      Sec. 65. “Derivative transaction” means a transaction involving the use of one or more derivative instruments.

      Sec. 66. “Direct” or “directly,” when used in connection with an obligation, means that the designated obligor is primarily liable on the instrument representing the obligation.

      Sec. 67. “Dollar roll transaction” means two simultaneous transactions with different settlement dates, not more than 96 days apart, such that in the transaction with the earlier settlement date, an insurer sells to a business entity, and in the other transaction the insurer is obligated to purchase from the same business entity substantially similar securities of the following types:

      1.  Asset-backed securities issued, assumed or guaranteed by the Government National Mortgage Association, the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, or their respective successors; and

      2.  Other asset-backed securities referred to in section 106 of title 1 of the Secondary Mortgage Market Enhancement Act of 1984, 15 U.S.C. § 77r-1, as amended.

 


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ê2015 Statutes of Nevada, Page 3419 (Chapter 522, SB 67)ê

 

      Sec. 68. “Domestic jurisdiction” means the United States, Canada, any state of the United States, any province of Canada or any political subdivision of any of the foregoing.

      Sec. 69. “Equity interest” means any of the following that are not rated credit instruments:

      1.  Common stock;

      2.  Preferred stock;

      3.  A trust certificate;

      4.  An equity investment in an investment company, other than a money market mutual fund or a class one bond mutual fund;

      5.  An investment in a common trust fund of a bank regulated by a federal or state agency;

      6.  An ownership interest in minerals, oil or gas, the rights to which have been separated from the underlying fee interest in the real estate where the minerals, oil or gas are located;

      7.  Instruments which are mandatorily, or at the option of the issuer, convertible to equity;

      8.  Limited partnership interests and those general partnership interests authorized pursuant to paragraph (d) of subsection 1 of section 154 of this act;

      9.  Member interests in a limited-liability company;

      10.  Warrants or other rights to acquire equity interests that are created by the person that owns or would issue the equity to be acquired; and

      11.  Instruments that would be rated credit instruments.

      Sec. 70. “Equivalent securities” means any securities which meet the qualifications of section 134 of this act.

      Sec. 71. “Floor” means an agreement obligating the seller to make payments to the buyer in which each payment is based on the amount by which a predetermined number, sometimes called the floor rate or price, exceeds a reference price, level, performance or value of one or more underlying interests.

      Sec. 72. “Foreign currency” means a currency other than that of a domestic jurisdiction.

      Sec. 73. “Foreign investment” means an investment in a foreign jurisdiction, or an investment in a person, real estate or asset domiciled in a foreign jurisdiction, that is substantially of the same type as those eligible for investment in accordance with this chapter, other than an investment made in accordance with sections 179 to 183, inclusive, and 219 to 223, inclusive, of this act.

      Sec. 74. “Foreign jurisdiction” means a jurisdiction other than a domestic jurisdiction.

      Sec. 75. “Forward” means an agreement, other than a future, to make or take delivery of or effect a cash settlement based on the actual or expected price, level, performance or value of one or more underlying interests.

      Sec. 76. “Future” means an agreement, traded on a qualified exchange or qualified foreign exchange, to make or take delivery of, or effect a cash settlement based on the actual or expected price, level, performance or value of one or more underlying interests.

      Sec. 77. “Government money market mutual fund” means a money market mutual fund that at all times:

 


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ê2015 Statutes of Nevada, Page 3420 (Chapter 522, SB 67)ê

 

      1.  Invests only in obligations issued, guaranteed or insured by the Federal Government or collateralized repurchase agreements composed of these obligations; and

      2.  Qualifies for investment without a reserve in accordance with the Purposes and Procedures Manual of the SVO.

      Sec. 78. “Government-sponsored enterprise” means a:

      1.  Governmental agency; or

      2.  Corporation, limited-liability company, association, partnership, joint stock company, joint venture, trust or other entity or instrumentality organized in accordance with the laws of any domestic jurisdiction to accomplish a public policy or other governmental purpose.

      Sec. 79. “Guaranteed or insured,” when used in connection with an obligation acquired in accordance with the provisions of this chapter, means that the guarantor or insurer has agreed to:

      1.  Perform or insure the obligation of the obligor or purchase the obligation; or

      2.  Be unconditionally obligated until the obligation is repaid to maintain in the obligor a minimum net worth, fixed charge coverage, stockholder’s equity or sufficient liquidity to enable the obligor to pay the obligation in full.

      Sec. 80. “Hedging transaction” means a derivative transaction which is entered into and maintained to reduce:

      1.  The risk of a change in the value, yield, price, cash flow or quantity of assets or liabilities which the insurer has acquired or incurred or anticipates acquiring or incurring; or

      2.  The currency exchange rate risk or the degree of exposure as to assets or liabilities which an insurer has acquired or incurred or anticipates acquiring or incurring.

      Sec. 81. “High grade investment” means a rated credit instrument rated 1 or 2 by the SVO.

      Sec. 82. “Income” means, as to a security, interest, accrual of discount, dividends or other distributions, including, without limitation, rights, tax or assessment credits, warrants and distributions in kind.

      Sec. 83. “Income generation transaction” means a derivative transaction involving the writing of covered call options, covered put options, covered caps or covered floors that is intended to generate income or enhance returns.

      Sec. 84. “Insurance future” means a future relating to an index or pool that is based on insurance-related claims.

      Sec. 85. “Insurance future option” means an option on an insurance future.

      Sec. 86. “Investment company” has the meaning ascribed to it in 15 U.S.C. § 80a-3, as amended, and a person described in section 3(c) of that Act.

      Sec. 87. “Investment company series” means an investment portfolio of an investment company that is organized as a series company and to which assets of the investment company have been specifically allocated.

      Sec. 88.  “Investment practices” means transactions of the types described in sections 178, 184 to 188, inclusive, 218 and 224 to 228, inclusive, of this act.

      Sec. 89. “Investment strategy” means the techniques and methods used by an insurer to meet its investment objectives, including, without limitation, active bond portfolio management, passive bond portfolio management, interest rate anticipation, growth investing and value investing.

 


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ê2015 Statutes of Nevada, Page 3421 (Chapter 522, SB 67)ê

 

limitation, active bond portfolio management, passive bond portfolio management, interest rate anticipation, growth investing and value investing.

      Sec. 90. “Investment subsidiary” means a subsidiary of an insurer engaged or organized to engage exclusively in the ownership and management of assets authorized as investments for the insurer where the subsidiary limits its investment in any asset so that its investments will not cause the amount of the total investment of the insurer to exceed any of the investment limitations or avoid any other provisions of this chapter applicable to the insurer. As used in this section, “total investment of the insurer” includes:

      1.  Direct investment by the insurer in an asset; and

      2.  The insurer’s proportionate share of an investment in an asset by an investment subsidiary of the insurer, calculated by multiplying the amount of the subsidiary’s investment by the percentage of the insurer’s ownership interest in the subsidiary.

      Sec. 91. “Letter of credit” means a clean, irrevocable and unconditional document that serves as a guaranty for payments made to a specified person under specified conditions, issued or confirmed by, and payable and presentable at, a financial institution on the list of financial institutions meeting the standards for issuing letters of credit in accordance with the Purposes and Procedures Manual of the SVO.

      Sec. 92. “Limited-liability company” means a business organization, excluding partnerships and ordinary business corporations, that is organized or operating in accordance with the laws of the United States, or any state thereof, and that limits the personal liability of investors to the equity investment of the investor in the business organization.

      Sec. 93. “Lower grade investment” means a rated credit instrument that is rated 4, 5 or 6 by the SVO.

      Sec. 94. “Market value” means:

      1.  As to cash and letters of credit, the face amounts thereof; and

      2.  As to a security as of any date, the price for the security on that date obtained from a generally recognized source or the most recent quotation from such a source or, to the extent no generally recognized source exists, the price for the security as determined in good faith by the parties to a transaction, plus accrued but unpaid income thereon to the extent not included in the price on that date.

      Sec. 95. “Medium grade investment” means a rated credit instrument that is rated 3 by the SVO.

      Sec. 96. “Money market mutual fund” means a mutual fund that meets the conditions of 17 C.F.R. § 270.2a-7, adopted in accordance with the provisions of the Investment Company Act of 1940, 15 U.S.C. §§ 80a-1 et seq., as amended.

      Sec. 97. “Mortgage loan” means an obligation secured by a mortgage, deed of trust, trust deed or other consensual lien on real estate.

      Sec. 98. “Multilateral development bank” means an international development organization of which the United States is a member.

      Sec. 99. “Mutual fund” means an investment company or, in the case of an investment company that is organized as a series company, an investment company series, that, in either case, is registered

 


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ê2015 Statutes of Nevada, Page 3422 (Chapter 522, SB 67)ê

 

with the United States Securities and Exchange Commission in accordance with the provisions of the Investment Company Act of 1940, 15 U.S.C. §§ 80a-1 et seq., as amended.

      Sec. 100. “NAIC” means the National Association of Insurance Commissioners, or its successor organization.

      Sec. 101. “Obligation” means evidence of indebtedness for the payment of money or other consideration, whether constituting a general obligation of the issuer or payable only out of certain revenues or certain funds pledged or otherwise dedicated for payment. The term includes, without limitation, a bond, note, debenture, trust certificate, including an equipment certificate, production payment, negotiable bank certificate of deposit, banker’s acceptance, credit tenant loan or loan secured by financing net leases.

      Sec. 102.  “Option” means an agreement giving the buyer the right to buy or receive, sell or deliver, enter into, extend or terminate, or effect a cash settlement based on the actual or expected price, level, performance or value of one or more underlying interests.

      Sec. 103. “Over-the-counter derivative instrument” means a derivative instrument entered into with a business entity other than through a qualified exchange or qualified foreign exchange, or cleared through a qualified clearinghouse.

      Sec. 104. “Person” means an individual, a business entity, a multilateral development bank or a government or quasi-governmental body, including, without limitation, a political subdivision or a government sponsored enterprise.

      Sec. 105. “Potential exposure” means the amount determined in accordance with the Annual Statement Instructions for the type of insurer to be reported on as adopted by the NAIC.

      Sec. 106. “Preferred stock” means the stock of a business entity authorized to issue the stock and that has a preference in liquidation over the common stock of the business entity.

      Sec. 107. “Qualified bank” means:

      1.  A national bank, state bank or trust company that at all times is not less than adequately capitalized as determined by the standards adopted by United States banking regulators and that is either regulated by state banking laws or is a member of the Federal Reserve System; or

      2.  A bank or trust company incorporated or organized in accordance with the laws of a country other than the United States that is regulated as a bank or trust company by that country’s government, or an agency thereof, and that at all times is not less than adequately capitalized as determined by the standards adopted by international banking authorities.

      Sec. 108. “Qualified business entity” means a business entity that is:

      1.  An issuer of obligations or preferred stock that is rated 1 or 2 by the SVO or an issuer of obligations, preferred stock or derivative instruments that are rated the equivalent of 1 or 2 by the SVO or by a nationally recognized statistical rating organization recognized by the SVO; or

      2.  A primary dealer in United States government securities, recognized by the Federal Reserve Bank of New York.

      Sec. 109. “Qualified clearinghouse” means a clearinghouse for, and subject to the rules of, a qualified exchange or qualified foreign exchange, which provides clearing services, including acting as a counterparty to each of the parties to a transaction such that the parties no longer have credit risk as to each other.

 


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ê2015 Statutes of Nevada, Page 3423 (Chapter 522, SB 67)ê

 

which provides clearing services, including acting as a counterparty to each of the parties to a transaction such that the parties no longer have credit risk as to each other.

      Sec. 110. “Qualified exchange” means:

      1.  A securities exchange registered as a national securities exchange or a securities market regulated in accordance with the Securities Exchange Act of 1934, 15 U.S.C. §§ 78a et seq., as amended;

      2.  A board of trade or commodities exchange designated as a contract market by the United States Commodity Futures Trading Commission or any successor thereof;

      3.  Private Offerings, Resales and Trading through Automated Linkages, otherwise known as PORTAL;

      4.  A designated offshore securities market as defined in Securities Exchange Commission Regulation S, 17 C.F.R. Part 230, as amended; or

      5.  A qualified foreign exchange.

      Sec. 111. “Qualified foreign exchange” means a foreign exchange, board of trade or contract market located outside the United States, its territories or possessions:

      1.  That has received regulatory comparability relief in accordance with Commodity Futures Trading Commission Rule 30.10, as set forth in 17 C.F.R. Part 30, Appendix C, as amended;

      2.  That is, or its members are, subject to the jurisdiction of a foreign futures authority that has received regulatory comparability relief in accordance with Commodity Futures Trading Commission Rule 30.10, as set forth in 17 C.F.R. Part 30, Appendix C, as amended, as to futures transactions in the jurisdiction where the exchange, board of trade or contract market is located; or

      3.  Upon which foreign stock index futures contracts are listed that are the subject of no-action relief issued by the Commodity Futures Trading Commission’s Office of General Counsel, provided that an exchange, board of trade or contract market that qualifies as a qualified foreign exchange only in accordance with this section is a qualified foreign exchange as to foreign stock index futures contracts that are the subject of no-action relief.

      Sec. 112. 1.  “Rated credit instrument” means a contractual right to receive cash or another rated credit instrument from another entity which instrument:

      (a) Is rated or required to be rated by the SVO;

      (b) In the case of an instrument with a maturity of 397 days or less, is issued, guaranteed or insured by an entity that is rated by, or another obligation of such entity is rated by, the SVO or by a nationally recognized statistical rating organization recognized by the SVO;

      (c) In the case of an instrument with a maturity of 90 days or less, is issued by a qualified bank;

      (d) Is a share of a class one bond mutual fund; or

      (e) Is a share of a money market mutual fund.

      2.  The term does not include:

      (a) An instrument that is mandatorily, or at the option of the issuer, convertible to an equity interest; or

      (b) A security that has a par value and whose terms provide that the issuer’s net obligation to repay all or part of the security’s par value is determined by reference to the performance of an equity, a commodity, a foreign currency or an index of equities, commodities, foreign currencies, or any combination thereof.

 


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ê2015 Statutes of Nevada, Page 3424 (Chapter 522, SB 67)ê

 

determined by reference to the performance of an equity, a commodity, a foreign currency or an index of equities, commodities, foreign currencies, or any combination thereof.

      Sec. 113. 1.  “Real estate” means:

      (a) Real property;

      (b) Interests in real property, including, without limitation, leaseholds, minerals and oil and gas that have not been separated from the underlying fee interest;

      (c) Improvements and fixtures located on or in real property; and

      (d) The seller’s equity in a contract providing for a deed of real estate.

      2.  As to a mortgage on real estate, the term includes the leasehold estate only if it has an unexpired term, including, without limitation, renewal options exercisable at the option of the lessee, extending beyond the scheduled maturity date of the obligation that is secured by a mortgage on the leasehold estate for the greater of:

      (a) A period equal to at least 20 percent of the original term of the obligation; or

      (b) Ten years.

      Sec. 114. “Replication transaction” means a derivative transaction that is intended to replicate the performance of one or more assets which an insurer is authorized to acquire in accordance with the provisions of this chapter. The term does not include a derivative transaction that is entered into as a hedging transaction.

      Sec. 115. “Repurchase transaction” means a transaction in which an insurer purchases securities from a business entity that is obligated to repurchase the purchased securities, or equivalent securities, from the insurer at a specified price, either within a specified period of time or upon demand.

      Sec. 116. “Required liabilities” means the total liabilities required to be reported on the statutory financial statement of the insurer most recently required to be filed with the Commissioner.

      Sec. 117. “Residential mortgage loan” means a mortgage loan primarily secured by real estate which is improved with at least one but not more than four residential dwelling units.

      Sec. 118. “Reverse repurchase transaction” means a transaction in which an insurer sells securities to a business entity and is obligated to repurchase the sold securities, or equivalent securities, from the business entity at a specified price, either within a specified period of time or on demand.

      Sec. 119. “Secured location” means the contiguous real estate owned by one person.

      Sec. 120. “Securities lending transaction” means a transaction in which securities are loaned by an insurer to a business entity that is obligated to return the loaned securities, or equivalent securities, to the insurer, either within a specified period of time or upon demand.

      Sec. 121. “Series company” means an investment company that is organized as a series company, as defined in 17 C.F.R. § 270.18f-2.

      Sec. 122. “Sinking fund stock” means preferred stock that:

      1.  Is subject to a mandatory sinking fund or similar arrangement that will provide for the redemption or open market purchase of the entire issue over a period not greater than 40 years after the date of acquisition; and

 


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ê2015 Statutes of Nevada, Page 3425 (Chapter 522, SB 67)ê

 

      2.  Provides for mandatory sinking fund installments or open market purchases commencing not more than 10.5 years after the date of issue, with the sinking fund installments providing for the purchase or redemption, on a cumulative basis commencing 10 years after the date of issue, of at least 2.5 percent per year of the original number of shares of that issue of preferred stock.

      Sec. 123. “Special rated credit instrument” means a rated credit instrument that meets the requirements of section 136 of this act.

      Sec. 124. “State” means a state, territory or possession of the United States, the District of Columbia or the Commonwealth of Puerto Rico.

      Sec. 125. “Substantially similar securities” means securities that meet all criteria for “substantially similar” specified in the Accounting Practices and Procedures Manual adopted by the NAIC, as amended, and in an amount that constitutes good delivery form as determined from time to time by the Public Securities Administration, or its successor organization.

      Sec. 126. “SVO” means the Securities Valuation Office of the NAIC, or any successor office established by the NAIC.

      Sec. 127. “Swap” means an agreement to exchange or to net payments at one or more times based on the actual or expected price, level, performance or value of one or more underlying interests.

      Sec. 128. “Underlying interest” means the assets, liabilities, other interests or a combination thereof underlying a derivative instrument, including, without limitation, any one or more securities, currencies, rates, indices, commodities or derivative instruments.

      Sec. 129. “Unrestricted surplus” means the amount by which total admitted assets exceed 125 percent of the insurer’s required liabilities.

      Sec. 130. “Warrant” means an instrument that:

      1.  Gives the holder the right to purchase an underlying financial instrument at a given price and time or at a series of prices and times outlined in the warrant agreement; and

      2.  Is issued alone or in connection with the sale of other securities, including, without limitation, as part of a merger or recapitalization agreement, or to facilitate the divestiture of the securities of another business entity.

      Sec. 131. To qualify as an asset-backed security, a trust or other special purpose bankruptcy-remote business entity must meet the following conditions:

      1.  The trust or other business entity is established solely for the purpose of acquiring specific types of assets or rights to cash flows, issuing securities and other instruments representing an interest in or right to receive cash flows from those assets or rights, and engaging in activities required to service the assets or rights and any credit enhancement or support features held by the trust or other business entity; and

      2.  The assets of the trust or other business entity consist solely of interest-bearing obligations or other contractual obligations representing the right to receive payment from the cash flows from the assets or rights. The existence of credit enhancements, including, without limitation, letters of credit or guarantees, or support features, including, without limitation, swap agreements, do not cause a security or other instrument to be ineligible as an asset-backed security.

 


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ê2015 Statutes of Nevada, Page 3426 (Chapter 522, SB 67)ê

 

      Sec. 132. 1.  Control, as defined in section 60 of this act, shall be deemed to exist if a person, directly or indirectly, owns, controls, holds with the power to vote or holds proxies representing 10 percent or more of the voting securities of another person.

      2.  A presumption of control may be rebutted by a showing that control does not exist in fact.

      3.  The Commissioner may determine, after furnishing all interested persons notice and an opportunity to be heard and making specific findings of fact to support the determination, that control exists in fact, notwithstanding the absence of a presumption to that effect.

      Sec. 133. 1.  Except as otherwise provided in this section, the counterparty exposure amount is the net amount of credit risk attributable to an over-the-counter derivative instrument. The amount of credit risk equals:

      (a) The market value of the over-the-counter derivative instrument if the liquidation of the derivative instrument would result in a final cash payment to the insurer; or

      (b) Zero, if the liquidation of the derivative instrument would not result in a final cash payment to the insurer.

      2.  If over-the-counter derivative instruments are entered into in accordance with a written master agreement which provides for netting of payments owed by the respective parties, and the domiciliary jurisdiction of the counterparty is either within the United States or, if not within the United States, within a foreign jurisdiction listed in the Purposes and Procedures Manual of the SVO as eligible for netting, the net amount of credit risk is the greater of zero or the net sum of:

      (a) The market value of the over-the-counter derivative instruments entered into in accordance with the agreement, the liquidation of which would result in a final cash payment to the insurer; and

      (b) The market value of the over-the-counter derivative instruments entered into in accordance with the agreement, the liquidation of which would result in a cash payment by the insurer to the business entity.

      3.  For open transactions, market value must be determined at the end of the most recent quarter of the insurer’s fiscal year and must be reduced by the market value of acceptable collateral held by the insurer or placed in escrow by one or both parties.

      Sec. 134. To qualify as equivalent securities, the securities must be:

      1.  In a securities lending transaction, securities that are identical to the loaned securities in all features including the amount of the loaned securities, except as to certificate number if held in physical form, but if any different security is exchanged for a loaned security by recapitalization, merger, consolidation or other corporate action, the different security shall be deemed to be the loaned security;

      2.  In a repurchase transaction, securities that are identical to the purchased securities in all features including the amount of the purchased securities, except as to the certificate number if held in physical form; or

      3.  In a reverse repurchase transaction, securities that are identical to the sold securities in all features including the amount of the sold securities, except as to the certificate number if held in physical form.

 


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ê2015 Statutes of Nevada, Page 3427 (Chapter 522, SB 67)ê

 

      Sec. 135. 1.  An investment shall not be deemed a foreign investment if the issuing person, qualified primary credit source or qualified guarantor is a domestic jurisdiction or a person domiciled in a domestic jurisdiction unless:

      (a) The issuing person is a shell business entity; and

      (b) The investment is not assumed, accepted, guaranteed or insured or otherwise backed by a domestic jurisdiction or a person, that is not a shell business entity, domiciled in a domestic jurisdiction.

      2.  For the purposes of this section:

      (a) “Qualified guarantor” means a guarantor against which an insurer has a direct claim for full and timely payment, evidenced by a contractual right for which an enforcement action can be brought in a domestic jurisdiction.

      (b) “Qualified primary credit source” means the credit source to which an insurer looks for payment as to an investment and against which an insurer has a direct claim for full and timely payment, evidenced by a contractual right for which an enforcement action can be brought in a domestic jurisdiction.

      (c) “Shell business entity” means a business entity having no economic substance, except as a vehicle for owning interests in assets issued, owned or previously owned by a person domiciled in a foreign jurisdiction.

      Sec. 136. 1.  To qualify as a special rated credit instrument the instrument must be:

      (a) An instrument that is structured so that, if it is held until retired by or on behalf of the issuer, its rate of return, based on its purchase cost and any cash flow stream possible in accordance with the structure of the transaction, may become negative because of reasons other than the credit risk associated with the issuer of the instrument. A rated credit instrument is not a special rated credit instrument for the purposes of this section if it is:

             (1) A share in a class one bond mutual fund;

             (2) An instrument, other than an asset-backed security, with payments of par value fixed as to amount and timing, or callable but in any event payable only at par or greater, and interest or dividend cash flows that are based on either a fixed or variable rate determined by reference to a specified rate or index;

             (3) An instrument, other than an asset-backed security, that has a par value and is purchased at a price not more than 110 percent of par;

             (4) An instrument, including an asset-backed security, whose rate of return would become negative only as a result of a prepayment due to casualty, condemnation, economic obsolescence of collateral or change of law;

             (5) An asset-backed security that relies on collateral that meets the requirements of subparagraph (2), the par value of which collateral:

                   (I) Is not allowed to be paid sooner than one-half of the remaining term to maturity from the date of acquisition;

                   (II) Is allowed to be paid before maturity only at a premium sufficient to provide a yield to maturity for the investment, considering the amount prepaid and reinvestment rates at the time of early repayment, at least equal to the yield to maturity of the initial investment; or

                   (III) Is allowed to be paid before maturity at a premium at least equal to the yield of a treasury issue of comparable remaining life; or

 


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             (6) An asset-backed security that relies on cash flows from assets that are not prepayable at any time at par, but is not otherwise governed by subparagraph (5), if the asset-backed security has a par value reflecting principal payments to be received if held until retired by or on behalf of the issuer and is purchased at a price not more than 105 percent of such par amount.

      (b) An asset-backed security that:

             (1) Relies on cash flows from assets that are prepayable at par at any time;

             (2) Does not make payments of par that are fixed as to amount and timing; and

             (3) Has a negative rate of return at the time of acquisition if a prepayment threshold assumption is used. As used in this subsection, “prepayment threshold assumption” includes:

                   (I) Two times the prepayment expectation reported by a recognized, publicly available source as being the median of expectations contributed by broker dealers or other entities, except insurers, engaged in the business of selling or evaluating such securities or assets. The prepayment expectation used in this calculation is, at the insurer’s election, the prepayment expectation for pass-through securities of the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation or the Government National Mortgage Association, or, for other assets of the same type as the assets that underlie the asset-backed security, in either case with a gross weighted average coupon of the assets that underlie the asset-backed security.

                   (II) Another prepayment threshold assumption specified by the Commissioner by regulation adopted pursuant to section 158 of this act.

      2.  For the purposes of paragraph (b) of subsection 1, if the asset-backed security is purchased in combination with one or more other asset-backed securities that are supported by identical underlying collateral, the insurer may calculate the rate of return for these specific combined asset-backed securities in combination. The insurer shall maintain documentation demonstrating that such securities were acquired and are continuing to be held in combination.

      Sec. 137. Subject to the provisions of section 138 of this act, an insurer shall not acquire or hold an investment as an admitted asset unless at the time of acquisition the investment is:

      1.  Eligible for the payment or accrual of interest or a discount, whether in cash or securities, eligible to receive dividends or other distributions or is otherwise income producing; or

      2.  Acquired in accordance with sections 168, 170, 176 to 180, inclusive, 182 to 185, inclusive, 208, 210, 216 to 220, inclusive, or 221 and 222 of this act or pursuant to the authority of this title, other than this chapter.

      Sec. 138. An insurer may acquire or hold as admitted assets investments that do not otherwise qualify as provided in this chapter if:

      1.  The insurer has not acquired them for the purpose of circumventing any limitations contained in this chapter;

      2.  The insurer complies with the provisions of sections 154 and 157 of this act as to the investments; and

      3.  The insurer acquires the investments in the following circumstances:

 


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      (a) As payment on account of existing indebtedness or in connection with the refinancing, restructuring or workout of existing indebtedness, if taken to protect the insurer’s interest in that investment;

      (b) As realization on collateral for an obligation;

      (c) In connection with an otherwise qualified investment or investment practice, as interest on, or a dividend or other distribution related to, the investment or investment practice, or in connection with the refinancing of the investment, in each case for no additional or only nominal consideration;

      (d) Under a lawful and bona fide agreement of recapitalization or voluntary or involuntary reorganization in connection with an investment held by the insurer; or

      (e) Under a bulk reinsurance, merger or consolidation transaction approved by the Commissioner if the assets constitute admissible investments for the ceding, merged or consolidated companies.

      Sec. 139. 1.  An investment, or portion of an investment, acquired by an insurer in accordance with section 138 of this act becomes a nonadmitted asset 3 years, or 5 years in the case of mortgage loans and real estate, after the date of its acquisition, unless within that period the investment has become a qualified investment in accordance with a provision of this chapter, other than section 138 of this act, but an investment acquired in accordance with an agreement of bulk reinsurance, merger or consolidation may be qualified for a longer period if so provided in the plan for reinsurance, merger or consolidation as approved by the Commissioner.

      2.  Upon application by the insurer, and a showing that the nonadmission of an asset held in accordance with section 138 of this act would materially injure the interests of the insurer, the Commissioner may extend the period of admissibility for an additional reasonable period of time.

      Sec. 140. Except as otherwise provided in sections 141 and 143 of this act, an investment shall be deemed to qualify pursuant to this chapter if, on the date the insurer committed to acquire the investment or on the date of its acquisition, it would have qualified pursuant to this chapter. For the purposes of determining limitations contained in this chapter, an insurer shall give appropriate recognition to any commitments to acquire investments.

      Sec. 141. 1.  An investment, held as an admitted asset by an insurer on July 1, 2015, which qualified pursuant to this chapter before July 1, 2015, shall be deemed to remain qualified as an admitted asset pursuant to this chapter.

      2.  Each specific transaction constituting an investment practice of the type described in this chapter that was lawfully entered into by an insurer, and was in effect on July 1, 2015, must continue to be allowed in accordance with the provisions of this chapter until its expiration or termination in accordance with its terms.

      Sec. 142. Unless otherwise specified, an investment limitation computed on the basis of an insurer’s admitted assets or capital and surplus shall relate to the amount required to be shown on the statutory balance sheet of the insurer most recently required to be filed with the Commissioner. For purposes of computing any limitation based on admitted assets, the insurer shall deduct from the amount of its admitted assets the amount of the liability recorded on its statutory balance sheet for:

 


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admitted assets, the insurer shall deduct from the amount of its admitted assets the amount of the liability recorded on its statutory balance sheet for:

      1.  The return of acceptable collateral received in a reverse repurchase transaction or a securities lending transaction;

      2.  Cash received in a dollar roll transaction; and

      3.  The amount reported as borrowed money in the most recently filed financial statement to the extent not included in subsections 1 and 2.

      Sec. 143. An investment qualified, in whole or in part, for acquisition or holding as an admitted asset may be qualified or prequalified at the time of acquisition or a later date, in whole or in part, in accordance with any section of this chapter if the relevant conditions contained in that section are satisfied at the time of qualification or requalification.

      Sec. 144. An insurer shall maintain documentation demonstrating that investments were acquired in accordance with the provisions of this chapter, and specifying the section of this chapter pursuant to which they were acquired.

      Sec. 145. An insurer shall not enter into an agreement to purchase securities in advance of their issuance for resale to the public as part of a distribution of the securities by the issuer, or otherwise guarantee the distribution, except that an insurer may acquire privately placed securities with registration rights.

      Sec. 146. Notwithstanding the provisions of this chapter, the Commissioner, for good cause, may, in accordance with the provisions of chapter 233B of NRS, order an insurer to nonadmit, limit, dispose of, withdraw from or discontinue an investment or investment practice. The authority of the Commissioner pursuant to this section is in addition to any other authority of the Commissioner.

      Sec. 147. Insurance futures and insurance future options are not considered investments or investment practices for the purposes of this chapter.

      Sec. 148. An insurer’s board of directors shall adopt a written plan for acquiring and holding investments and for engaging in investment practices that specifies guidelines as to the quality, maturity and diversification of investments and other specifications, including, without limitation, investment strategies intended to ensure that the investments and investment practices are appropriate for the business conducted by the insurer, its liquidity needs and its capital and surplus. The board of directors shall review and assess the insurer’s technical investment and administrative capabilities and expertise before adopting a written plan concerning an investment strategy or practice.

      Sec. 149. Investments acquired and held pursuant to this chapter must be acquired and held under the supervision and direction of the board of directors of the insurer. The board of directors shall evidence by formal resolution, at least annually, that it has determined whether all investments have been made in accordance with delegations, standards, limitations and investment objectives prescribed by the board or a committee of the board charged with the responsibility to direct the insurer’s investments.

      Sec. 150. On no less than a quarterly basis, and more often if deemed appropriate, an insurer’s board of directors or a committee of the board shall:

 


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      1.  Receive and review a summary report on the insurer’s investment portfolio, its investment activities and practices engaged in pursuant to delegated authority, in order to determine whether the investment activity or practice of the insurer is consistent with its written plan; and

      2.  Review and revise, as appropriate, the written plan.

      Sec. 151. In discharging its duties pursuant to sections 148 to 153, inclusive, of this act, the board of directors shall require that the records of any authorizations or approvals, other documentation as the board may require and reports of any action taken pursuant to authority delegated in accordance with the written plan referred to in section 148 of this act be made available on a regular basis to the board of directors.

      Sec. 152. In discharging its duties pursuant to sections 148 to 153, inclusive, of this act, the board of directors of an insurer shall perform its duties in good faith and with that degree of care that ordinarily prudent individuals in like positions would use under similar circumstances.

      Sec. 153. If an insurer does not have a board of directors, all references to the board of directors in this chapter shall be deemed to be references to the governing body of the insurer having authority equivalent to that of a board of directors.

      Sec. 154. 1.  An insurer shall not, directly or indirectly:

      (a) Invest in an obligation or security, or make a guarantee for the benefit of or in favor of an officer or director of the insurer, except as provided in sections 155 and 156 of this act;

      (b) Invest in an obligation or security, make a guarantee for the benefits of or in favor of, or make other investments in a business entity of which 10 percent or more of the voting securities or equity interests are owned directly or indirectly by, or for the benefit of, one or more officers or directors of the insurer, except as authorized in chapter 692C of NRS or provided in sections 155 and 156 of this act;

      (c) Engage on its own behalf, or through one or more affiliates, in a transaction or series of transactions designed to evade the prohibitions of this chapter;

      (d) Invest in a partnership as a general partner, except that an insurer may make an investment as a general partner:

             (1) If all other partners are subsidiaries of the insurer;

             (2) For the purpose of:

                   (I) Meeting cash calls committed to before July 1, 2015;

                   (II) Completing those specific projects or activities of the partnership in which the insurer was a general partner on July 1, 2015, that had been undertaken as of that date; or

                   (III) Making capital improvements to property owned by the partnership on July 1, 2015, if the insurer was a general partner as of that date; or

             (3) Pursuant to section 138 of this act; or

      (e) Invest in or lend its funds upon the security of shares of its own stock, except that an insurer may acquire shares of its own stock for the following purposes:

             (1) Conversion of a stock insurer into a mutual or reciprocal insurer or a mutual or reciprocal insurer into a stock insurer;

             (2) Issuance to the insurer’s officers, employees or agents in connection with a plan approved by the Commissioner for converting a publicly held insurer into a privately held insurer pursuant to NRS 693A.400 to 693A.540, inclusive, or in connection with other stock option and employee benefit plans; or

 


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publicly held insurer into a privately held insurer pursuant to NRS 693A.400 to 693A.540, inclusive, or in connection with other stock option and employee benefit plans; or

             (3) In accordance with any other plan approved by the Commissioner.

      2.  Nothing contained in paragraph (d) of subsection 1 shall be construed to prohibit a subsidiary or other affiliate of the insurer from becoming a general partner.

      3.  Any investment or loan made by an insurer in accordance with the provisions of paragraph (e) of subsection 1 must not be an admitted asset of the insurer.

      Sec. 155. 1.  Except as otherwise provided in section 156 of this act, an insurer shall not, without the prior written approval of the Commissioner, directly or indirectly:

      (a) Make a loan to, or another investment in, an officer or director of the insurer, or a person in which the officer or director has any direct or indirect financial interest;

      (b) Make a guarantee for the benefit of, or in favor of, an officer or director of the insurer, or a person in which the officer or director has any direct or indirect financial interest; or

      (c) Enter into an agreement for the purchase or sale of property from or to an officer or director of the insurer, or a person in which the officer or director has any direct or indirect financial interest.

      2.  For the purposes of this section, an officer or director shall not be deemed to have a financial interest by reason of an interest that is held directly or indirectly through the ownership of equity interests representing less than 2 percent of all outstanding equity interests issued by a person that is a party to the transaction, or solely by reason of that individual’s position as a director or officer of a person that is a party to the transaction.

      3.  This section does not allow an investment that is prohibited by section 154 of this act.

      4.  This section does not apply to a transaction between an insurer and any of its subsidiaries or affiliates that is entered into in compliance with the provisions of chapter 692C of NRS, other than a transaction between an insurer and its officer or director.

      Sec. 156. An insurer may, without the prior written approval of the Commissioner, make:

      1.  Policy loans in accordance with the terms of the policy or contract and section 189 of this act;

      2.  Advances to officers or directors for expenses reasonably expected to be incurred in the ordinary course of the insurer’s business or guarantees associated with credit or charge cards issued, or credit extended, for the purpose of financing these expenses;

      3.  Loans secured by the principal residence of an existing or new officer of the insurer made in connection with the officer’s relocation at the insurer’s request, if the loans comply with the requirements of sections 174 to 177, inclusive, or 214 to 217, inclusive, of this act and the terms and conditions otherwise are the same as those generally available from unaffiliated third parties;

 


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      4.  Secured loans to an existing or new officer of the insurer made in connection with the officer’s relocation at the insurer’s request, if the loans:

      (a) Do not have a term exceeding 2 years;

      (b) Are required to finance mortgage loans outstanding at the same time on the prior and new residences of the officer;

      (c) Do not exceed an amount equal to the equity of the officer in the prior residence; and

      (d) Are required to be fully repaid upon the earlier of the end of the 2-year period or the sale of the prior residence; or

      5.  Loans and advances to officers or directors made in compliance with state or federal law specifically related to the loans and advances by a regulated noninsurance subsidiary or affiliate of the insurer in the ordinary course of business and on terms not more favorable than available to other customers of the entity.

      Sec. 157. For the purposes of this chapter, the value or amount of an investment acquired or held, or an investment practice engaged in, pursuant to this chapter, unless otherwise specified in this title, is the value at which assets of an insurer are required to be reported for statutory accounting purposes as determined in accordance with procedures prescribed in published accounting and valuation standards of the NAIC, including, without limitation, the Purposes and Procedures Manual of the SVO and the Valuation of Securities Manual, the Accounting Practices and Procedures Manual, the Annual Statement Instructions or any successor valuation procedures officially adopted by the NAIC.

      Sec. 158. The Commissioner may, pursuant to chapter 233B of NRS, adopt regulations to carry out the provisions of this chapter.

      Sec. 159. Sections 159 to 193, inclusive, of this act apply to the investments and investment practices of life and health insurers.

      Sec. 160. 1.  Except as otherwise specified in this chapter, an insurer shall not acquire, directly or indirectly through an investment subsidiary, an investment in accordance with the provisions of this chapter if, as a result of and after giving effect to the investment, the insurer would hold more than 3 percent of its admitted assets in investments of all kinds issued, assumed, accepted, insured or guaranteed by a single person, or 5 percent of its admitted assets in investments in the voting securities of a depository institution or any company that controls the institution.

      2.  The limitations in subsection 1 do not apply to the aggregate amounts insured by a single financial guaranty insurer with the highest generic rating issued by a nationally recognized statistical rating organization.

      3.  Asset-backed securities are not subject to the limitations in subsection 1. However, an insurer shall not acquire an asset-backed security if, as a result of and after giving effect to the investment, the aggregate amount of asset-backed securities secured by, or evidencing an interest in, a single asset or single pool of assets held by a trust or other business entity held by the insurer would exceed 3 percent of its admitted assets.

      Sec. 161. 1.  An insurer shall not acquire, directly or indirectly through an investment subsidiary, an investment in accordance with the provisions of sections 163, 169 to 173, inclusive, or 179 to 183, inclusive, of this act, or counterparty exposure in accordance with the provisions of section 187 of this act if, as a result of and after giving effect to the investment:

 


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this act, or counterparty exposure in accordance with the provisions of section 187 of this act if, as a result of and after giving effect to the investment:

      (a) The aggregate amount of medium and lower grade investments held by the insurer would exceed 20 percent of its admitted assets;

      (b) The aggregate amount of lower grade investments held by the insurer would exceed 10 percent of its admitted assets;

      (c) The aggregate amount of investments rated 5 or 6 by the SVO held by the insurer would exceed 3 percent of its admitted assets;

      (d) The aggregate amount of investments rated 6 by the SVO held by the insurer would exceed 1 percent of its admitted assets;

      (e) The aggregate amount of medium and lower grade investments held by the insurer that receive as cash income less than the equivalent yield for United States Treasury issues with a comparative average life, would exceed 1 percent of its admitted assets;

      (f) The aggregate amount of medium and lower grade investments issued, assumed, guaranteed, accepted or insured by any one person or, as to asset-backed securities secured by or evidencing an interest in a single asset or pool of assets, held by the insurer would exceed 1 percent of its admitted assets; or

      (g) The aggregate amount of lower grade investments issued, assumed, guaranteed, accepted or insured by any one person or, as to asset-backed securities secured by or evidencing an interest in a single asset or pool of assets, held by the insurer would exceed 0.5 percent of its admitted assets.

      2.  If an insurer attains or exceeds the limit of any one rating category referred to in this section, the insurer is not precluded from acquiring investments in other rating categories subject to the specific and multicategory limits applicable to those investments.

      Sec. 162. 1.  An insurer shall not acquire, directly or indirectly through an investment subsidiary, a Canadian investment authorized by the provisions of this chapter if, as a result of and after giving effect to the investment, the aggregate amount of these investments held by the insurer would exceed 40 percent of its admitted assets, or if the aggregate amount of Canadian investments not acquired in accordance with the provisions of paragraph (c) or (d) of subsection 2 of section 163 of this act held by the insurer would exceed 25 percent of its admitted assets.

      2.  As to an insurer that is authorized to do business in Canada or that has outstanding insurance, annuity or reinsurance contracts on lives or risks resident or located in Canada and denominated in Canadian currency, the limitations in subsection 1 must be increased by the greater of:

      (a) The amount the insurer is required by Canadian law to invest in Canada or to be denominated in Canadian currency; or

      (b) An amount not to exceed 115 percent of the amount of its reserves and other obligations under contracts on lives or risks resident or located in Canada.

      Sec. 163. 1.  Subject to the limitations of section 161 of this act, but not to the limitations of section 160 of this act, an insurer may acquire rated credit instruments issued, assumed, guaranteed or insured by:

      (a) The United States;

      (b) A government-sponsored enterprise of the United States, if the instruments of the government-sponsored enterprise are assumed, guaranteed or insured by the United States or are otherwise backed or supported by the full faith and credit of the United States;

 


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guaranteed or insured by the United States or are otherwise backed or supported by the full faith and credit of the United States;

      (c) Canada; or

      (d) A government-sponsored enterprise of Canada, if the instruments of the government-sponsored enterprise are assumed, guaranteed or insured by Canada or are otherwise backed or supported by the full faith and credit of Canada.

      2.  An insurer shall not acquire an instrument in accordance with paragraph (c) or (d) of subsection 1 if, as a result of and after giving effect to the investment, the aggregate amount of investments held by the insurer in accordance with paragraph (c) or (d) of subsection 1 would exceed 40 percent of its admitted assets.

      3.  Subject to the limitations of section 161 of this act, but not to the limitations of section 160 of this act, an insurer may acquire credit rated instruments, excluding asset-backed securities:

      (a) Issued by a government money market mutual fund, a class one money market mutual fund or a class one bond mutual fund;

      (b) Issued, assumed, guaranteed or insured by a government-sponsored enterprise of the United States other than those eligible under subsection 1;

      (c) Issued, assumed, guaranteed or insured by a state, if the instruments are general obligations of the state; or

      (d) Issued by a multilateral development bank.

      4.  An insurer shall not acquire an instrument of any one fund, any one enterprise or entity or any one state as described in subsection 3 if, as a result of and after giving effect to the investment, the aggregate amount of investments held in any one fund, enterprise or entity, or state would exceed 10 percent of the insurer’s admitted assets.

      5.  Subject to the limitations of sections 160, 161 and 162 of this act, an insurer may acquire preferred stocks that are not foreign investments and which meet the requirements of rated credit instruments if, as a result of and after giving effect to the investment:

      (a) The aggregate amount of preferred stocks held by the insurer in accordance with this section does not exceed 20 percent of the insurer’s admitted assets; and

      (b) The aggregate amount of preferred stocks held by the insurer in accordance with this section which are not sinking fund stocks or rated P1 or P2 by the SVO does not exceed 10 percent of the insurer’s admitted assets.

      6.  Subject to the limitations of sections 160, 161 and 162 of this act, in addition to those investments eligible pursuant to subsections 1 to 5, inclusive, an insurer may acquire rated credit instruments that are not foreign investments.

      7.  An insurer shall not acquire special rated credit instruments as described in this section if, as a result of and after giving effect to the investment, the aggregate amount of special rated credit instruments held by the insurer would exceed 5 percent of the insurer’s admitted assets.

      Sec. 164. 1.  An insurer may acquire investments in investment pools that invest only in:

      (a) Obligations with an SVO rating of 1 or 2, or the equivalent of an SVO rating of 1 or 2 by a nationally recognized statistical rating organization recognized by the SVO, or, in the absence of an equivalent rating, the issuer has outstanding obligations with the equivalent of an SVO rating of 1 or 2, or an equivalent rating, and have:

 


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rating, the issuer has outstanding obligations with the equivalent of an SVO rating of 1 or 2, or an equivalent rating, and have:

             (1) A remaining maturity of 397 days or less or a put option that entitles the holder to receive the principal amount of the obligation with the ability to exercise the put option through maturity at specified intervals not exceeding 397 days; or

             (2) A remaining maturity less than or equal to 3 years and a floating interest rate that resets not less frequently than quarterly on the basis of a current short-term index and is not subject to a maximum limit, if the obligations do not have an interest rate that varies inversely to market interest rate changes. For the purposes of this subparagraph, qualifying short-term indexes include, without limitation, the federal funds rate, prime rate, treasury bills rates, the London Interbank Offered Rate or commercial paper rates.

      (b) Government money market mutual funds or class one money market mutual funds.

      (c) Securities lending, repurchase and reverse repurchase transactions that meet all the requirements of section 178 of this act, except the quantitative limitations of subsection 4 of section 178 of this act.

      (d) Investments which an insurer may acquire pursuant to this chapter if the insurer’s proportionate interest in the amount invested in these investments does not exceed the applicable limits of this chapter.

      2.  For an investment in an investment pool to be qualified pursuant to this chapter, the investment pool must not:

      (a) Acquire securities issued, assumed, guaranteed or insured by the insurer or an affiliate of the insurer;

      (b) Borrow or incur any indebtedness for borrowed money, except for securities lending and reverse repurchase transactions that meet the requirements of section 178 of this act, except the quantitative limitations of subsection 4 of section 178 of this act; or

      (c) Permit the aggregate value of securities loaned or sold to, purchased from or invested in any one business entity in accordance with this section to exceed 10 percent of the total assets of the investment pool.

      3.  The limitations of section 160 of this act do not apply to an insurer’s investment in an investment pool, however an insurer shall not acquire an investment in an investment pool in accordance with this section if, as a result of and after giving effect to the investment, the aggregate amount of investments held by the insurer in accordance with this section:

      (a) In any one investment pool would exceed 10 percent of its admitted assets;

      (b) In all investment pools investing in investments permitted in accordance with paragraph (d) of subsection 1 would exceed 25 percent of its admitted assets; or

      (c) In all investment pools would exceed 35 percent of its admitted assets.

      4.  For an investment in an investment pool to be qualified pursuant to this chapter, the manager of the investment pool must:

      (a) Be organized in accordance with the laws of the United States or a state and designated as the pool manager in a pooling agreement;

      (b) Be the insurer, an affiliated insurer or a business entity affiliated with the insurer, a qualified bank, a business entity registered in

 


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accordance with the provisions of the Investment Advisers Act of 1940, 15 U.S.C. §§ 80a-1 et seq., as amended, or, in the case of a reciprocal insurer or interinsurance exchange, its attorney-in-fact, or in the case of a United States branch of an alien insurer, its United States manager or affiliates or subsidiaries of its United States manager;

      (c) Compile and maintain detailed accounting records setting forth:

             (1) The cash receipts and disbursements reflecting each participant’s proportionate investments in the investment pool;

             (2) A complete description of all underlying assets of the investment pool, including, without limitation, amount, interest rate, maturity date, if any, and other appropriate designations; and

             (3) Other records which, on a daily basis, allow third parties to verify each participant’s investment in the investment pool; and

      (d) Maintain the assets of the investment pool in one or more accounts, in the name of or on behalf of the investment pool, in accordance with a custody agreement with a qualified bank. The custody agreement must:

             (1) State and recognize the claims and rights of each participant;

             (2) Acknowledge that the underlying assets of the investment pool are held solely for the benefit of each participant in proportion to the aggregate amount of its investments in the investment pool; and

             (3) Contain an agreement that the underlying assets of the investment pool must not be commingled with the general assets of the custodian qualified bank or any other person.

      5.  The pooling agreement for each investment pool must be in writing and must provide that:

      (a) An insurer and its affiliated insurers or, in the case of an investment pool investing solely in investments allowed in accordance with paragraph (a) of subsection 1, the insurer and its subsidiaries, affiliates or any pension or profit-sharing plan of the insurer, its subsidiaries and affiliates or, in the case of a United States branch of an alien insurer, affiliates or subsidiaries of its United States manager, shall at all times hold 100 percent of the interests in the investment pool.

      (b) The underlying assets of the investment pool must not be commingled with the general assets of the pool manager or any other person.

      (c) In proportion to the aggregate amount of each pool participant’s interest in the investment pool:

             (1) Each participant owns an undivided interest in the underlying assets of the investment pool; and

             (2) The underlying assets of the investment pool are held solely for the benefit of each participant.

      (d) A participant, or in the event of the participant’s insolvency, bankruptcy or receivership, its trustee, receiver or other successor-in-interest, may withdraw all or any portion of its investment from the investment pool in accordance with the terms of the pooling agreement.

      (e) Withdrawals may be made on demand without penalty or other assessment on any business day, but settlements of funds must occur within a reasonable and customary period thereafter not to exceed 5 business days. Distributions in accordance with this paragraph must be calculated in each case net of all applicable fees and expenses of the investment pool.

 


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investment pool. The pooling agreement must provide that the pool manager shall distribute to a participant, at the discretion of the pool manager:

             (1) In cash, the then fair market value of the participant’s pro rata share of each underlying asset of the investment pool;

             (2) In kind, a pro rata share of each underlying asset; or

             (3) In a combination of cash and in-kind distributions, a pro rata share in each underlying asset.

      (f) The pool manager shall make the records of the investment pool available for inspection by the Commissioner.

      Sec. 165. Subject to the limitations of sections 160, 161 and 162 of this act, an insurer may acquire equity interests in business entities organized in accordance with the laws of any domestic jurisdiction.

      Sec. 166. An insurer shall not acquire an investment in accordance with the provisions of sections 165 to 168, inclusive, of this act if, as a result of and after giving effect to the investment, the aggregate amount of investments held by the insurer in accordance with those sections would exceed 20 percent of the insurer’s admitted assets, or the amount of equity interests held by the insurer that are not listed on a qualified exchange would exceed 5 percent of the insurer’s admitted assets. An accident and health insurer is not subject to the provisions of sections 165 to 168, inclusive, of this act, but is subject to the same aggregate limitation on equity interests as a property and casualty insurer in accordance with the provisions of sections 195 to 199, inclusive, and 205 to 208, inclusive, of this act.

      Sec. 167. An insurer shall not acquire in accordance with the provisions of sections 165 to 168, inclusive, of this act any investments that the insurer may acquire in accordance with the provisions of sections 174 to 177, inclusive, of this act.

      Sec. 168. An insurer shall not short sell equity investments unless the insurer covers the short sale by owning the equity investment or an unrestricted right to the equity investment exercisable within 6 months after the short sale.

      Sec. 169. 1.  Subject to the limitations of sections 160, 161 and 162 of this act, an insurer may acquire tangible personal property or equity interests therein located or used wholly or in part within a domestic jurisdiction either directly or indirectly through limited partnership interests and general partnership interests not otherwise prohibited by paragraph (d) of subsection 1 of section 154 of this act, joint ventures, stock of an investment subsidiary or membership interests in a limited-liability company, trust certificates or other similar instruments.

      2.  Investments acquired as described in subsection 1 are eligible only if:

      (a) The property is subject to a lease or other agreement with a person whose rated credit instruments in the amount of the purchase price of the personal property the insurer could acquire in accordance with the provisions of section 163 of this act; and

      (b) The lease or other agreement provides the insurer the right to receive rental, purchase or other fixed payments for the use or purchase of the property, and the aggregate value of the payments, together with the estimated residual value of the property at the end of its useful life and the estimated tax benefits to the insurer resulting from ownership of the property, must be adequate to return the cost of the insurer’s investment in the property, plus a return deemed adequate by the insurer.

 


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the property, must be adequate to return the cost of the insurer’s investment in the property, plus a return deemed adequate by the insurer.

      Sec. 170. The insurer shall compute the amount of each investment acquired in accordance with the provisions of sections 169 to 173, inclusive, of this act on the basis of the out-of-pocket purchase price and applicable related expenses paid by the insurer for the investment, net of each borrowing made to finance the purchase price and expenses, to the extent the borrowing is without recourse to the insurer.

      Sec. 171. An insurer shall not acquire an investment in accordance with the provisions of sections 169 to 173, inclusive, of this act if, as a result of and after giving effect to the investment, the aggregate amount of all investments held by the insurer in accordance with the provisions of sections 169 to 173, inclusive, of this act would exceed:

      1.  Two percent of its admitted assets; or

      2.  One half of one percent of its admitted assets as to any single item of tangible personal property.

      Sec. 172. For the purposes of determining compliance with the limitations of sections 160, 161 and 162 of this act, investments acquired by an insurer in accordance with the provisions of sections 169 to 173, inclusive, of this act must be aggregated with those acquired in accordance with the provisions of section 163 of this act, and each lessee of the property under a lease referred to in sections 169 to 173, inclusive, of this act shall be deemed the issuer of an obligation in the amount of the investment of the insurer in the property determined as provided in section 170 of this act.

      Sec. 173.  Nothing in sections 169 to 173, inclusive, of this act applies to tangible personal property lease arrangements between an insurer and its subsidiaries and affiliates in accordance with a cost-sharing arrangement or agreement permitted in accordance with the provisions of chapter 692C of NRS.

      Sec. 174. 1.  Subject to the limitations of sections 160, 161 and 162 of this act, an insurer may acquire, either directly or indirectly through limited partnership interests and general partnership interests not otherwise prohibited by paragraph (d) of subsection 1 of section 154 of this act, joint ventures, stock of an investment subsidiary or membership interests in a limited-liability company, trust certificates or other similar instruments, obligations secured by mortgages on real estate situated within a domestic jurisdiction.

      2.  A mortgage loan which is secured by other than a first lien must not be acquired unless the insurer is the holder of the first lien.

      3.  The obligations held by the insurer and any obligations with an equal lien priority shall not, at the time of acquisition of the obligation, exceed:

      (a) Ninety percent of the fair market value of the real estate, if the mortgage loan is secured by a purchase money mortgage or like security received by the insurer upon disposition of the real estate.

      (b) Eighty percent of the fair market value of the real estate, if the mortgage loan requires immediate scheduled payment in periodic installments of principal and interest, has an amortization period of not more than 30 years and periodic payments made not less frequently than annually. Each periodic payment must be sufficient to ensure that at all times the outstanding principal balance of the mortgage loan is not greater than the outstanding principal balance that would be outstanding under a mortgage loan with the same original principal balance, with the same interest rate and requiring equal payments of principal and interest with the same frequency over the same amortization period.

 


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than the outstanding principal balance that would be outstanding under a mortgage loan with the same original principal balance, with the same interest rate and requiring equal payments of principal and interest with the same frequency over the same amortization period. Mortgage loans allowed in accordance with this section are allowed notwithstanding the fact that they provide for a payment of the principal balance before the end of the period of amortization of the loan. For residential mortgage loans, the 80-percent limitation may be increased to 97 percent if acceptable private mortgage insurance has been obtained.

      (c) Seventy-five percent of the fair market values of the real estate for mortgage loans that do not meet the requirements of paragraph (a) or (b).

      4.  For purposes of subsections 1, 2 and 3, the amount of an obligation required to be included in the calculation of the loan-to-value ratio may be reduced to the extent the obligation is insured by the Federal Housing Administration or guaranteed by the Administrator of Veterans Affairs, or their successors.

      5.  A mortgage loan that is held by an insurer pursuant to section 141 of this act or acquired in accordance with the provisions of sections 174 to 177, inclusive, of this act, and is restructured in a manner that meets the requirements of a restructured mortgage loan in conformance with the Accounting Practices and Procedures Manual adopted by the NAIC will continue to qualify as a mortgage loan in accordance with the provisions of this chapter.

      6.  Subject to the limitations of sections 160, 161 and 162 of this act, credit lease transactions that do not qualify for investment pursuant to section 163 of this act are exempt from the provisions of subsections 1, 2 and 3 if they meet the following criteria:

      (a) The loan amortizes over the initial fixed lease term at least in an amount sufficient so that the loan balance at the end of the lease term does not exceed the original appraised value of the real estate;

      (b) The lease payments cover or exceed the total debt service over the life of the loan;

      (c) A tenant or its affiliated entity whose rated credit instruments have an SVO rating of 1 or 2, or a comparable rating from a nationally recognized statistical rating organization recognized by the SVO, has a full faith and credit obligation to make the lease payments;

      (d) The insurer holds or is the beneficial holder of a first lien mortgage on the real estate;

      (e) The expenses of the real estate are passed through to the tenant, excluding exterior, structural, parking and heating, ventilation and air conditioning replacement expenses, unless annual escrow contributions, from cash flows derived from the lease payments, cover the expense shortfall; and

      (f) There is a perfected assignment of the rents due pursuant to the lease to, or for the benefit of, the insurer.

      Sec. 175. 1.  An insurer may acquire, manage and dispose of real estate situated in a domestic jurisdiction either directly or indirectly through limited partnership interests and general partnership interests not otherwise prohibited by paragraph (d) of subsection 1 of section 154 of this act, joint ventures, stock of an investment subsidiary or membership interests in a limited-liability company, trust certificates or other similar instruments. The real estate must be income producing or intended for improvement or development for investment purposes under an existing program, in which case the real estate shall be deemed to be income producing.

 


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improvement or development for investment purposes under an existing program, in which case the real estate shall be deemed to be income producing.

      2.  The real estate may be subject to mortgages, liens or other encumbrances, the amount of which must, to the extent that the obligations secured by the mortgages, liens or encumbrances are without recourse to the insurer, be deducted from the amount of the investment of the insurer in the real estate for purposes of determining compliance with subsections 2 and 3 of section 177 of this act.

      Sec. 176. 1.  An insurer may acquire, manage and dispose of real estate for the convenient accommodation of the insurer’s, and its affiliates, business operations, including home office, branch office and filed office operations.

      2.  Real estate acquired as described in this section may include excess space for rent to others, if the excess space, valued at its fair market value, would otherwise be an allowed investment in accordance with the provisions of section 175 of this act and is so qualified by the insurer.

      3.  The real estate acquired as described in this section may be subject to one or more mortgages, liens or other encumbrances, the amount of which must, to the extent that the obligations secured by the mortgages, liens or encumbrances are without recourse to the insurer, be deducted from the amount of the investment of the insurer in the real estate for purposes of determining compliance with subsection 4 of section 177 of this act.

      4.  For the purposes of this section, business operations must not include that portion of real estate used for the direct provision of health care services by an accident and health insurer for its insureds. An insurer may acquire real estate used for these purposes under section 175 of this act.

      Sec. 177. 1.  An insurer shall not acquire an investment in accordance with the provisions of section 174 of this act if, as a result of and after giving effect to the investment, the aggregate amount of all investments held by the insurer pursuant to that section would exceed:

      (a) One percent of its admitted assets in mortgage loans covering any one secured location;

      (b) One-quarter of one percent of its admitted assets in construction loans covering any one secured location; or

      (c) Two percent of its admitted assets in construction loans in the aggregate.

      2.  An insurer shall not acquire an investment under section 175 of this act if, as a result of and after giving effect to the investment and any outstanding guarantees made by the insurer in connection with the investment, the aggregate amount of investments held by the insurer under section 175 of this act plus the guarantees outstanding would exceed:

      (a) One percent of its admitted assets in one parcel or group of contiguous parcels of real estate, except that this limitation does not apply to that portion of real estate used for the direct provision of health care services by an accident and health insurer for its insureds, such as hospitals, medical clinics, medical professional buildings or other health facilities used for the purpose of providing health services; or

 


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      (b) Fifteen percent of its admitted assets in the aggregate, but not more than 5 percent of its admitted assets as to properties that are to be improved or developed.

      3.  An insurer shall not acquire an investment pursuant to sections 174 and 175 of this act if, as a result of and after giving effect to the investment and any guarantees made by the insurer in connection with the investment, the aggregate amount of all investments held by the insurer in accordance with those sections plus the guarantees outstanding would exceed 45 percent of the insurer’s admitted assets. An insurer may exceed this limitation by not more than 30 percent of the insurer’s admitted assets if:

      (a) This increased amount is invested only in residential mortgage loans;

      (b) The insurer has not more than 10 percent of the insurer’s admitted assets invested in mortgage loans other than residential mortgage loans;

      (c) The loan-to-value ratio of each residential mortgage loan does not exceed 60 percent at the time the mortgage loan is qualified pursuant to this increased authority, and the fair market value is supported by an appraisal that is not more than 2 years old and prepared by an independent appraiser;

      (d) A single mortgage loan qualified pursuant to this increased authority does not exceed 0.5 percent of the insurer’s admitted assets;

      (e) The insurer files with the Commissioner, and receives approval from the Commissioner for, a plan that is designed to result in a portfolio of residential mortgage loans that is sufficiently geographically diversified; and

      (f) The insurer agrees to file annually with the Commissioner records which demonstrate that the insurer’s portfolio of residential mortgage loans is geographically diversified in accordance with the plan.

      4.  The limitations of sections 160, 161 and 162 of this act do not apply to an insurer’s acquisition of real estate under section 175 of this act. An insurer shall not acquire real estate under section 175 of this act if, as a result of and after giving effect to the acquisition, the aggregate amount of real estate held by the insurer in accordance with that section would exceed 10 percent of its admitted assets. With the approval of the Commissioner, additional amounts of real estate may be acquired under section 175 of this act.

      Sec. 178. An insurer may enter into securities lending, repurchase, reverse repurchase and dollar roll transactions with business entities, subject to the following requirements:

      1.  The insurer’s board of directors shall adopt a written plan that is consistent with the requirements of the written plan in section 148 of this act which specifies the guidelines and objectives to be followed, including, without limitation:

      (a) A description of how cash received will be invested or used for general corporate purposes of the insurer;

      (b) Operational procedures to manage interest rate risk, counterparty default risk, the conditions under which proceeds from reverse repurchase transactions may be used in the ordinary course of business and the use of acceptable collateral in a manner that reflects the liquidity needs of the transactions; and

      (c) The extent to which the insurer may engage in these transactions.

 


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      2.  The insurer shall enter into a written agreement for all transactions authorized by this section other than dollar roll transactions. The written agreement must require that each transaction terminate not more than 1 year after its inception or upon the earlier demand of the insurer. The agreement must be with the business entity counterparty, but for securities lending transactions, the agreement may be with an agent acting on behalf of the insurer, if the agent is a qualified business entity and if the agreement:

      (a) Requires the agent to enter into separate agreements with each counterparty that are consistent with the requirements of this section; and

      (b) Prohibits securities lending transactions under the agreement with the agent or its affiliates.

      3.  Cash received in a transaction as described in this section must be invested in accordance with the provisions of this chapter and in a manner that recognizes the liquidity needs of the transaction or used by the insurer for its general corporate purposes. For so long as the transaction remains outstanding, the insurer, its agent or custodian shall maintain, as to acceptable collateral received in a transaction in accordance with this section, either physically or through book entry systems of the Federal Reserve, the Depository Trust Company, the Participants Trust Company or any other securities depositories approved by the Commissioner:

      (a) Possession of the acceptable collateral;

      (b) A perfected security interest in the acceptable collateral; or

      (c) In the case of a jurisdiction outside of the United States, title to, or rights of a secured creditor to, the acceptable collateral.

      4.  The limitations of sections 160, 161, 162 and 179 to 183, inclusive, of this act do not apply to the business entity counterparty exposure created by transactions entered into under this section. For purposes of calculations made to determine compliance with this subsection, no effect will be given to the insurer’s future obligation to resell securities, in the case of a repurchase transaction, or to repurchase securities, in the case of a reverse repurchase transaction. An insurer shall not enter into a transaction under this section if, as a result of and after giving effect to the transaction:

      (a) The aggregate amount of securities loaned, sold or purchased from any one business entity counterparty under this section would exceed 5 percent of its admitted assets. In calculating the amount sold to or purchased from a business entity counterparty in accordance with repurchase or reverse purchase transactions, effect may be given to netting provisions under a master written agreement.

      (b) The aggregate amount of all securities loaned, sold to or purchased from all business entities under this section would exceed 40 percent of its admitted assets.

      5.  In a securities lending transaction, the insurer shall receive acceptable collateral having a market value on the transaction date equal to 102 percent or more of the market value of the securities loaned by the insurer in the transaction on that date. If at any time the market value of the acceptable collateral is less than the market value of the loaned securities, the business entity counterparty is obligated to deliver additional acceptable collateral, the market value of which, together with the market value of all acceptable collateral held in connection with the transaction, equals 102 percent or more of the market value of the loaned securities.

 


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      6.  In a reverse repurchase transaction, other than a dollar roll transaction, the insurer shall receive acceptable collateral having a market value on the transaction date equal to 95 percent or more of the market value of the securities transferred by the insurer in the transaction on that date. If at any time the market value of the acceptable collateral is less than 95 percent of the market value of the securities so transferred, the business entity counterparty is obligated to deliver additional acceptable collateral, the market value of which, together with the market value of all acceptable collateral held in connection with the transaction, equals 95 percent or more of the market value of the transferred securities.

      7.  In a dollar roll transaction, the insurer shall receive cash in an amount equal to at least the market value of the securities transferred by the insurer in the transaction on the transaction date.

      8.  In a repurchase transaction, the insurer shall receive as acceptable collateral transferred securities having a market value equal to 102 percent or more of the purchase price paid by the insurer for the securities. If at any time the market value of the acceptable collateral is less than 100 percent of the purchase price paid by the insurer, the business entity counterparty is obligated to provide additional acceptable collateral, the market value of which, together with the market value of all acceptable collateral held in connection with the transaction, equals 102 percent or more of the purchase price. Securities acquired by an insurer in a repurchase transaction may not be sold in a reverse repurchase transaction, loaned in a securities lending transaction or otherwise pledged.

      9.  To constitute acceptable collateral for the purposes of this section, a letter of credit must have an expiration date beyond the term of the subject transaction.

      Sec. 179. Subject to the limitations of sections 160, 161 and 162 of this act, an insurer may acquire foreign investments, or engage in investment practices with persons of or in foreign jurisdictions, of substantially the same type as those that an insurer is allowed to acquire pursuant to this chapter, other than of the type allowed under section 164 of this act if, as a result of and after giving effect to the investments:

      1.  The aggregate amount of foreign investments held by the insurer in accordance with this section does not exceed 20 percent of its admitted assets; and

      2.  The aggregate amount of foreign investments held by the insurer in accordance with this section in a single foreign jurisdiction does not exceed 10 percent of its admitted assets as to a foreign jurisdiction that has a sovereign debt rating of SVO 1 or 3 percent of its admitted assets as to any other foreign jurisdiction.

      Sec. 180. 1.  Subject to the limitations of sections 160, 161 and 162 of this act, an insurer may acquire investments, or engage in investment practices denominated in foreign currencies, whether or not they are foreign investments acquired as described in section 179 of this act, or additional foreign currency exposure as a result of the termination or expiration of a hedging transaction with respect to investments denominated in a foreign currency if:

      (a) The aggregate amount of investments held by the insurer in accordance with this section denominated in foreign currencies does not exceed 10 percent of its admitted assets; and

 


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      (b) The aggregate amount of investments held by the insurer in accordance with this section denominated in the foreign currency of a single foreign jurisdiction does not exceed 10 percent of its admitted assets as to a foreign jurisdiction that has a sovereign debt rating of SVO 1 or 3 percent of its admitted assets as to any other foreign jurisdiction.

      2.  An investment must not be considered denominated in a foreign currency if the acquiring insurer enters into one or more contracts in transactions allowed under sections 184 to 188, inclusive, of this act and the business entity counterparty agrees in the contract or contracts to exchange all payments made on the foreign currency denominated investment for United States currency at a rate which effectively insulates the investment cash flows against future changes in currency exchange rates during the period the contract or contracts are in effect.

      Sec. 181. In addition to investments allowed under sections 179 and 180 of this act, an insurer that is authorized to do business in a foreign jurisdiction, and that has outstanding insurance, annuity or reinsurance contracts on lives or risks resident or located in that foreign jurisdiction and denominated in a foreign currency of that jurisdiction, may acquire foreign investments respecting that foreign jurisdiction, and may acquire investments denominated in the currency of that jurisdiction, subject to the limitations of sections 160, 161 and 162 of this act. Investments made in accordance with this section in obligations of foreign governments, their political subdivisions and government-sponsored enterprises are not subject to the limitations of sections 160, 161 and 162 of this act if those investments carry an SVO rating of 1 or 2. The aggregate amount of investments acquired by the insurer in accordance with this section must not exceed the greater of:

      1.  The amount the insurer is required by the law of the foreign jurisdiction to invest in the foreign jurisdiction; or

      2.  One hundred fifteen percent of the amount of the insurer’s reserves, net of reinsurance, and other obligations under the contracts on lives or risks resident or located in the foreign jurisdiction.

      Sec. 182. In addition to investments allowed under sections 179 and 180 of this act, an insurer that is not authorized to do business in a foreign jurisdiction, but which has outstanding insurance, annuity or reinsurance contracts on lives or risks resident or located in that foreign jurisdiction and denominated in foreign currency of that jurisdiction, may acquire foreign investments respecting that foreign jurisdiction, and may acquire investments denominated in the currency of that jurisdiction subject to the limitations of sections 160, 161 and 162 of this act. Investments made in accordance with this section in obligations of foreign governments, their political subdivisions and government-sponsored enterprises are not subject to the limitations of sections 160, 161 and 162 of this act if those investments carry an SVO rating of 1 or 2. The aggregate amount of investments acquired by the insurer in accordance with this section must not exceed 105 percent of the amount of the insurer’s reserves, net of reinsurance, and other obligations under the contracts on lives or risks resident or located in the foreign jurisdiction.

      Sec. 183. Investments acquired in conformance with sections 179 to 183, inclusive, of this act must be aggregated with investments of the same types made under this chapter, and in a similar manner, for purposes of determining compliance with the limitations, if any, contained in this chapter.

 


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chapter. Investments in obligations of foreign governments, their political subdivisions and government-sponsored enterprises of these persons, except for those exempted by sections 181 and 182 of this act, are subject to the limitations of sections 160, 161 and 162 of this act.

      Sec. 184. An insurer may, directly or indirectly through an investment subsidiary, engage in derivative transactions as described in sections 184 to 188, inclusive, of this act pursuant to the following conditions:

      1.  An insurer may use derivative instruments under sections 184 to 188, inclusive, of this act to engage in hedging transactions and certain income generation transactions, as these terms may be further defined in regulations adopted by the Commissioner pursuant to section 158 of this act; and

      2.  An insurer must be able to demonstrate to the Commissioner the intended hedging characteristics and the ongoing effectiveness of the derivative transaction or combination of the transactions through cash flow testing or other appropriate analyses.

      Sec. 185. An insurer may enter into hedging transactions under sections 184 to 188, inclusive, of this act if, as a result of and after giving effect to the transaction:

      1.  The aggregate statement value of options, caps, floors and warrants not attached to another financial instrument purchased and used in hedging transactions does not exceed 7.5 percent of its admitted assets;

      2.  The aggregate statement value of options, caps and floors written in hedging transactions does not exceed 3 percent of its admitted assets; and

      3.  The aggregate potential exposure of collars, swaps, forwards and futures used in hedging transactions does not exceed 6.5 percent of its admitted assets.

      Sec. 186. An insurer may only enter into the following types of income generation transactions if, as a result of and after giving effect to the transactions, the aggregate statement value of the fixed income assets that are subject to call or which generate the cash flows for payments under the caps or floors, plus the face value of fixed income securities underlying a derivative instrument subject to call, plus the amount of the purchase obligations under the puts, does not exceed 10 percent of its admitted assets:

      1.  Sales of covered call options on noncallable fixed income securities, callable fixed income securities if the option expires by its terms before the end of the noncallable period or derivative instruments based on fixed income securities;

      2.  Sales of covered call options on equity securities, if the insurer holds in its portfolio, or can immediately acquire through the exercise of options, warrants or conversion rights already owned, the equity securities subject to call during the complete term of the call option sold;

      3.  Sales of covered puts on investments that the insurer is allowed to acquire pursuant to this chapter, if the insurer has escrowed, or entered into a custodian agreement segregating, cash or cash equivalents with a market value equal to the amount of its purchase obligations under the put during the complete term of the put option sold; or

 


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      4.  Sales of covered caps or floors, if the insurer holds in its portfolio the investments generating the cash flow to make the required payments under the caps or floors during the complete term that the cap or floor is outstanding.

      Sec. 187. An insurer shall include all counterparty exposure amounts in determining compliance with the limitations of sections 160, 161 and 162 of this act.

      Sec. 188. In accordance with the regulations adopted pursuant to section 158 of this act, the Commissioner may approve additional transactions involving the use of derivative instruments in excess of the limits of section 185 of this act for other risk-management purposes, but replication transactions must not be allowed for other than risk-management purposes.

      Sec. 189. A life insurer may lend to a policyholder on the security of the cash surrender value of the policyholder’s policy a sum not exceeding the legal reserve that the insurer is required to maintain on the policy.

      Sec. 190. Solely for the purpose of acquiring investments that exceed the quantitative limitations of sections 160 to 183, inclusive, of this act, an insurer may acquire in accordance with this section an investment, or engage in investment practices described in section 178 of this act, but an insurer shall not acquire an investment or engage in investment practices described in section 178 of this act in accordance with this section if, as a result of and after giving effect to the transaction:

      1.  The aggregate amount of investments held by the insurer would exceed 3 percent of its admitted assets; or

      2.  The aggregate amount of investments as to one limitation in sections 160 to 183, inclusive, of this act held by the insurer would exceed 1 percent of its admitted assets.

      Sec. 191.  1.  In addition to the authority provided in section 190 of this act, an insurer may acquire in accordance with this section an investment of any kind, or engage in investment practices described in section 178 of this act that are not specifically prohibited by the provisions of this chapter, without regard to the categories, conditions, standards or other limitations of sections 160 to 183, inclusive, of this act if, as a result of and after giving effect to the transaction, the aggregate amount of investments held would not exceed the lesser of:

      (a) Ten percent of its admitted assets; or

      (b) Seventy-five percent of its capital and surplus.

      2.  An insurer shall not acquire any investment or engage in any investment practice in accordance with this section if, as a result of and after giving effect to the transaction, the aggregate amount of all investments in any one person held by the insurer would exceed 3 percent of its admitted assets.

      Sec. 192. In addition to the investments acquired as described in sections 190 and 191 of this act, an insurer may acquire in accordance with this section an investment of any kind, or engage in investment practices described in section 178 of this act, that are not specifically prohibited by the provisions of this chapter, without regard to any limitations of sections 160 to 183, inclusive, of this act if:

 


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      1.  The Commissioner grants prior approval;

      2.  The insurer demonstrates that its investments are being made in a prudent manner and that the additional amounts will be invested in a prudent manner; and

      3.  As a result of and after giving effect to the transaction the aggregate amount of investments held by the insurer is not greater than:

      (a) Twenty-five percent of its capital and surplus; or

      (b) One hundred percent of capital and surplus less 10 percent of its admitted assets.

      Sec. 193. An investment prohibited by section 154 of this act, not allowed by sections 184 to 188, inclusive, of this act or additional derivative instruments acquired under sections 184 to 188, inclusive, of this act must not be acquired pursuant to sections 190 to 193, inclusive, of this act.

      Sec. 194. Sections 194 to 230, inclusive, of this act apply to the investments and investment practices of property and casualty, financial guaranty and mortgage guarantee insurers.

      Sec. 195. Subject to all other limitations and requirements of this chapter, a property and casualty, financial guaranty, mortgage guaranty or accident and health insurer shall maintain an amount not less than 100 percent of adjusted loss reserves and loss adjustment expense reserves, 100 percent of adjusted unearned premium reserves and 100 percent of statutorily required policy and contract reserves in:

      1.  Cash and cash equivalents;

      2.  High and medium grade investments that qualify pursuant to sections 203 and 204 of this act;

      3.  Equity interests that qualify pursuant to sections 205 to 208, inclusive, of this act and which are traded on a qualified exchange;

      4.  Investments of the type set forth in sections 219 to 223, inclusive, of this act, if the investments are rated in the highest generic rating category by a nationally recognized statistical rating organization recognized by the SVO for rating foreign jurisdictions and if any foreign currency exposure is effectively hedged through the maturity date of the investments;

      5.  Qualifying investments of the type set forth in subsections 2, 3 and 4 that are acquired pursuant to sections 229 and 230 of this act;

      6.  Interest and dividends receivable on qualifying investments of the type set forth in subsections 1 to 5, inclusive; or

      7.  Reinsurance recoverable on paid losses.

      Sec. 196. 1.  For the purposes of determining the amount of assets to be maintained in accordance with this section, the calculation of adjusted loss reserves and loss adjustment expense reserves, adjusted unearned premium reserves and statutorily required policy and contract reserves must be based on the amounts reported as of the most recent annual or quarterly statement date.

      2.  Adjusted loss reserves and loss adjustment expense reserves must be, for each individual line of business, equal to the sum derived by multiplying the amount obtained pursuant to paragraph (a) by the amount obtained pursuant to paragraph (b), and subtracting from the product obtained by way of that multiplication the amount obtained pursuant to paragraph (c), as follows:

      (a) The result of each amount reported by the insurer as losses and loss adjustment expenses unpaid for each accident year for each individual line of business.

 


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ê2015 Statutes of Nevada, Page 3449 (Chapter 522, SB 67)ê

 

      (b) The discount factor that is applicable to the line of business and accident year published by the Internal Revenue Service in accordance with the provisions of section 846 of the Internal Revenue Code, 26 U.S.C. § 846, as amended, for the calendar year that corresponds to the most recent annual statement of the insurer.

      (c) Accrued retrospective premiums discounted by an average discount factor. The discount factor used in this paragraph must be calculated by dividing the losses and loss adjustment expenses unpaid after discounting by loss and loss adjustment expense reserves before discounting the amount obtained pursuant to paragraph (a).

      3.  For purposes of the calculations required pursuant to subsection 2, the losses and loss adjustment expenses unpaid must be determined net of anticipated salvage and subrogation, and gross of any discount for the time value of money or tabular discount.

      4.  Adjusted unearned premium reserves must be equal to the sum derived by subtracting the amount obtained pursuant to paragraph (b) from the amount obtained pursuant to paragraph (a), as follows:

      (a) The amount reported by the insurer as unearned premium reserves.

      (b) The admitted asset amounts reported by the insurer as:

             (1) Premiums in and agent’s balances in the course of collection, accident and health premiums due and unpaid and uncollected premiums for accident and health premiums;

             (2) Premiums, agent’s balances and installments booked but deferred and not yet due; and

             (3) Bills receivable, taken for premium.

      5.  Statutorily required policy and contract reserves also must include, without limitation, any required contingency reserves, including, without limitation, in the case of a mortgage guaranty insurer, the amounts required by NRS 681B.100.

      Sec. 197. A property and casualty, financial guaranty, mortgage guaranty or accident and health insurer shall supplement its annual statement with a reconciliation and summary of its assets and reserve requirements as required in sections 195 and 196 of this act. A reconciliation and summary showing that an insurer’s assets as required in sections 195 and 196 of this act are greater than or equal to its undiscounted reserves referred to in sections 195 and 196 of this act is sufficient to satisfy this requirement. Upon prior notification, the Commissioner may require an insurer to submit such a reconciliation and summary with any quarterly statement filed during the calendar year.

      Sec. 198. If a property and casualty, financial guaranty, mortgage guaranty or accident and health insurer’s assets and reserves do not comply with sections 195 and 196 of this act, the insurer shall notify the Commissioner immediately of the amount by which the reserve requirements exceed the annual statement value of the qualifying assets, explain why the deficiency exists and, within 30 days after the date of the notice, propose a plan of action to remedy the deficiency.

      Sec. 199. 1.  If the Commissioner determines that an insurer is not in compliance with sections 195 and 196 of this act, the Commissioner shall require the insurer to eliminate the condition causing the noncompliance within a specified time after the date on which the notice of the Commissioner’s requirements is mailed or delivered to the insurer.

 


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ê2015 Statutes of Nevada, Page 3450 (Chapter 522, SB 67)ê

 

      2.  If an insurer fails to comply with the Commissioner’s requirements that are imposed pursuant to subsection 1, the insurer is deemed to be in hazardous financial condition and the Commissioner shall take one or more of the actions authorized by law as to insurers in hazardous financial condition.

      Sec. 200. 1.  Except as otherwise specified in this chapter, an insurer shall not acquire, directly or indirectly through an investment subsidiary, an investment in accordance with the provisions of this chapter if, as a result of and after giving effect to the investment, the insurer would hold more than 5 percent of its admitted assets in investments of all kinds issued, assumed, accepted, insured or guaranteed by a single person.

      2.  The limitation in subsection 1 does not apply to the aggregate amounts insured by a single financial guaranty insurer with the highest generic rating issued by a nationally recognized statistical rating organization.

      3.  Asset-backed securities are not subject to the limitation in subsection 1. However, an insurer shall not acquire an asset-backed security if, as a result of and after giving effect to the investment, the aggregate amount of asset-backed securities secured by, or evidencing an interest in, a single asset or single pool of assets held by a trust or other business entity held by the insurer would exceed 5 percent of its admitted assets.

      Sec. 201. 1.  An insurer shall not acquire, directly or indirectly through an investment subsidiary, an investment in accordance with the provisions of sections 203, 209 to 213, inclusive, or 219 to 223, inclusive, of this act or counterparty exposure in accordance with the provisions of section 227 of this act if, as a result of and after giving effect to the investment:

      (a) The aggregate amount of all medium and lower grade investments held by the insurer would exceed 20 percent of its admitted assets;

      (b) The aggregate amount of lower grade investments held by the insurer would exceed 10 percent of its admitted assets;

      (c) The aggregate amount of investments rated 5 or 6 by the SVO held by the insurer would exceed 5 percent of its admitted assets;

      (d) The aggregate amount of investments rated 6 by the SVO held by the insurer would exceed 1 percent of its admitted assets; or

      (e) The aggregate amount of medium and lower grade investments held by the insurer that receive as cash income less than the equivalent yield for United States Treasury issues with a comparative average life, would exceed 1 percent of its admitted assets.

      2.  An insurer shall not acquire, directly or indirectly through an investment subsidiary, an investment in accordance with the provisions of sections 203, 209 to 213, inclusive, or 219 to 223, inclusive, of this act or counterparty exposure in accordance with the provisions of section 227 of this act if, as a result of and after giving effect to the investment:

      (a) The aggregate amount of medium and lower grade investments issued, assumed, guaranteed, accepted or insured by any one person or, as to asset-backed securities by or evidencing an interest in a single asset or pool of assets, held by the insurer, would exceed 1 percent of its admitted assets; or

      (b) The aggregate amount of lower grade investments issued, assumed, guaranteed, accepted or insured by any one person or, as to asset-backed securities by or evidencing an interest in a single asset or pool of assets, held by the insurer, would exceed 0.5 percent of its admitted assets.

 


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ê2015 Statutes of Nevada, Page 3451 (Chapter 522, SB 67)ê

 

securities by or evidencing an interest in a single asset or pool of assets, held by the insurer, would exceed 0.5 percent of its admitted assets.

      3.  If an insurer attains or exceeds the limit of any one rating category referred to in this section, the insurer must not be precluded from acquiring investments in other rating categories subject to the specific and multicategory limits applicable to those investments.

      Sec. 202. 1.  An insurer shall not acquire, directly or indirectly through an investment subsidiary, any Canadian investments authorized by the provisions of this chapter if, as a result of and after giving effect to the investment, the aggregate amount of these investments held by the insurer would exceed 40 percent of its admitted assets, or if the aggregate amount of Canadian investments not acquired in accordance with paragraph (c) or (d) of subsection 1 of section 203 of this act held by the insurer would exceed 25 percent of its admitted assets.

      2.  As to an insurer that is authorized to do business in Canada or that has outstanding insurance, annuity or reinsurance contracts on lives or risks resident or located in Canada and denominated in Canadian currency, the limitations in subsection 1 must be increased by the greater of:

      (a) The amount the insurer is required by Canadian law to invest in Canada or to be denominated in Canadian currency; or

      (b) One hundred twenty-five percent of the amount of its reserves and other obligations under contracts on risks resident or located in Canada.

      Sec. 203. 1.  Subject to the limitations of section 201 of this act, but not to the limitations of section 200 of this act, an insurer may acquire rated credit instruments issued, assumed, guaranteed or insured by:

      (a) The United States;

      (b) A government-sponsored enterprise of the United States, if the instruments of the government-sponsored enterprise are assumed, guaranteed or insured by the United States or are otherwise backed or supported by the full faith and credit of the United States;

      (c) Canada; or

      (d) A government-sponsored enterprise of Canada, if the instruments of the government-sponsored enterprise are assumed, guaranteed or insured by Canada or are otherwise backed or supported by the full faith and credit of Canada.

      2.  An insurer shall not acquire an instrument in accordance with paragraph (c) or (d) of subsection 1 if, as a result of and after giving effect to the investment, the aggregate amount of investments held by the insurer in accordance with paragraph (c) or (d) of subsection 1 would exceed 40 percent of its admitted assets.

      3.  Subject to the limitations of section 201 of this act, but not to the limitations of section 200 of this act, an insurer may acquire rated credit instruments, excluding asset-backed securities:

      (a) Issued by a government money market mutual fund, a class one money market mutual fund or a class one bond mutual fund;

      (b) Issued, assumed, guaranteed or insured by a government-sponsored enterprise of the United States other than those eligible in accordance with subsection 1;

      (c) Issued, assumed, guaranteed or insured by a state, if the instruments are general obligations of the state; or

      (d) Issued by a multilateral development bank.

 


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ê2015 Statutes of Nevada, Page 3452 (Chapter 522, SB 67)ê

 

      4.  An insurer shall not acquire an instrument of any one fund, any one enterprise or entity, or any one state as described in subsection 3 if, as a result of and after giving effect to the investment, the aggregate amount of investments held in any one fund, enterprise or entity or state would exceed 10 percent of the insurer’s admitted assets.

      5.  Subject to the limitations of sections 200, 201 and 202 of this act, an insurer may acquire preferred stocks that are not foreign investments and which meet the requirements of rated credit instruments if, as a result of and after giving effect to the investments:

      (a) The aggregate amount of preferred stocks held by the insurer in accordance with this section does not exceed 20 percent of the insurer’s admitted assets; and

      (b) The aggregate amount of preferred stocks held by the insurer in accordance with this section which are not sinking fund stocks or rated P1 or P2 by the SVO does not exceed 10 percent of the insurer’s admitted assets.

      6.  Subject to the limitations of sections 200, 201 and 202 of this act, in addition to those investments eligible pursuant to subsections 1 to 5, inclusive, an insurer may acquire rated credit instruments that are not foreign investments.

      7.  An insurer shall not acquire special rated credit instruments as described in this section if, as a result of and after giving effect to the investment, the aggregate amount of special rated credit instruments held by the insurer would exceed 5 percent of the insurer’s admitted assets.

      Sec. 204. 1.  An insurer may acquire investments in investment pools that invest only in:

      (a) Obligations that are rated 1 or 2 by the SVO or have an equivalent of an SVO 1 or 2 rating, or, in the absence of a 1 or 2 rating or equivalent rating, the issuer has outstanding obligations with an SVO 1 or 2 equivalent rating, by a nationally recognized statistical rating organization recognized by the SVO, and have:

             (1) A remaining maturity of 397 days or less or a put option that entitles the holder to receive the principal amount of the obligation with the ability to exercise the put option through maturity at specified intervals not exceeding 397 days; or

             (2) A remaining maturity of less than or equal to 3 years and a floating interest rate that resets not less frequently than quarterly on the basis of a current short-term index and is not subject to a maximum limit, if the obligations do not have an interest rate that varies inversely to market interest rate changes. For the purpose of this subparagraph, qualifying short-term indexes include, without limitation, the federal funds rate, prime rate, treasury bills rates, the London Interbank Offered Rate or commercial paper rates.

      (b) Government money market mutual funds or class one money market mutual funds.

      (c) Securities lending, repurchase and reverse repurchase transactions that meet all the requirements of section 218 of this act, except the quantitative limitations of subsection 4 of that section.

      (d) Investments which an insurer may acquire pursuant to this chapter if the insurer’s proportionate interest in the amount invested in these investments does not exceed the applicable limits of this chapter.

 


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ê2015 Statutes of Nevada, Page 3453 (Chapter 522, SB 67)ê

 

      2.  For an investment in an investment pool to be qualified pursuant to this chapter, the investment pool must not:

      (a) Acquire securities issued, assumed, guaranteed or insured by the insurer or an affiliate of the insurer;

      (b) Borrow or incur any indebtedness for borrowed money, except for securities lending and reverse repurchase transactions that meet the requirements of section 218 of this act except the quantitative limitations of subsection 4 of that section; or

      (c) Permit the aggregate value of securities loaned or sold to, purchased from or invested in any one business entity in accordance with this section to exceed 10 percent of the total assets of the investment pool.

      3.  The limitations of section 200 of this act do not apply to an insurer’s investment in an investment pool, however an insurer shall not acquire an investment in an investment pool in accordance with this section if, as a result of and after giving effect to the investment, the aggregate amount of investments held by the insurer in accordance with this section:

      (a) In any one investment pool would exceed 10 percent of its admitted assets;

      (b) In all investment pools investing in investments permitted in accordance with paragraph (d) of subsection 1 would exceed 25 percent of its admitted assets; or

      (c) In all investment pools would exceed 40 percent of its admitted assets.

      4.  For an investment in an investment pool to be qualified pursuant to this chapter, the manager of the investment pool must:

      (a) Be organized in accordance with the laws of the United States or a state and designated as the pool manager in a pooling agreement;

      (b) Be the insurer, an affiliated insurer or a business entity affiliated with the insurer, a qualified bank, a business entity registered in accordance with the provisions of the Investment Advisers Act of 1940, 15 U.S.C. §§ 80a-1 et seq., as amended, or, in the case of a United States branch of an alien insurer, its United States manager or affiliates or subsidiaries of its United States manager;

      (c) Compile and maintain detailed accounting records setting forth:

             (1) The cash receipts and disbursements reflecting each participant’s proportionate investments in the investment pool;

             (2) A complete description of all underlying assets of the investment pool, including, without limitation, amount, interest rate, maturity date, if any, and other appropriate designations; and

             (3) Other records which, on a daily basis, allow third parties to verify each participant’s investment in the investment pool; and

      (d) Maintain the assets of the investment pool in one or more accounts, in the name of or on behalf of the investment pool, in accordance with a custody agreement with a qualified bank. The custody agreement must:

             (1) State and recognize the claims and rights of each participant;

             (2) Acknowledge that the underlying assets of the investment pool are held solely for the benefit of each participant in proportion to the aggregate amount of its investments in the investment pool; and

             (3) Contain an agreement that the underlying assets of the investment pool must not be commingled with the general assets of the custodian qualified bank or any other person.

 


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ê2015 Statutes of Nevada, Page 3454 (Chapter 522, SB 67)ê

 

      5.  The pooling agreement for each investment pool must be in writing and must provide that:

      (a) An insurer and its affiliated insurers or, in the case of an investment pool investing solely in investments allowed in accordance with paragraph (a) of subsection 1, the insurer and its subsidiaries, affiliates or any pension or profit-sharing plan of the insurer, its subsidiaries and affiliates or, in the case of a United States branch of an alien insurer, affiliates or subsidiaries of its United States manager, shall at all times hold 100 percent of the interests in the investment pool.

      (b) The underlying assets of the investment pool must not be commingled with the general assets of the pool manager or any other person.

      (c) In proportion to the aggregate amount of each pool participant’s interest in the investment pool:

             (1) Each participant owns an undivided interest in the underlying assets of the investment pool; and

             (2) The underlying assets of the investment pool are held solely for the benefit of each participant.

      (d) A participant, or in the event of the participant’s insolvency, bankruptcy or receivership, its trustee, receiver or other successor-in-interest, may withdraw all or any portion of its investment from the investment pool in accordance with the terms of the pooling agreement.

      (e) Withdrawals may be made on demand without penalty or other assessment on any business day, but settlements of funds shall occur within a reasonable and customary period thereafter not to exceed 5 business days. Distributions in accordance with this paragraph must be calculated in each case net of all applicable fees and expenses of the investment pool. The pooling agreement must provide that the pool manager shall distribute to a participant at the discretion of the pool manager:

             (1) In cash, the then fair market value of the participant’s pro rata share of each underlying asset of the investment pool;

             (2) In kind, a pro rata share of each underlying asset; or

             (3) In a combination of cash and in-kind distributions, a pro rata share in each underlying asset.

      (f) The pool manager shall make the records of the investment pool available for inspection by the Commissioner.

      Sec. 205. Subject to the limitations of sections 200, 201 and 202 of this act, an insurer may acquire equity interests in business entities organized in accordance with the laws of any domestic jurisdiction.

      Sec. 206. An insurer shall not acquire an investment in accordance with the provisions of sections 205 to 208, inclusive, of this act if, as a result of and after giving effect to the investment, the aggregate amount of investments held by the insurer in accordance with the provisions of those sections would exceed the greater of 25 percent of the insurer’s admitted assets or 100 percent of the insurer’s surplus as regards policyholders.

      Sec. 207. An insurer shall not acquire in accordance with the provisions of sections 205 to 208, inclusive, of this act any investments that the insurer may acquire in accordance with the provisions of sections 214 to 217, inclusive, of this act.

 


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ê2015 Statutes of Nevada, Page 3455 (Chapter 522, SB 67)ê

 

      Sec. 208.  An insurer shall not short sell equity investments unless the insurer covers the short sale by owning the equity investment or an unrestricted right to the equity instrument exercisable within 6 months after the short sale.

      Sec. 209. 1.  Subject to the limitations of sections 200, 201 and 202 of this act, an insurer may acquire tangible personal property or equity interests therein located or used wholly or in part within a domestic jurisdiction either directly or indirectly through limited partnership interests and general partnership interests not otherwise prohibited by paragraph (d) of subsection 1 of section 154 of this act, joint ventures, stock of an investment subsidiary or membership interests in a limited-liability company, trust certificates or other similar instruments.

      2.  Investments acquired as described in subsection 1 are eligible only if:

      (a) The property is subject to a lease or other agreement with a person whose rated credit instruments in the amount of the purchase price of the personal property the insurer could acquire in accordance with the provisions of section 203 of this act; and

      (b) The lease or other agreement provides the insurer the right to receive rental, purchase or other fixed payments for the use or purchase of the property, and the aggregate value of the payments, together with the estimated residual value of the property at the end of its useful life and the estimated tax benefits to the insurer resulting from ownership of the property, must be adequate to return the cost of the insurer’s investment in the property, plus a return deemed adequate by the insurer.

      Sec. 210. The insurer shall compute the amount of each investment entered into in accordance with the provisions of sections 209 to 213, inclusive, of this act on the basis of the out-of-pocket purchase price and applicable related expenses paid by the insurer for the investment, net of each borrowing made to finance the purchase price and expenses, to the extent the borrowing is without recourse to the insurer.

      Sec. 211. An insurer shall not acquire an investment in accordance with the provisions of sections 209 to 213, inclusive, of this act if, as a result of and after giving effect to the investment, the aggregate amount of all investments held by the insurer in accordance with the provisions of sections 209 to 213, inclusive, of this act would exceed:

      1.  Two percent of its admitted assets; or

      2.  One half of one percent of its admitted assets as to any single item of tangible personal property.

      Sec. 212. For the purposes of determining compliance with the limitations of sections 200, 201 and 202 of this act, investments acquired by an insurer in accordance with the provisions of sections 209 to 213, inclusive, of this act must be aggregated with those acquired in accordance with the provisions of section 203 of this act, and each lessee of the property in accordance with a lease referred to in sections 209 to 213, inclusive, of this act shall be deemed the issuer of an obligation in the amount of the investment of the insurer in the property determined as provided in section 210 of this act.

      Sec. 213. Nothing in sections 209 to 213, inclusive, of this act applies to tangible personal property lease arrangements between an insurer and its subsidiaries and affiliates in accordance with a cost-sharing arrangement or agreement permitted in accordance with the provisions of chapter 692C of NRS.

 


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ê2015 Statutes of Nevada, Page 3456 (Chapter 522, SB 67)ê

 

its subsidiaries and affiliates in accordance with a cost-sharing arrangement or agreement permitted in accordance with the provisions of chapter 692C of NRS.

      Sec. 214. 1.  Subject to the limitations of sections 200, 201 and 202 of this act, an insurer may acquire, either directly, or indirectly through limited partnership interests and general partnership interests not otherwise prohibited by paragraph (d) of subsection 1 of section 154 of this act, joint ventures, stock of an investment subsidiary or membership interests in a limited-liability company, trust certificates, or other similar instruments, obligations secured by mortgages on real estate situated within a domestic jurisdiction. A mortgage loan which is secured by other than a first lien must not be acquired unless the insurer is the holder of the first lien.

      2.  The obligations held by the insurer and any obligations with an equal lien priority must not, at the time of acquisition of the obligation, exceed:

      (a) Ninety percent of the fair market value of the real estate, if the mortgage loan is secured by a purchase money mortgage or like security received by the insurer upon disposition of the real estate.

      (b) Eighty percent of the fair market value of the real estate, if the mortgage loan requires immediate scheduled payment in periodic installments of principal and interest, has an amortization period of 30 years or less and periodic payments made not less frequently than annually. Each periodic payment must be sufficient to ensure that at all times the outstanding principal balance of the mortgage loan is not greater than the outstanding principal balance that would be outstanding under a mortgage loan with the same original principal balance, the same interest rate and requiring equal payments of principal and interest with the same frequency over the same amortization period. Mortgage loans allowed in accordance with this section are allowed notwithstanding the fact that they provide for a payment of the principal balance before the end of the period of amortization of the loan. For residential mortgage loans, the 80-percent limitation may be increased to 97 percent if acceptable private mortgage insurance has been obtained.

      (c) Seventy-five percent of the fair market value of the real estate for mortgage loans that do not meet the requirements of paragraph (a) or (b).

      3.  For the purposes of subsection 2, the amount of an obligation required to be included in the calculation of the loan-to-value ratio may be reduced to the extent the obligation is insured by the Federal Housing Administration or guaranteed by the Administrator of Veterans Affairs, or their successors.

      4.  A mortgage loan that is held by an insurer pursuant to section 141 of this act or acquired in accordance with the provisions of sections 214 to 217, inclusive, of this act and is restructured in a manner that meets the requirements of a restructured mortgage loan in conformance with the Accounting Practices and Procedures Manual adopted by the NAIC, will continue to qualify as a mortgage loan in accordance with the provisions of this chapter.

      5.  Subject to the limitations of sections 200, 201 and 202 of this act, credit lease transactions that do not qualify for investment pursuant to section 203 of this act are exempt from the provisions of subsections 1, 2 and 3 if they meet the following criteria:

 


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ê2015 Statutes of Nevada, Page 3457 (Chapter 522, SB 67)ê

 

      (a) The loan amortizes over the initial fixed lease term at least in an amount sufficient so that the loan balance at the end of the lease term does not exceed the original appraised value of the real estate;

      (b) The lease payments cover or exceed the total debt service over the life of the loan;

      (c) A tenant or its affiliated entity whose rated credit instruments have an SVO 1 or 2 rating or a comparable rating from a nationally recognized statistical rating organization recognized by the SVO, has a full faith and credit obligation to make the lease payments;

      (d) The insurer holds or is the beneficial holder of a first lien mortgage on the real estate;

      (e) The expenses of the real estate are passed through to the tenant excluding exterior, structural, parking and heating, ventilation and air conditioning replacement expenses, unless annual escrow contributions, from cash flows derived from the lease payments, cover the expense shortfall; and

      (f) There is a perfected assignment of the rents due pursuant to the lease to, or for the benefit of, the insurer.

      Sec. 215. 1.  An insurer may acquire, manage and dispose of real estate situated in a domestic jurisdiction either directly or indirectly through limited partnership interests and general partnership interests not otherwise prohibited by paragraph (d) of subsection 1 of section 154 of this act, joint ventures, stock of an investment subsidiary or membership interests in a limited-liability company, trust certificates or other similar interests. The real estate must be income producing or intended for improvement or development for investment purposes under an existing program, in which case the real estate shall be deemed to be income producing.

      2.  The real estate may be subject to mortgages, liens or other encumbrances, the amount of which must, to the extent that the obligations secured by the mortgages, liens or encumbrances are without recourse to the insurer, be deducted from the amount of the investment of the insurer in the real estate for purposes of determining compliance with subsections 2 and 3 of section 217 of this act.

      Sec. 216. 1.  An insurer may acquire, manage and dispose of real estate for the convenient accommodation of the insurer’s, and its affiliates, business operations, including home office, branch office and filed office operations.

      2.  Real estate acquired as described in this section may include excess space for rent to others, if the excess space, valued at its fair market value, would otherwise be an allowed investment in accordance with the provisions of section 215 of this act and is so qualified by the insurer.

      3.  The real estate acquired as described in this section may be subject to one or more mortgages, liens or other encumbrances, the amount of which must, to the extent that the obligations secured by the mortgages, liens or encumbrances are without recourse to the insurer, be deducted from the amount of the investment of the insurer in the real estate for purposes of determining compliance with subsection 4 of section 217 of this act.

      4.  For purposes of this section, business operations must not include that portion of real estate used for the direct provision of health care services by an insurer whose insurance premiums and required statutory reserves for accident and health insurance constitute at least 95 percent of total premium considerations or total statutory required reserves, respectively.

 


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ê2015 Statutes of Nevada, Page 3458 (Chapter 522, SB 67)ê

 

reserves for accident and health insurance constitute at least 95 percent of total premium considerations or total statutory required reserves, respectively. An insurer may acquire real estate used for these purposes under section 215 of this act.

      Sec. 217. 1.  An insurer shall not acquire an investment in accordance with the provisions of section 214 of this act if, as a result of and after giving effect to the investment, the aggregate amount of all investments held by the insurer pursuant to that section would exceed:

      (a) One percent of its admitted assets in mortgage loans covering any one secured location;

      (b) One-quarter of one percent of its admitted assets in construction loans covering any one secured location; or

      (c) One percent of its admitted assets in construction loans in the aggregate.

      2.  An insurer shall not acquire an investment under section 215 of this act if, as a result of and after giving effect to the investment and any outstanding guarantees made by the insurer in connection with the investment, the aggregate amount of investments held by the insurer under section 215 of this act plus the guarantees outstanding would exceed:

      (a) One percent of its admitted assets in any one parcel or group of contiguous parcels of real estate, except that this limitation does not apply to that portion of real estate used for the direct provision of health care services by an insurer whose insurance premiums and required statutory reserves for accident and health insurance constitute at least 95 percent of total premium considerations or total statutory required reserves, respectively, including, without limitation, hospitals, medical clinics, medical professional buildings or other health facilities used for the purpose of providing health services; or

      (b) The lesser of 10 percent of its admitted assets or 40 percent of its surplus as regards policyholders in the aggregate, except for an insurer whose insurance premiums and required statutory reserves for accident and health insurance constitute at least 95 percent of total premium considerations or total statutory required reserves, respectively, this limitation must be increased to 15 percent of its admitted assets in the aggregate.

      3.  An insurer shall not acquire an investment pursuant to sections 214 and 215 of this act if, as a result of and after giving effect to the investment and any guarantees it has made in connection with the investment, the aggregate amount of all investments held by the insurer in accordance with the provisions of those sections plus the guarantees outstanding would exceed 25 percent of the insurer’s admitted assets.

      4.  The limitations of sections 200, 201 and 202 of this act do not apply to an insurer’s acquisition of real estate under section 216 of this act. An insurer shall not acquire real estate under section 216 of this act if, as a result of and after giving effect to the acquisition, the aggregate amount of real estate held by the insurer in accordance with that section would exceed 10 percent of its admitted assets. With the permission of the Commissioner, additional amounts of real estate may be acquired under section 216 of this act.

      Sec. 218. An insurer may enter into securities lending, repurchase, reverse repurchase and dollar roll transactions with business entities, subject to the following requirements:

 


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ê2015 Statutes of Nevada, Page 3459 (Chapter 522, SB 67)ê

 

      1.  The insurer’s board of directors shall adopt a written plan that is consistent with the requirements of the written plan in section 148 of this act which specifies the guidelines and objectives to be followed, including, without limitation:

      (a) A description of how cash received will be invested or used for general corporate purposes of the insurer;

      (b) Operational procedures to manage interest rate risk, counterparty default risk, the conditions under which proceeds from reverse repurchase transactions may be used in the ordinary course of business and the use of acceptable collateral in a manner that reflects the liquidity needs of the transaction; and

      (c) The extent to which the insurer may engage in these transactions.

      2.  The insurer shall enter into a written agreement for all transactions authorized in this section other than dollar roll transactions. The written agreement must require that each transaction terminate not more than 1 year after its inception or upon the earlier demand of the insurer. The agreement must be with the business entity counterparty, but for securities lending transactions, the agreement may be with an agent acting on behalf of the insurer, if the agent is a qualified business entity and if the agreement:

      (a) Requires the agent to enter into separate agreements with each counterparty that are consistent with the requirements of this section; and

      (b) Prohibits securities lending transactions under the agreement with the agent or its affiliates.

      3.  Cash received in a transaction entered into as described in this section must be invested in accordance with the provisions of this chapter and in a manner that recognizes the liquidity needs of the transaction or used by the insurer for its general corporate purposes. For so long as the transaction remains outstanding, the insurer, its agent or custodian shall maintain, as to acceptable collateral received in a transaction entered into in accordance with this section, either physically or through the book entry systems of the Federal Reserve, the Depository Trust Company, the Participants Trust Company or any other securities depositories approved by the Commissioner:

      (a) Possession of the acceptable collateral;

      (b) A perfected security interest in the acceptable collateral; or

      (c) In the case of a jurisdiction outside of the United States, title to, or rights of a secured creditor to, the acceptable collateral.

      4.  The limitations of sections 200, 201, 202 and 219 to 223, inclusive, of this act do not apply to the business entity counterparty exposure created by transactions entered into under this section. For purposes of calculations made to determine compliance with this subsection, no effect will be given to the insurer’s future obligation to resell securities, in the case of a repurchase transaction, or to repurchase securities, in the case of a reverse repurchase transaction. An insurer shall not enter into a transaction under this section if, as a result of and after giving effect to the transaction:

      (a) The aggregate amount of securities loaned, sold to or purchased from any one business entity counterparty under this section would exceed 5 percent of its admitted assets. In calculating the amount sold to or purchased from a business entity counterparty under repurchase or reverse repurchase transactions, effect may be given to netting provisions contained within a master written agreement.

 


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repurchase transactions, effect may be given to netting provisions contained within a master written agreement.

      (b) The aggregate amount of all securities loaned, sold to or purchased from all business entities under this section would exceed 40 percent of its admitted assets.

Ê The limitation in this subsection does not apply to reverse repurchase transactions for so long as the borrowing is used to meet operational liquidity requirements resulting from an officially declared catastrophe and subject to a plan approved by the Commissioner.

      5.  In a securities lending transaction, the insurer shall receive acceptable collateral having a market value on the transaction date, equal to 102 percent or more of the market value of the securities loaned by the insurer in the transaction on that date. If at any time the market value of the acceptable collateral is less than the market value of the loaned securities, the business entity counterparty is obligated to deliver additional acceptable collateral, the market value of which, together with the market value of all acceptable collateral held in connection with the transaction, equals 102 percent or more of the market value of the loaned securities.

      6.  In a reverse repurchase transaction, other than a dollar roll transaction, the insurer shall receive acceptable collateral having a market value on the transaction date equal to 95 percent or more of the market value of the securities transferred by the insurer in the transaction on that date. If at any time the market value of the acceptable collateral is less than 95 percent of the market value of the securities so transferred, the business entity counterparty is obligated to deliver additional acceptable collateral, the market value of which, together with the market value of all acceptable collateral held in connection with the transaction, equals 95 percent or more of the market value of the transferred securities.

      7.  In a dollar roll transaction, the insurer shall receive cash in an amount equal to at least the market value of the securities transferred by the insurer in the transaction on the transaction date.

      8.  In a repurchase transaction, the insurer shall receive as acceptable collateral transferred securities having a market value equal to 102 percent or more of the purchase price paid by the insurer for the securities. If at any time the market value of the acceptable collateral is less than 100 percent of the purchase price paid by the insurer, the business entity counterparty is obligated to provide additional acceptable collateral, the market value of which, together with the market value of all acceptable collateral held in connection with the transaction, equals 102 percent or more of the purchase price. Securities acquired by an insurer in a repurchase transaction must not be sold in a reverse repurchase transaction, loaned in a securities lending transaction or otherwise pledged.

      9.  To constitute acceptable collateral for the purposes of this section, a letter of credit must have an expiration date beyond the term of the subject transaction.

      Sec. 219. Subject to the limitations of sections 200, 201 and 202 of this act, an insurer may acquire foreign investments, or engage in investment practices with persons of, or in, foreign jurisdictions, of substantially the same types as those that an insurer is allowed to acquire pursuant to this chapter, other than of the type allowed under section 204 of this act if, as a result of and after giving effect to the investment:

 


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      1.  The aggregate amount of foreign investments held by the insurer in accordance with this section does not exceed 20 percent of its admitted assets; and

      2.  The aggregate amount of foreign investments held by the insurer in accordance with this section in a single foreign jurisdiction does not exceed 10 percent of its admitted assets as to a foreign jurisdiction that has a sovereign debt rating of SVO 1 or 5 percent of its admitted assets as to any other foreign jurisdiction.

      Sec. 220. 1.  Subject to the limitations of sections 200, 201 and 202 of this act, an insurer may acquire investments, or engage in investment practices denominated in foreign currencies, whether or not they are foreign investments acquired as described in section 219 of this act, or additional foreign currency exposure as a result of the termination or expiration of a hedging transaction with respect to investments denominated in a foreign currency if:

      (a) The aggregate amount of investments held by the insurer in accordance with this section denominated in foreign currencies does not exceed 15 percent of its admitted assets; and

      (b) The aggregate amount of investments held by the insurer in accordance with this section denominated in the foreign currency of a single foreign jurisdiction does not exceed 10 percent of its admitted assets as to a foreign jurisdiction that has a sovereign debt rating of SVO 1 or 5 percent of its admitted assets as to any other foreign jurisdiction.

      2.  An investment must not be considered denominated in a foreign currency if the acquiring insurer enters into one or more contracts in transactions allowed under sections 224 to 228, inclusive, of this act and the business entity counterparty agrees, in accordance with the contract or contracts, to exchange all payments made on the foreign currency denominated investment for United States currency at a rate which effectively insulates the investment cash flows against future changes in currency exchange rates during the period the contract or contracts are in effect.

      Sec. 221. In addition to investments allowed under sections 219 and 220 of this act, an insurer that is authorized to do business in a foreign jurisdiction, and that has outstanding insurance, annuity or reinsurance contracts on lives or risks resident or located in that foreign jurisdiction and denominated in foreign currency of that jurisdiction, may acquire foreign investments respecting that foreign jurisdiction, and may acquire investments denominated in the currency of that jurisdiction, subject to the limitations of sections 200, 201 and 202 of this act. Investments made in accordance with this section in obligations of foreign governments, their political subdivisions and government-sponsored enterprises are not subject to the limitations of sections 200, 201 and 202 of this act if those investments carry an SVO rating of 1 or 2. The aggregate amount of investments acquired by the insurer in accordance with this section must not exceed the greater of:

      1.  The amount the insurer is required by law to invest in the foreign jurisdiction; or

      2.  One hundred twenty-five percent of the amount if the insurer’s reserves, net of reinsurance and other obligations under the contracts.

      Sec. 222. In addition to investments allowed under sections 219 and 220 of this act, an insurer that is not authorized to do business in a foreign jurisdiction but which has outstanding insurance, annuity or reinsurance contracts on lives or risks resident or located in a foreign jurisdiction and denominated in foreign currency of that jurisdiction, may acquire foreign investments respecting that foreign jurisdiction, and may acquire investments denominated in the currency of that jurisdiction subject to the limitations set forth in sections 200, 201 and 202 of this act.

 


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jurisdiction but which has outstanding insurance, annuity or reinsurance contracts on lives or risks resident or located in a foreign jurisdiction and denominated in foreign currency of that jurisdiction, may acquire foreign investments respecting that foreign jurisdiction, and may acquire investments denominated in the currency of that jurisdiction subject to the limitations set forth in sections 200, 201 and 202 of this act. Investments made in accordance with this section in obligations of foreign governments, their political subdivisions and government-sponsored enterprises are not subject to the limitations of sections 200, 201 and 202 of this act if those investments carry an SVO rating of 1 or 2. The aggregate amount of investments acquired by the insurer in accordance with this section must not exceed 105 percent of the amount of the insurer’s reserves, net of reinsurance, and other obligations under the contracts on risks resident or located in the foreign jurisdiction.

      Sec. 223. Investments acquired in conformance with sections 219 to 223, inclusive, of this act must be aggregated with investments of the same types made under this chapter, and in a similar manner, for purposes of determining compliance with the limitations, if any, contained in this chapter. Investments in obligations of foreign governments, their political subdivisions and government-sponsored enterprises of these persons, except for those exempted in accordance with the provisions of sections 221 and 222 of this act, are subject to the limitations of sections 200, 201 and 202 of this act.

      Sec. 224. An insurer may, directly or indirectly through an investment subsidiary, engage in derivative transactions as described in sections 224 to 228, inclusive, of this act pursuant to the following conditions:

      1.  An insurer may use derivative instruments under sections 224 to 228, inclusive, of this act to engage in hedging transactions and certain income generation transactions, as these terms may be further defined in regulations adopted by the Commissioner pursuant to section 158 of this act; and

      2.  An insurer must be able to demonstrate to the Commissioner the intended hedging characteristics and the ongoing effectiveness of the derivative transaction or combination of transactions through cash flow testing or other appropriate analyses.

      Sec. 225. An insurer may enter into hedging transactions under sections 224 to 228, inclusive, of this act if, as a result of and after giving effect to the transaction:

      1.  The aggregate statement value of options, caps, floors and warrants not attached to another financial instrument purchased and used in hedging transactions does not exceed 7.5 percent of its admitted assets;

      2.  The aggregate statement value of options, caps and floors written in hedging transactions does not exceed 3 percent of its admitted assets; and

      3.  The aggregate potential exposure of collars, swaps, forwards and futures used in hedging transactions does not exceed 6.5 percent of its admitted assets.

      Sec. 226. An insurer may only enter into the following types of income generation transactions if, as a result of and after giving effect to the transactions, the aggregate statement value of the fixed income assets that are subject to call plus the face value of fixed income securities underlying a derivative instrument subject to call, plus the amount of the purchase obligations under the puts, does not exceed 10 percent of its admitted assets:

 


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underlying a derivative instrument subject to call, plus the amount of the purchase obligations under the puts, does not exceed 10 percent of its admitted assets:

      1.  Sales of covered call options on noncallable fixed income securities, callable fixed income securities if the option expires by its terms before the end of the noncallable period or derivative instruments based on fixed income securities;

      2.  Sales of covered call options on equity securities, if the insurer holds in its portfolio, or can immediately acquire through the exercise of options, warrants or conversion rights already owned, the equity securities subject to call during the complete term of the call option sold; or

      3.  Sales of covered puts on investments that the insurer is allowed to acquire pursuant to this chapter if the insurer has escrowed, or entered into a custodian agreement segregating, cash or cash equivalents with a market value equal to the amount of its purchase obligations under the put during the complete term of the put option sold.

      Sec. 227. An insurer shall include all counterparty exposure amounts in determining compliance with the limitations of sections 200, 201 and 202 of this act.

      Sec. 228. In accordance with the regulations adopted pursuant to section 158 of this act, the Commissioner may approve additional transactions involving the use of derivative instruments in excess of the limits of section 225 of this act or for other risk-management purposes, but replication transactions must not be allowed for other than risk-management purposes.

      Sec. 229. An insurer may acquire investments, or engage in investment practices, in accordance with the provisions of this section and section 230 of this act, of any kind that are not specifically prohibited by this chapter, or engage in investment practices, without regard to any limitation in sections 200 to 223, inclusive, of this act, but an insurer shall not acquire an investment or engage in an investment practice in accordance with the provisions of this section and section 230 of this act if, as a result of and after giving effect to the transaction, the aggregate amount of the investments held by the insurer in accordance with the provisions of this section and section 230 of this act would exceed the greater of:

      1.  Its unrestricted surplus; or

      2.  The lesser of:

      (a) Ten percent of its admitted assets; or

      (b) Fifty percent of its surplus as regards policy holders.

      Sec. 230.  An insurer shall not acquire any investment or engage in any investment practice in accordance with subsection 2 of section 229 of this act if, as a result of and after giving effect to the transaction, the aggregate amount of all investments in any one person held by the insurer in accordance with subsection 1 of section 229 would exceed 5 percent of its admitted assets.

      Sec. 231. NRS 682A.020 is hereby amended to read as follows:

      682A.020  [1.]  Insurers may acquire, hold or invest in [or lend their funds on the security of, and may hold as invested assets, only eligible investments as prescribed in this chapter.

 


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      2.  Any particular investment held by an insurer on January 1, 1972, which was a legal investment at the time it was made, and which the insurer was legally entitled to possess immediately before January 1, 1972, shall be deemed to be an eligible investment.

      3.  Any particular investment held by a successor organization to the State Industrial Insurance System that was established by section 79 of chapter 642, Statutes of Nevada 1981, at page 1449, which was a legal investment of the System made before January 1, 2000, and which the successor organization is legally entitled to possess on or after January 1, 2000, shall be deemed to be an eligible investment of the successor organization.

      4.  Eligibility of an investment must be determined as of the date of its making or acquisition, except as stated in subsections 2 and 3.

      5.  Any investment limitation based upon the amount of the insurer’s assets or particular funds must relate to such assets or funds as shown by the insurer’s annual statement as of December 31 next preceding the date of acquisition of the investment by the insurer, or as shown by a current financial statement resulting from merger of another insurer, bulk reinsurance or change in capitalization.

      6.  No insurer may pay any commission or brokerage for the purchase or sale of property in excess of that usual and customary at the time and in the locality where such purchases or sales are made, and complete information regarding all payments of commission and brokerage must be reported in the next annual statement.] investments or engage in investment practices as set forth in this chapter. Investments not conforming to the provisions of this chapter are not admitted assets.

      Sec. 232. NRS 682B.130 is hereby amended to read as follows:

      682B.130  1.  An alien insurer may use Nevada as a state of entry to transact insurance in the United States of America by making and maintaining in this state a deposit of assets in trust with a bank, credit union or trust company approved by the Commissioner.

      2.  The deposit, together with other trust deposits of the insurer held in the United States of America for the same purpose, must be in an amount not less than as required of an alien insurer under NRS 680A.140, deposit requirement in general, and must consist of United States money, public obligations of the government or states or political subdivisions of the United States of America, and obligations of corporations and institutions in the United States of America, all as eligible for the investment of money of domestic insurers under [NRS 682A.060, 682A.070 and 682A.080.] sections 159 to 193, inclusive, of this act.

      3.  Such a deposit may be referred to as “trusteed assets.”

      Sec. 233. NRS 683A.08528 is hereby amended to read as follows:

      683A.08528  1.  Not later than [July 1 of each year,] 90 days after the expiration of the fiscal year of the administrator, or within such other period as the Commissioner may allow, each holder of a certificate of registration as an administrator shall file with the Commissioner an annual report for [the most recently completed] that fiscal year . [of the administrator.] Each annual report must be verified by at least two officers of the administrator.

      2.  Each annual report filed pursuant to this section must include all the following:

 


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      (a) A financial statement of the administrator that has been reviewed by an independent certified public accountant.

      (b) The complete name and address of each person, if any, for whom the administrator agreed to act as an administrator during the [most recently completed] fiscal year . [of the administrator.]

      (c) A statement regarding the total money handled by the administrator on behalf of contracted entities in connection with his or her activities as an administrator. The statement must be on a form prescribed or approved by the Commissioner for the purpose of calculating the amount of the bond required by NRS 683A.0857.

      (d) Any other information required by the Commissioner.

      3.  [In] Except as otherwise provided in subsection 4, in addition to the information required pursuant to subsection 2, if an annual report is prepared on a consolidated basis, the annual report must include [a columnar or combining worksheet] supplemental exhibits that:

      (a) [Includes the amounts shown on the consolidated financial statement accompanying the annual report;] Have been reviewed by an independent certified public accountant; and

      (b) [Separately sets forth the amounts for each entity included in the worksheet; and

      (c) Includes an explanation of each consolidating and eliminating entry included in the worksheet.] Include a balance sheet and income statement for each holder of a certificate of registration as an administrator in this State.

      4.  In lieu of complying with the requirements set forth in paragraphs (a) and (b) of subsection 3, an administrator who is a wholly owned subsidiary of a parent company may submit to the Commissioner:

      (a) The financial statement of the parent company that has been audited by an independent certified public accountant; and

      (b) A parental guaranty that is signed by an officer of the parent company and which guarantees the financial solvency of the administrator.

      5.  Each administrator who files an annual report pursuant to this section shall, at the time of filing the annual report, pay a filing fee in an amount determined by the Commissioner.

      [5.] 6.  The Commissioner shall, for each administrator, review the annual report that is most recently filed by the administrator. As soon as practicable after reviewing the report, the Commissioner shall:

      (a) Issue a certificate to the administrator:

             (1) Indicating that, based on the annual report and accompanying financial statement, the administrator has a positive net worth and is currently licensed and in good standing in this State; or

             (2) Setting forth any deficiency found by the Commissioner in the annual report and accompanying financial statement; or

      (b) Submit a statement to any electronic database maintained by the National Association of Insurance Commissioners or any affiliate or subsidiary of the Association:

             (1) Indicating that, based on the annual report and accompanying financial statement, the administrator has a positive net worth and is in compliance with existing law; or

             (2) Setting forth any deficiency found by the Commissioner in the annual report and accompanying financial statement.

 


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      Sec. 234. NRS 683A.251 is hereby amended to read as follows:

      683A.251  1.  The Commissioner shall prescribe the form of application by a natural person for a license as a resident producer of insurance. The applicant must declare, under penalty of refusal to issue, or suspension or revocation of, the license, that the statements made in the application are true, correct and complete to the best of his or her knowledge and belief. Before approving the application, the Commissioner must find that the applicant has:

      (a) Attained the age of 18 years;

      (b) Not committed any act that is a ground for refusal to issue, or suspension or revocation of, a license;

      (c) Completed a course of study for the lines of authority for which the application is made, unless the applicant is exempt from this requirement;

      (d) Paid all applicable fees prescribed for the license and a fee established by the Commissioner of not more than $15 for deposit in the Insurance Recovery Account, neither of which may be refunded; and

      (e) Successfully passed the examinations for the lines of authority for which application is made, unless the applicant is exempt from this requirement.

      2.  A business organization must be licensed as a producer of insurance in order to act as such. Application must be made on a form prescribed by the Commissioner. Before approving the application, the Commissioner must find that the applicant has:

      (a) Paid all applicable fees prescribed for the license and a fee established by the Commissioner of not more than $15 for deposit in the Insurance Recovery Account, neither of which may be refunded;

      (b) Designated a natural person who is licensed as a producer of insurance and who is authorized to transact business on behalf of the business organization to be responsible for the organization’s compliance with the laws and regulations of this State relating to insurance; [and]

      (c) If the business organization has authorized a producer of insurance not designated pursuant to paragraph (b) to transact business on behalf of the business organization, submitted to the Commissioner on a form prescribed by the Commissioner the name of each producer of insurance authorized to transact business on behalf of the business organization [.] ; and

      (d) Established and maintains a valid electronic mail address at the applicant’s own expense.

      3.  A natural person who is a resident of this State applying for a license must, as part of his or her application and at the applicant’s own expense:

      (a) Arrange to have a complete set of his or her fingerprints taken by a law enforcement agency or other authorized entity acceptable to the Commissioner; [and]

      (b) Submit to the Commissioner:

             (1) A completed fingerprint card and written permission authorizing the Commissioner to submit the applicant’s fingerprints to the Central Repository for Nevada Records of Criminal History for submission to the Federal Bureau of Investigation for a report on the applicant’s background and to such other law enforcement agencies as the Commissioner deems necessary; or

             (2) Written verification, on a form prescribed by the Commissioner, stating that the fingerprints of the applicant were taken and directly forwarded electronically or by another means to the Central Repository and that the applicant has given written permission to the law enforcement agency or other authorized entity taking the fingerprints to submit the fingerprints to the Central Repository for submission to the Federal Bureau of Investigation for a report on the applicant’s background and to such other law enforcement agencies as the Commissioner deems necessary [.]

 


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that the applicant has given written permission to the law enforcement agency or other authorized entity taking the fingerprints to submit the fingerprints to the Central Repository for submission to the Federal Bureau of Investigation for a report on the applicant’s background and to such other law enforcement agencies as the Commissioner deems necessary [.] ; and

      (c) Establish and maintain a valid electronic mail address.

      4.  The Commissioner may:

      (a) Unless the applicant’s fingerprints are directly forwarded pursuant to subparagraph (2) of paragraph (b) of subsection 3, submit those fingerprints to the Central Repository for submission to the Federal Bureau of Investigation and to such other law enforcement agencies as the Commissioner deems necessary;

      (b) Request from each such agency any information regarding the applicant’s background as the Commissioner deems necessary; and

      (c) Adopt regulations concerning the procedures for obtaining this information.

      5.  The Commissioner may require any document reasonably necessary to verify information contained in an application.

      Sec. 235. NRS 683A.261 is hereby amended to read as follows:

      683A.261  1.  Unless the Commissioner refuses to issue the license under NRS 683A.451, the Commissioner shall issue a license as a producer of insurance to a person who has satisfied the requirements of NRS 683A.241 and 683A.251. A producer of insurance may qualify for a license in one or more of the lines of authority permitted by statute or regulation, including:

      (a) Life insurance on human lives, which includes benefits from endowments and annuities and may include additional benefits from death by accident and benefits for dismemberment by accident and for disability income.

      (b) Accident and health insurance for sickness, bodily injury or accidental death, which may include benefits for disability income.

      (c) Property insurance for direct or consequential loss or damage to property of every kind.

      (d) Casualty insurance against legal liability, including liability for death, injury or disability and damage to real or personal property. For the purposes of a producer of insurance, this line of insurance includes surety indemnifying financial institutions or providing bonds for fidelity, performance of contracts or financial guaranty.

      (e) Variable annuities and variable life insurance, including coverage reflecting the results of a separate investment account.

      (f) Credit insurance, including credit life, credit accident and health, credit property, credit involuntary unemployment, guaranteed asset protection, and any other form of insurance offered in connection with an extension of credit that is limited to wholly or partially extinguishing the obligation which the Commissioner determines should be considered as limited-line credit insurance.

      (g) Personal lines, consisting of automobile and motorcycle insurance and residential property insurance, including coverage for flood, of personal watercraft and of excess liability, written over one or more underlying policies of automobile or residential property insurance.

      (h) Fixed annuities, including, without limitation, indexed annuities, as a limited line.

 


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      (i) Travel and baggage as a limited line.

      (j) Rental car agency as a limited line.

      (k) Portable electronics as a limited line.

      (l) Crop as a limited line.

      2.  A license as a producer of insurance remains in effect unless revoked, suspended or otherwise terminated if a request for a renewal is submitted on or before the date for the renewal specified on the license, all applicable fees for renewal and a fee established by the Commissioner of not more than $15 for deposit in the Insurance Recovery Account are paid for each license and each authorization to transact business on behalf of a business organization licensed pursuant to subsection 2 of NRS 683A.251, and any requirement for education or any other requirement to renew the license is satisfied by the date specified on the license for the renewal. A producer of insurance may submit a request for a renewal of his or her license within 30 days after the date specified on the license for the renewal if the producer of insurance otherwise complies with the provisions of this subsection and pays, in addition to any fee paid pursuant to this subsection, a penalty of 50 percent of all applicable renewal fees, except for any fee required pursuant to NRS 680C.110. A license as a producer of insurance expires if the Commissioner receives a request for a renewal of the license more than 30 days after the date specified on the license for the renewal. A fee paid pursuant to this subsection is nonrefundable.

      3.  A natural person who allows his or her license as a producer of insurance to expire may reapply for the same license within 12 months after the date specified on the license for a renewal without passing a written examination or completing a course of study required by paragraph (c) of subsection 1 of NRS 683A.251, but a penalty of twice all applicable renewal fees, except for any fee required pursuant to NRS 680C.110, is required for any request for a renewal of the license that is received after the date specified on the license for the renewal.

      4.  A licensed producer of insurance who is unable to renew his or her license because of military service, extended medical disability or other extenuating circumstance may request a waiver of the time limit and of any fine or sanction otherwise required or imposed because of the failure to renew.

      5.  A license must state the licensee’s name, address, personal identification number, the date of issuance, the lines of authority and the date of expiration and must contain any other information the Commissioner considers necessary. The license must be made available for public inspection upon request.

      6.  A licensee shall inform the Commissioner of each change of business , [or] residence or electronic mail address, in writing or by other means acceptable to the Commissioner, within 30 days after the change. If a licensee changes his or her business , [or] residence or electronic mail address without giving written notice and the Commissioner is unable to locate the licensee after diligent effort, the Commissioner may revoke the license without a hearing. The mailing of a letter by certified mail, return receipt requested, addressed to the licensee at his or her last mailing address appearing on the records of the Division, and the return of the letter undelivered, constitutes a diligent effort by the Commissioner.

 


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      Sec. 236. NRS 683A.271 is hereby amended to read as follows:

      683A.271  1.  Unless the Commissioner refuses to issue the license under NRS 683A.451, the Commissioner shall issue a license as a producer of insurance to a nonresident person if the nonresident person:

      (a) Is currently licensed as a resident and in good standing in his or her home state;

      (b) Has made the proper request for licensure and paid all applicable fees prescribed for the license and a fee established by the Commissioner of not more than $15 for deposit in the Insurance Recovery Account;

      (c) Has sent to the Commissioner the application for licensure that the nonresident person made in his or her home state, or a completed uniform application; [and]

      (d) Has a home state which issues nonresident licenses as producers of insurance to residents of this State pursuant to substantially the same procedure [.] ; and

      (e) Establishes and maintains a valid electronic mail address at the applicant’s own expense.

      2.  The Commissioner may participate with the National Association of Insurance Commissioners or a subsidiary in a centralized registry in which licensing and appointment of producers of insurance may be effected for all states that require licensing and participate in the registry. If the Commissioner finds that participation is in the public interest, the Commissioner may adopt by regulation any uniform standards and procedures necessary for participation, including central collection of fees for licensing and appointment that are handled through the registry.

      3.  A nonresident producer who moves from one state to another state shall file a change of address and certification from the new state of residence within 30 days after the change of legal residence. No fee or application for license is required.

      4.  A nonresident licensed as a producer for surplus lines in his or her home state must be issued a nonresident license of that kind in this State pursuant to subsection 1, subject in all other respects to chapter 685A of NRS. A nonresident licensed as a producer for limited lines in his or her home state is entitled to a nonresident license of that kind in this State pursuant to subsection 1, granting the same scope of authority as the license issued in the home state. As used in this subsection, insurance for limited lines is authority granted by the home state which is restricted to less than the total authority prescribed for the associated major lines pursuant to NRS 683A.261.

      5.  A nonresident firm or corporation maintaining a physical business location in this State shall notify the Commissioner of each physical location in this State from which it transacts business. A nonresident firm or corporation shall maintain a list identifying the locations outside this State from which it transacts business and provide the list to the Commissioner upon request.

      Sec. 237. NRS 683A.378 is hereby amended to read as follows:

      683A.378  1.  A person shall not conduct utilization review unless the person is:

      (a) Registered with the Commissioner as an agent who performs utilization review and has a medical director who is a physician or, in the case of an agent who reviews dental services, a dentist, licensed in any state; or

 


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      (b) Employed by a registered agent who performs utilization review.

      2.  A person may apply for registration by filing with the Commissioner a $250 fee and, in addition to any other fee or charge, all applicable fees required pursuant to NRS 680C.110 and the following information on a form provided by the Commissioner:

      (a) The applicant’s name, address, telephone number , valid electronic mail address and normal business hours;

      (b) The name and telephone number of a person the Commissioner may contact for information concerning the applicant;

      (c) The name of the medical director of the applicant and the state in which he or she is licensed to practice medicine or dentistry; and

      (d) A summary of the plan for utilization review, including procedures for appealing determinations made through utilization review.

      3.  An agent who performs utilization review shall file with the Commissioner any material changes in the information provided pursuant to subsection 1 within 30 days after the change occurs.

      4.  The Commissioner shall not evaluate the plan submitted pursuant to paragraph (d) of subsection 2. The Commissioner shall make the plan available upon request and shall charge a reasonable fee for providing a copy of the plan.

      5.  Registration pursuant to this section must be renewed on or before March 1 of each year by providing the information specified in subsection 2 and paying a renewal fee of $250 and, in addition to any other fee or charge, all applicable fees required pursuant to NRS 680C.110.

      Sec. 238.  NRS 683A.451 is hereby amended to read as follows:

      683A.451  The Commissioner may refuse to issue a license or certificate pursuant to this chapter or may place any person to whom a license or certificate is issued pursuant to this chapter on probation, suspend the person for not more than 12 months, or revoke or refuse to renew his or her license or certificate, or may impose an administrative fine or take any combination of the foregoing actions, for one or more of the following causes:

      1.  Providing incorrect, misleading, incomplete or partially untrue information in his or her application for a license.

      2.  Violating a law regulating insurance, or violating a regulation, order or subpoena of the Commissioner or an equivalent officer of another state.

      3.  Obtaining or attempting to obtain a license through misrepresentation or fraud.

      4.  Misappropriating, converting or improperly withholding money or property received in the course of the business of insurance.

      5.  Intentionally misrepresenting the terms of an actual or proposed contract of or application for insurance.

      6.  Conviction of a felony [.] or a crime which involves theft, fraud, dishonesty or moral turpitude.

      7.  Admitting or being found to have committed an unfair trade practice or fraud.

      8.  Using fraudulent, coercive or dishonest practices, or demonstrated incompetence, untrustworthiness or financial irresponsibility in the conduct of business , or otherwise, in this State or elsewhere.

      9.  Denial, suspension or revocation of a license as a producer of insurance, or its equivalent, in any other state, territory or province.

 


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      10.  Forging another’s name to an application for insurance or any other document relating to the transaction of insurance.

      11.  Improperly using notes or other reference material to complete an examination for a license related to insurance.

      12.  Knowingly accepting business related to insurance from an unlicensed person.

      13.  Failing to comply with an administrative or judicial order imposing an obligation of child support.

      14.  Failing to pay a tax as required [pursuant to the provisions of chapter 363A of NRS.] by law.

      Sec. 239. NRS 686B.080 is hereby amended to read as follows:

      686B.080  1.  Except as otherwise provided in subsections 2 [and 3,] to 5, inclusive, each filing and any supporting information filed under NRS 686B.010 to 686B.1799, inclusive, must, as soon as filed, be open to public inspection at any reasonable time. Copies may be obtained by any person on request and upon payment of a reasonable charge therefor.

      2.  All [approved] rates for health benefit plans available for purchase by individuals and small employers are considered proprietary and [to] constitute trade secrets, and are not subject to disclosure by the Commissioner to persons outside the Division except as agreed to by the carrier or as ordered by a court of competent jurisdiction.

      3.  The provisions of subsection 2 expire annually on the date 30 days before open enrollment.

      4.  Except in cases of violations of NRS 689A.010 to 689A.740, inclusive, or 689C.015 to 689C.355, inclusive, the unified rate review template and rate filing documentation used by carriers servicing the individual and small employer markets are considered proprietary and constitute a trade secret, and are not subject to disclosure by the Commissioner to persons outside the Division except as agreed to by the carrier or as ordered by a court of competent jurisdiction.

      5.  An insurer providing blanket health insurance in accordance with the provisions of chapter 689B of NRS shall make all information concerning rates available to the Commissioner upon request. Such information is considered proprietary and constitutes a trade secret and is not subject to disclosure by the Commissioner to persons outside the Division except as agreed by the insurer or as ordered by a court of competent jurisdiction.

      6.  For the purposes of this section [, “open] :

      (a) “Open enrollment” has the meaning ascribed to it in 45 C.F.R. § 147.104(b)(1)(ii).

      (b) “Rate filing documentation” and “unified rate review template” have the meanings ascribed to them in 45 C.F.R. § 154.215.

      Sec. 240. Chapter 686C of NRS is hereby amended by adding thereto the provisions set forth as sections 241 to 246, inclusive, of this act.

      Sec. 241. 1.  At any time within 180 days after the date of an order of liquidation, the Association may elect to succeed to the rights and obligations of the ceding member insurer that relate to policies or annuities covered, in whole or in part, by the Association, in each case under any one or more reinsurance contracts entered into by the insolvent insurer and its reinsurers and selected by the Association. Any such assumption must be effective on the date of the order of liquidation. The election must be carried out by the Association sending written notice, return receipt requested, to the affected reinsurers.

 


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election must be carried out by the Association sending written notice, return receipt requested, to the affected reinsurers.

      2.  To facilitate the earliest practicable decision about whether to assume any of the contracts of reinsurance, and to protect the financial position of the estate, the receiver and each reinsurer of the ceding insurer shall make available upon request to the Association as soon as possible after commencement of formal delinquency proceedings:

      (a) Copies of in-force contracts of reinsurance and all related files and records relevant to the determination of whether such contracts should be assumed; and

      (b) Notices of any defaults under the reinsurance contracts or any known event or condition which with the passage of time could become a default under the reinsurance contracts.

      3.  The following apply to reinsurance contracts assumed by the Association:

      (a) The Association is responsible for all unpaid premiums due pursuant to the reinsurance contracts for periods both before and after the date of the order of liquidation, and is responsible for the performance of all other obligations to be performed after the date of the order of liquidation, in each case which relates to policies or annuities covered, in whole or in part, by the Association. The Association may charge policies or annuities covered in part by the Association, through reasonable allocation methods, the costs for reinsurance in excess of the obligations of the Association and shall provide notice and an accounting of these changes to the liquidator.

      (b) The Association may be entitled to any amounts payable by the reinsurer pursuant to the reinsurance contracts with respect to losses or events that occur in periods after the date of the order of liquidation and which relate to policies or annuities covered, in whole or in part, by the Association, provided that, upon receipt of any such amounts, the Association is obligated to pay to the beneficiary, under the policy or annuity on account of which the amounts were paid, a portion of the amount equal to the lesser of:

             (1) The amount received by the Association; or

             (2) The excess of the amount received by the Association over the amount equal to the benefits paid by the Association on account of the policy or annuity, less the retention of the insurer applicable to the loss or event.

      (c) Within 30 days after the Association’s election, the Association and each reinsurer under the contracts assumed by the Association shall calculate the net balance due to or from the Association pursuant to each reinsurance contract on the election date with respect to policies or annuities covered, in whole or in part, by the Association, which calculation must give full credit to all items paid by either the insurer or its receiver or the reinsurer before the election date. The reinsurer shall pay the receiver any amounts due for losses or events before the date of the order of liquidation, subject to any set-off for premiums unpaid for periods before the date, and the Association or reinsurer shall pay any remaining balance due to the other, in each case within 5 days after the completion of the aforementioned calculation. Any disputes over the amounts due to either the Association or the reinsurer must be resolved by arbitration pursuant to the terms of the affected reinsurance contracts or, if the contracts contain no arbitration clause, as otherwise prescribed by law.

 


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contracts contain no arbitration clause, as otherwise prescribed by law. If the receiver has received any amounts due to the Association under paragraph (d), the receiver shall remit the same to the Association as promptly as practicable.

      (d) If the Association or receiver, on the Association’s behalf, within 60 days after the election date, pays the unpaid premiums due for periods both before and after the election date that relate to policies or annuities covered, in whole or in part, by the Association, the reinsurer is not entitled to terminate the reinsurance contracts for failure to pay premiums insofar as the reinsurance contracts relate to policies or annuities covered, in whole or in part, by the Association, and is not entitled to set off any unpaid amounts due pursuant to the other contracts, or unpaid amounts due from parties other than the Association, against amounts due to the Association.

      Sec. 242. 1.  During the period after the date of an order of liquidation until the election date, or, if the election date does not occur, until 180 days after the date of the order of liquidation:

      (a) Neither the Association nor the reinsurer shall have any rights or obligations under reinsurance contracts that the Association has the right to assume under section 241 of this act, whether for periods before or after the date of the order of liquidation.

      (b) The reinsurer, the receiver and the Association shall, to the extent practicable, provide each other data and records as reasonably requested.

      2.  Once the Association has elected to assume a reinsurance contract, the parties’ rights and obligations are governed by the provisions of section 241 of this act.

      Sec. 243. If the Association does not elect to assume a reinsurance contract by the election date under section 241 of this act, the Association has no rights or obligations, in each case for periods both before and after the date of the order of liquidation, with respect to the reinsurance contract.

      Sec. 244. When policies or annuities, or covered obligations with respect thereto, are transferred to an assuming insurer, reinsurance on the policies or annuities may also be transferred by the Association, in the case of contracts assumed under section 241 of this act, subject to the following:

      1.  Unless the reinsurer and the assuming insurer agree otherwise, the reinsurance contract transferred must not cover any new policies of insurance or annuities in addition to those transferred.

      2.  The obligations described in section 241 of this act no longer apply with respect to matters arising after the effective date of the transfer.

      3.  Notice must be given in writing, return receipt requested, by the transferring party to the affected reinsurer not less than 30 days before the effective date of the transfer.

      Sec. 245. The provisions of sections 241 to 246, inclusive, of this act supersede the provisions of any state law or of any affected reinsurance contract that provides for or requires any payment of reinsurance proceeds, on account of losses or events that occur in periods after the date of an order of liquidation, to the receiver of the insolvent insurer or any other person. The receiver shall remain entitled to any amounts payable by the reinsurer pursuant to the reinsurance contracts with respect to losses or events that occur in periods before the date of the order of liquidation, subject to applicable set-off provisions.

 


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      Sec. 246. 1.  Except as otherwise provided in NRS 686C.130 to 686C.226, inclusive, nothing in sections 241 to 246, inclusive, of this act shall alter or modify the terms and conditions of any reinsurance contract.

      2.  Nothing in this section shall:

      (a) Abrogate or limit any rights of any reinsurer to claim that it is entitled to rescind a reinsurance contract;

      (b) Give a policyholder or beneficiary an independent cause of action against a reinsurer that is not otherwise set forth in the reinsurance contract;

      (c) Limit or affect the Association’s rights as a creditor of the estate against the assets of the estate; or

      (d) Apply to reinsurance agreements covering property or casualty risks.

      Sec. 247. NRS 686C.030 is hereby amended to read as follows:

      686C.030  1.  This chapter provides coverage for the policies or contracts described in subsection 4 to persons who are:

      (a) Owners of or certificate holders under such policies or contracts, other than structured settlement annuities, and who:

             (1) Are residents of this state; or

             (2) Are not residents, but only if:

                   (I) The insurer that issued the policies or contracts is domiciled in this state;

                   (II) The states in which the persons reside have associations similar to the Association created by this chapter; and

                   (III) The persons are not eligible for coverage by an association in another state because the insurer was not authorized in the other state at the time specified in that state’s law governing guaranty associations; and

      (b) Beneficiaries, assignees or payees of the persons covered under paragraph (a), wherever they reside, except for nonresident certificate holders under group policies or contracts.

      2.  For structured settlement annuities, except as otherwise provided in subsection 3, this chapter provides coverage to a payee under the annuity, or beneficiary of a payee if the payee is deceased, if the payee or beneficiary:

      (a) Is a resident of this state, regardless of the residence of the owner of the annuity; or

      (b) Is not a resident of this state, but:

             (1) The owner of the annuity is a resident of this state, or the issuer of the annuity is domiciled in this state and the state in which the owner resides has an association similar to the Association created by this chapter; and

             (2) Neither the payee or beneficiary nor the owner of the annuity is eligible for coverage by the association of the state in which the payee, beneficiary or owner resides.

      3.  This chapter does not provide coverage for a payee or beneficiary of a structured settlement annuity if the owner of the annuity is a resident of this state and the payee or beneficiary is afforded any coverage by the association of another state. In determining the application of the provisions of this chapter to a situation where a person could be covered by the association of more than one state, this chapter must be construed in conjunction with the laws of other states to result in coverage by only one association.

      4.  This chapter provides coverage to the persons described in subsections 1 and 2 for direct, nongroup life, health and [supplemental] annuity policies or contracts, [and annuities, and] for certificates under direct group policies and contracts, and [annuities,] for supplemental contracts to any of these, in each case issued by member insurers, except as limited by this chapter.

 


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direct group policies and contracts, and [annuities,] for supplemental contracts to any of these, in each case issued by member insurers, except as limited by this chapter.

      Sec. 248. NRS 686C.090 is hereby amended to read as follows:

      686C.090  “Impaired insurer” means [an] a member insurer which is not an insolvent insurer and is placed under an order of rehabilitation or conservation by a court of competent jurisdiction.

      Sec. 249. NRS 686C.095 is hereby amended to read as follows:

      686C.095  “Insolvent insurer” means [an] a member insurer which is ordered to liquidate by a court of competent jurisdiction after a finding of insolvency.

      Sec. 250. (Deleted by amendment.)

      Sec. 251. NRS 686C.110 is hereby amended to read as follows:

      686C.110  “Premiums” means amounts received in any calendar year on covered policies or contracts less premiums, considerations and deposits returned thereon, and less dividends and credits for experience thereon. The term does not include:

      1.  Any amounts received for policies or contracts or for the portions of policies or contracts for which coverage is not provided under NRS 686C.030 except that the assessable premium is not reduced on account of paragraph (c) of subsection 1 of NRS 686C.035 relating to limitations on interest and subsection 2 or paragraph (b) of subsection 1 of NRS 686C.210 relating to limitations with respect to any one life.

      2.  Premiums for an unallocated annuity contract [.] , except those issued in accordance with the provisions of a governmental retirement plan, established under section 401, 403(b) or 457 of the Internal Revenue Code, 26 U.S.C. §§ 401, 403(b) and 457, respectively, or the trustees of such a plan.

      3.  Premiums that exceed $5,000,000 for several nongroup policies of life insurance owned by one owner, regardless of:

      (a) Whether the owner is a natural person, firm, corporation or other person;

      (b) Whether any person insured under the policies is an officer, manager, employee or other person; or

      (c) The number of policies or contracts held by the owner.

      Sec. 252. NRS 686C.120 is hereby amended to read as follows:

      686C.120  “Resident” means any person to whom a contractual obligation is owed and who resides in this state on the date of entry of a court order that determines a member insurer to be impaired or insolvent . [, whichever determination is first made.] A person may be a resident of but one state, which in the case of a person other than a natural person is its principal place of business. A citizen of the United States who is a resident of a foreign country or of a territory or insular possession subject to the jurisdiction of the United States which does not have an association similar to the Association created by this chapter shall be deemed to be a resident of the state of domicile of the insurer that issued the policy or contract.

      Sec. 253. NRS 686C.240 is hereby amended to read as follows:

      686C.240  1.  The Board of Directors of the Association shall determine the amount of each assessment in Class A and may, but need not, prorate it. If an assessment is prorated, the Board may provide that any surplus be credited against future assessments in Class B. An assessment which is not prorated must not exceed [$300] $500 for each member insurer for any 1 calendar year.

 


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assessment which is not prorated must not exceed [$300] $500 for each member insurer for any 1 calendar year.

      2.  The Board may allocate any assessment in Class B among the accounts according to the premiums or reserves of the impaired or insolvent insurer or any other standard which it considers fair and reasonable under the circumstances.

      3.  Assessments in Class B against member insurers for each account and subaccount must be in the proportion that the premiums received on business in this State by each assessed member insurer on policies or contracts covered by each account or subaccount for the 3 most recent calendar years for which information is available preceding the year in which the insurer became impaired or insolvent bears to premiums received on business in this State for those calendar years by all assessed member insurers.

      4.  Assessments for money to meet the requirements of the Association with respect to an impaired or insolvent insurer must not be authorized or called until necessary to carry out the purposes of this chapter. Classification of assessments under subsection 2 of NRS 686C.230 and computation of assessments under this section must be made with a reasonable degree of accuracy, recognizing that exact determinations may not always be possible. The Association shall notify each member insurer of its anticipated prorated share of an assessment authorized but not yet called within 180 days after it is authorized.

      Sec. 254. Chapter 687A of NRS is hereby amended by adding thereto a new section to read as follows:

      “Assumed claims transaction” includes:

      1.  A policy obligation that has been assumed by an insolvent insurer, before the entry of a final order of liquidation, through a merger between the insolvent insurer and another entity obligated under the policy.

      2.  An assumption reinsurance transaction in which:

      (a) The insolvent insurer assumed, before the entry of a final order of liquidation, the claim or policy obligations of another insurer or entity obligated under a claim or policy;

      (b) The assumption of the claim or policy obligations has been approved by the Commissioner, if such approval is required; and

      (c) As a result of the assumption, the claim or policy obligation became the direct obligation of the insolvent insurer through a novation of the claim or policy.

      Sec. 255. NRS 687A.030 is hereby amended to read as follows:

      687A.030  As used in this chapter, unless the context otherwise requires, the words and terms defined in NRS 687A.031 to 687A.039, inclusive, and section 254 of this act have the meanings ascribed to them in those sections.

      Sec. 256. NRS 687A.033 is hereby amended to read as follows:

      687A.033  1.  “Covered claim” means an unpaid claim or judgment, including a claim for unearned premiums, which arises out of and is within the coverage of an insurance policy to which this chapter applies [issued by an insurer which] if the insurer becomes an insolvent insurer, [if] the policy was issued by the insurer or assumed by the insurer in an assumed claims transaction, and one of the following conditions exists:

      (a) The claimant or insured, if a natural person, is a resident of this State at the time of the insured event.

 


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      (b) The claimant or insured, if other than a natural person, maintains its principal place of business in this State at the time of the insured event.

      (c) The property from which the first party property damage claim arises is permanently located in this State.

      (d) The claim is not a covered claim pursuant to the laws of any other state and the premium tax imposed on the insurance policy is payable in this State pursuant to NRS 680B.027.

      2.  The term does not include:

      (a) An amount that is directly or indirectly due a reinsurer, insurer, insurance pool or underwriting association, as recovered by subrogation, indemnity or contribution, or otherwise.

      (b) That part of a loss which would not be payable because of a provision for a deductible or a self-insured retention specified in the policy.

      (c) Except as otherwise provided in this paragraph, any claim filed with the Association:

             (1) More than 18 months after the date of the order of liquidation; or

             (2) After the final date set by the court for the filing of claims against the liquidator or receiver of the insolvent insurer,

Ê whichever is earlier. The provisions of this paragraph do not apply to a claim for workers’ compensation that is reopened pursuant to the provisions of NRS 616C.390 or 616C.392.

      (d) A claim filed with the Association for a loss that is incurred but is not reported to the Association before the expiration of the period specified in subparagraph (1) or (2) of paragraph (c).

      (e) An obligation to make a supplementary payment for adjustment or attorney’s fees and expenses, court costs or interest and bond premiums incurred by the insolvent insurer before the appointment of a liquidator, unless the expenses would also be a valid claim against the insured.

      (f) A first party or third party claim brought by or against an insured, if the aggregate net worth of the insured and any affiliate of the insured, as determined on a consolidated basis, is more than $25,000,000 on December 31 of the year immediately preceding the date the insurer becomes an insolvent insurer. The provisions of this paragraph do not apply to a claim for workers’ compensation. As used in this paragraph, “affiliate” means a person who directly or indirectly owns or controls, is owned or controlled by, or is under common ownership or control with, another person. For the purpose of this definition, the terms “owns,” “is owned” and “ownership” mean ownership of an equity interest, or the equivalent thereof, of 10 percent or more.

      Sec. 257. NRS 687B.420 is hereby amended to read as follows:

      687B.420  [An]

      1.  An insurer shall not cancel, fail to renew or renew with altered terms a policy or contract issued pursuant to chapter 688B, 689A, 689B, 689C, 695A, 695B, 695C, 695D or 695F of NRS unless notice in writing of the proposal is given to the insured at least 60 days before the date the proposed action becomes effective. The notice must include, without limitation, any changes in specific rates by line of coverage.

      2.  An insurer shall not cancel, fail to renew or renew with altered terms an individual health benefit plan that is not grandfathered pursuant to applicable law unless notice in writing of the proposal is given to the insured at least 30 days before the beginning of the open enrollment period described in NRS 686B.080.

 


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period described in NRS 686B.080. The notice must include the specific changes in terms or rates, as applicable.

      Sec. 258. NRS 688A.305 is hereby amended to read as follows:

      688A.305  1.  This section applies to all policies issued on or after January 1, 1987. Any cash surrender value available under the policy in the event of default in a premium payment due on any policy anniversary must be in an amount which does not differ by more than two-tenths of 1 percent of the amount of insurance, if the insurance is uniform in amount, or the average amount of insurance at the beginning of each of the first 10 policy years, from the sum of:

      (a) The greater of zero and the basic cash value specified in this section; and

      (b) The present value of any existing paid-up additions less the amount of any indebtedness to the [insurer] company under the policy.

      2.  The basic cash value must be equal to the present value, on the anniversary, of the future guaranteed benefits which would have been provided by the policy, excluding any existing paid-up additions and before deduction of any indebtedness to the [insurer,] company, if there had been no default, less the present value of the nonforfeiture factors, [corresponding to premiums which would have fallen due on and after the anniversary.] as defined in NRS 688A.290 to 688A.360, inclusive. The effects on the basic cash value of supplemental life insurance or annuity benefits or of family coverage, as described in this section or NRS 688A.300 or 688A.320, whichever is applicable, must be the same as the effects specified in this section or NRS 688A.300 or 688A.320, on the cash surrender values defined in [that] the applicable section.

      3.  The nonforfeiture factor for each policy year must be an amount equal to a percentage of the adjusted premium for the policy year, as defined in NRS 688A.320 or 688A.325, whichever is applicable. Except as is required in this subsection, the percentage must be:

      (a) The same for each policy year between the second policy anniversary and the later of:

             (1) The fifth policy anniversary; and

             (2) The first policy anniversary at which there is available under the policy a cash surrender value in an amount, before including any paid-up additions and before deducting any indebtedness, of at least two-tenths of 1 percent of the amount of insurance, if the insurance is uniform in amount, or the average amount of insurance at the beginning of each of the first 10 policy years; and

      (b) Such that no percentage after the later of the two policy anniversaries specified in paragraph (a) may apply to fewer than 5 consecutive policy years.

Ê No basic cash value may be less than the value which would be obtained if the adjusted premiums for the policy, as defined in NRS 688A.320 or 688A.325, whichever is applicable, were substituted for the nonforfeiture factors in the calculation of the basic cash value.

      4.  All adjusted premiums and present values referred to in this section for a particular policy must be calculated on the same mortality and interest bases as are used in demonstrating the policy’s compliance with NRS 688A.290 to 688A.360, inclusive. The cash surrender values referred to in this section must include any endowment benefits provided for by the policy.

 


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      5.  Any cash surrender value available other than in the event of default in a premium payment due on a policy anniversary, and the amount of any paid-up nonforfeiture benefit available under the policy in the event of default in a premium payment must be determined by methods consistent with those specified for determining the analogous minimum amounts in NRS 688A.290, 688A.300, 688A.310, 688A.325 and 688A.350. The amounts of any cash surrender values and of any paid-up nonforfeiture benefits granted in connection with additional benefits such as those listed in paragraphs (a) to (f), inclusive, of subsection 4 of NRS 688A.350, must conform with the principles of this section.

      Sec. 259. (Deleted by amendment.)

      Sec. 259.5. NRS 688A.325 is hereby amended to read as follows:

      688A.325  1.  This section applies to all policies issued by an insurer on or after the operative date of this section as it relates to that insurer. Except as otherwise provided in subsection 7, the adjusted premiums for any policy must be calculated on an annual basis and be the uniform percentage of the respective premium specified in the policy for each policy year, excluding amounts payable as extra premiums to cover impairments or special hazards and any uniform annual contract charge or policy fee specified in the policy in a statement of the method to be used in calculating the cash surrender values and paid-up nonforfeiture benefits. The present value, at the date of issue of the policy, of all adjusted premiums must be equal to the sum of:

      (a) The value of the future guaranteed benefits provided for by the policy;

      (b) One percent of the amount of insurance, if the insurance is uniform in amount, or the average amount of insurance at the beginning of each of the first 10 policy years; and

      (c) One hundred twenty-five percent of the nonforfeiture net level premium. In applying the percentage specified in paragraph (c), no nonforfeiture net level premium may be deemed to exceed 4 percent of the amount of insurance, if the insurance is uniform in amount, or the average amount of insurance at the beginning of each of the first 10 policy years. The date of issue of a policy for the purpose of this section must be the date as of which the rated age of the insured is determined.

      2.  The nonforfeiture net level premium must be equal to the present value, at the date of issue of the policy, of the guaranteed benefits provided for by the policy divided by the present value, at the date of issue of the policy, of an annuity of one per annum payable on the date of issue of the policy and on each anniversary of the policy on which a premium falls due.

      3.  In the case of policies which cause unscheduled changes in benefits or premiums on a basis guaranteed in the policy, or which provide an option for changes in benefits or premiums other than a change to a new policy, the adjusted premiums and present values must initially be calculated on the assumption that future benefits and premiums do not change from those stipulated at the date of issue of the policy. At the time of any change in the benefits or premiums, the future adjusted premiums, nonforfeiture net level premiums and present values must be recalculated on the assumption that future benefits and premiums do not change from those stipulated by the policy immediately after the change.

      4.  Except as otherwise provided in subsection 7, the recalculated future adjusted premiums for any such policy must be a uniform percentage of the respective future premiums specified in the policy for each policy year, excluding amounts payable as extra premiums to cover impairments and special hazards and any uniform annual contract charge or policy fee specified in the policy in a statement of the method to be used in calculating the cash surrender values and paid-up nonforfeiture benefits, which results in the present value, at the time of change to the newly defined benefits or premiums, of all future adjusted premiums being equal to the excess of the sum of the present value of the future guaranteed benefits provided for by the policy and the additional expense allowance, if any, over the cash surrender value, if any, or present value of any paid-up nonforfeiture benefit under the policy.

 


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respective future premiums specified in the policy for each policy year, excluding amounts payable as extra premiums to cover impairments and special hazards and any uniform annual contract charge or policy fee specified in the policy in a statement of the method to be used in calculating the cash surrender values and paid-up nonforfeiture benefits, which results in the present value, at the time of change to the newly defined benefits or premiums, of all future adjusted premiums being equal to the excess of the sum of the present value of the future guaranteed benefits provided for by the policy and the additional expense allowance, if any, over the cash surrender value, if any, or present value of any paid-up nonforfeiture benefit under the policy.

      5.  The additional expense allowance, at the time of the change to the newly defined benefits or premiums, must be the sum of:

      (a) One percent of the excess, if positive, of the average amount of insurance at the beginning of each of the first 10 policy years after the change, over the average amount of insurance before the change at the beginning of each of the first 10 policy years after the most recent previous change, or, if there has been no previous change, the date of issue of the policy; and

      (b) One hundred twenty-five percent of the increase, if positive, in the nonforfeiture net level premium.

      6.  The recalculated nonforfeiture net level premium must be equal to the result obtained by dividing amount “A” by amount “B” where:

      (a) “A” equals the sum of:

             (1) The nonforfeiture net level premium applicable before the change, multiplied by the present value of an annuity of one per annum payable on each anniversary of the policy on or after the date of the change on which a premium would have fallen due if the change had not occurred; and

             (2) The present value of the increase in future guaranteed benefits provided for by the policy.

      (b) “B” equals the present value of an annuity of one per annum payable on each anniversary of the policy on or after the date of change on which a premium falls due.

      7.  In the case of a policy issued on a substandard basis which provides reduced graded amounts of insurance so that, in each policy year, the policy has the same tabular mortality cost as an otherwise similar policy issued on the standard basis which provides higher uniform amounts of insurance, adjusted premiums and present values for the substandard policy may be calculated as if it were issued to provide the higher uniform amounts of insurance on the standard basis.

      8.  All adjusted premiums and present values referred to in NRS 688A.290 to 688A.360, inclusive, must be calculated for all policies of ordinary insurance on the basis of the Commissioners 1980 Standard Ordinary Mortality Table or, at the election of the insurer for any one or more specified plans of life insurance, the Commissioners 1980 Standard Ordinary Mortality Table with Ten-Year Select Mortality Factors; all policies of industrial insurance must be calculated on the basis of the Commissioners 1961 Standard Industrial Mortality Table; and all policies issued in a particular calendar year must be calculated on the basis of a rate of interest not exceeding the nonforfeiture interest rate established in this section for policies issued in that calendar year, except as follows:

 


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      (a) At the option of the insurer, calculations for all policies issued in a particular calendar year may be made on the basis of a rate of interest not exceeding the nonforfeiture interest rate, established in this section, for policies issued in the immediately preceding calendar year.

      (b) Under any paid-up nonforfeiture benefit, including any paid-up dividend additions, any cash surrender value available, whether or not required by NRS 688A.290, must be calculated on the basis of the mortality table and rate of interest used in determining the amount of the paid-up nonforfeiture benefit and paid-up dividend additions, if any.

      (c) An insurer may calculate the amount of any guaranteed paid-up nonforfeiture benefit including any paid-up additions under the policy on the basis of an interest rate which is not lower than that specified in the policy for calculating cash surrender values.

      (d) In calculating the present value of any paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may be not more than those shown in the Commissioners 1980 Extended Term Insurance Table for policies of ordinary insurance and not more than the Commissioners 1961 Industrial Extended Term Insurance Table for policies of industrial insurance.

      (e) For insurance issued on a substandard basis or a special underwriting basis, the calculation of any adjusted premiums and present values may be based on appropriate modifications of the tables specified in this subsection.

      (f) [Any] For policies issued:

             (1) Before the operative date of the Valuation Manual, as determined pursuant to section 33.7 of this act, any Commissioners Standard ordinary mortality tables which are adopted after 1980 by the National Association of Insurance Commissioners and are approved by a regulation adopted by the Commissioner for use in determining the minimum nonforfeiture standard may be substituted for the Commissioners 1980 Standard Ordinary Mortality Table with or without Ten-Year Select Mortality Factors or for the Commissioners 1980 Extended Term Insurance Table.

             (2) On or after the operative date of the Valuation Manual, as determined pursuant to section 33.7 of this act, the Valuation Manual must set forth the Commissioners Standard mortality table for use in determining the minimum nonforfeiture standard that may be substituted for the Commissioners 1980 Standard Ordinary Mortality Table with or without Ten-Year Select Mortality Factors or for the Commissioners 1980 Extended Term Insurance Table. If the Commissioner approves by regulation any Commissioners Standard ordinary mortality table adopted by the National Association of Insurance Commissioners for use in determining the minimum nonforfeiture standard for policies issued on or after the operative date of the Valuation Manual, then that minimum nonforfeiture standard supersedes the minimum nonforfeiture standard specified in the Valuation Manual.

      (g) [Any] For policies issued:

             (1) Before the operative date of the Valuation Manual, as determined pursuant to section 33.7 of this act, any Commissioners Standard industrial mortality tables which are adopted after 1980 by the National Association of Insurance Commissioners and are approved by a regulation adopted by the Commissioner for use in determining the minimum nonforfeiture standard may be substituted for the Commissioners 1961 Standard Industrial Mortality Table or the Commissioners 1961 Industrial Extended Term Insurance Table.

 


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1961 Standard Industrial Mortality Table or the Commissioners 1961 Industrial Extended Term Insurance Table.

             (2) On or after the operative date of the Valuation Manual, as determined pursuant to section 33.7 of this act, the Valuation Manual must set forth the Commissioners Standard industrial mortality table for use in determining the minimum nonforfeiture standard that may be substituted for the Commissioners 1961 Standard Industrial Mortality Table or the Commissioners 1961 Industrial Extended Term Insurance Table. If the Commissioner approves by regulation any Commissioners Standard industrial mortality table adopted by the National Association of Insurance Commissioners for use in determining the minimum nonforfeiture standard for policies issued on or after the operative date of the Valuation Manual, then that minimum nonforfeiture standard supersedes the minimum nonforfeiture standard specified in the Valuation Manual.

      9.  [The] For the purposes of this section:

      (a) For policies issued before the operative date of the Valuation Manual, as determined pursuant to section 33.7 of this act, the nonforfeiture interest rate for any policy issued in a particular calendar year must be equal to [125] the greater of:

             (1) One hundred twenty-five percent of the calendar year statutory valuation interest rate for the policy as defined in the Standard Valuation Law, rounded to the nearer one-fourth of 1 percent [.] ; or

             (2) Four percent.

      (b) For policies issued on or after the operative date of the Valuation Manual, as determined pursuant to section 33.7 of this act, the nonforfeiture interest rate per annum for any policy issued in a particular calendar year must be as specified in the Valuation Manual.

      10.  Any refiling of nonforfeiture values or their methods of computation for any previously approved policy form which involves only a change in the interest rate or mortality table used to compute nonforfeiture values does not require refiling of any other provisions of that policy form.

      11.  After July 1, 1983, any insurer may file with the Commissioner a written notice of its election to comply with the provision of this section after a specified date before January 1, 1989. A date so specified is the operative date of this section for that insurer. If an insurer makes no election, the operative date of this section for that insurer is January 1, 1989.

      12.  As used in this section, “Valuation Manual” has the meaning ascribed to it in section 32 of this act.

      Sec. 260. NRS 688A.390 is hereby amended to read as follows:

      688A.390  1.  A domestic life insurer may establish one or more separate accounts, and may allocate thereto amounts (including without limitation proceeds applied under optional modes of settlement or under dividend options) to provide for life insurance or annuities (and benefits incidental thereto), payable in fixed or variable amounts or both, subject to the following:

      (a) The income, gains and losses, realized or unrealized, from assets allocated to a separate account shall be credited to or charged against the account, without regard to other income, gains or losses of the company.

      (b) Except as may be provided with respect to reserves for guaranteed benefits and funds referred to in paragraph (c):

 


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             (1) Amounts allocated to any separate account and accumulations thereon may be invested and reinvested without regard to any requirements or limitations prescribed by the laws of this state governing the investments of life insurance companies; and

             (2) The investments in such separate account or accounts shall not be taken into account in applying the investment limitations otherwise applicable to the investments of the company.

      (c) Except with the approval of the Commissioner and under such conditions as to investments and other matters as the Commissioner may prescribe, which shall recognize the guaranteed nature of the benefits provided, reserves for:

             (1) Benefits guaranteed as to dollar amount and duration; and

             (2) Funds guaranteed as to principal amount or stated rate of interest,

Ê shall not be maintained in a separate account.

      (d) Unless otherwise approved by the Commissioner, assets allocated to a separate account shall be valued at their market value on the date of valuation, or if there is no readily available market, then as provided under the terms of the contract or the rules or other written agreement applicable to such separate account; but unless otherwise approved by the Commissioner, the portion if any of the assets of such separate account equal to the company’s reserve liability with regard to the guaranteed benefits and funds referred to in paragraph (c) shall be valued in accordance with the rules otherwise applicable to the company’s assets.

      (e) Amounts allocated to a separate account in the exercise of the power granted by this section shall be owned by the company, and the company shall not be, nor hold itself out to be, a trustee with respect to such amounts. If and to the extent so provided under the applicable contracts, that portion of the assets of any such separate account equal to the reserves and other contract liabilities with respect to such account shall not be chargeable with liabilities arising out of any other business the company may conduct.

      (f) No sale, exchange or other transfer of assets may be made by a company between any of its separate accounts or between any other investment account and one or more of its separate accounts unless, in case of a transfer into a separate account, such transfer is made solely to establish the account pursuant to subsection 6 or to support the operation of the contracts with respect to the separate account to which the transfer is made, and unless such transfer, whether into or from a separate account, is made:

             (1) By a transfer of cash; or

             (2) By a transfer of securities having a readily determinable market value, provided that such transfer of securities is approved by the Commissioner.

Ê The Commissioner may approve other transfers among such accounts if, in the opinion of the Commissioner, such transfers would not be inequitable.

      (g) To the extent such company deems it necessary to comply with any applicable federal or state laws, such company, with respect to any separate account, including without limitation any separate account which is a management investment company or a unit investment trust, may provide for persons having an interest therein appropriate voting and other rights and special procedures for the conduct of the business of such account, including without limitation special rights and procedures relating to investment policy, investment advisory services, selection of independent public accountants and the selection of a committee, the members of which need not be otherwise affiliated with such company, to manage the business of such account.

 


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accountants and the selection of a committee, the members of which need not be otherwise affiliated with such company, to manage the business of such account.

      2.  Any contract providing benefits payable in variable amounts delivered or issued for delivery in this state, including a group contract and any certificate issued thereunder, shall contain a statement of the essential features of the procedures to be followed by the insurance company in determining the dollar amount of such variable benefits. Any such contract under which the benefits vary to reflect investment experience, including a group contract and any certificate in evidence of variable benefits issued thereunder, shall state that such dollar amount will so vary and shall contain on its first page a statement to the effect that the benefits thereunder are on a variable basis.

      3.  No company shall deliver or issue for delivery within this state variable contracts unless it is licensed or organized to do a life insurance or annuity business in this state, and the Commissioner is satisfied that its condition or method of operation in connection with the issuance of such contracts will not render its operation hazardous to the public or its policyholders in this state. In this connection, the Commissioner shall consider among other things:

      (a) The history and financial condition of the company;

      (b) The character, responsibility and fitness of the officers and directors of the company; and

      (c) The law and regulations under which the company is authorized in the state of domicile to issue variable contracts.

Ê If the company is a subsidiary of an admitted life insurance company, or affiliated with such company through common management or ownership, it may be deemed by the Commissioner to have met the provisions of this subsection if either it or the parent or the affiliated company meets the requirements hereof.

      4.  Notwithstanding any other provision of law, the Commissioner has sole authority to regulate the issuance and sale of variable contracts, and to issue such reasonable rules and regulations as may be appropriate to carry out the purposes and provisions of this section.

      5.  Except for NRS 688A.190, 688A.240 and 688A.250 in the case of a variable annuity contract and NRS 688A.060, 688A.110, 688A.120, 688A.130, 688A.290 to 688A.360, inclusive, and 688B.050 in the case of a variable life insurance policy and except as otherwise provided in this Code, all pertinent provisions of this Code shall apply to separate accounts and contracts relating thereto. Any individual variable life insurance contract, delivered or issued for delivery in this state, shall contain grace, reinstatement and nonforfeiture provisions appropriate to such a contract. Any individual variable annuity contract, delivered or issued for delivery in this state, shall contain grace and reinstatement provisions appropriate to such a contract. The reserve liability for variable contracts shall be established in accordance with actuarial procedures that recognize the variable nature of the benefits provided and any mortality guarantees.

      6.  A domestic life insurer which establishes one or more separate accounts pursuant to this section may participate therein by allocating and contributing to such separate account funds which otherwise might be invested pursuant to [subsection 1 of NRS 682A.050 and NRS 682A.110.] sections 164 and 201 of this act. The insurer shall have a proportionate interest in any such account, along with all other participating contract holders, to the extent of its participation therein .

 


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interest in any such account, along with all other participating contract holders, to the extent of its participation therein . [, and with respect thereto shall also be subject to all the provisions of NRS 682A.210 applicable to separate account contract holders generally.] The aggregate amount so allocated or contributed by such an insurer to one or more separate accounts shall not, without the consent of the Commissioner, exceed the greater of:

      (a) One hundred thousand dollars;

      (b) One percent of its admitted assets as of December 31 next preceding; or

      (c) Five percent of its surplus as to policyholders as of December 31 next preceding.

Ê All funds allocated or contributed by the insurer to a separate account for the purpose of participation therein shall be included in applying the limitations upon investments otherwise specified in this Code. The insurer shall be entitled to withdraw at any time in whole or in part its participation in any separate account to which funds have been allocated or contributed and to receive upon withdrawal its proportional share of the value of the assets of the separate account at the time of withdrawal.

      Sec. 261. NRS 689A.700 is hereby amended to read as follows:

      689A.700  The Commissioner may adopt regulations to carry out the provisions of this section and NRS 689A.690 [and 689A.695] and to ensure that the practices used by individual carriers relating to the establishment of rates are consistent with the purposes of NRS 689A.470 to 689A.740, inclusive.

      Sec. 262. NRS 689A.725 is hereby amended to read as follows:

      689A.725  For the purposes of NRS 689A.470 to 689A.740, inclusive, a plan for coverage of a bona fide association must:

      1.  Conform with NRS 689A.690 [, 689A.695] and 689A.700 concerning rates.

      2.  Provide for the renewability of coverage for members of the bona fide association, and their dependents, if such coverage meets the criteria set forth in NRS 689A.630.

      Sec. 263. NRS 690B.023 is hereby amended to read as follows:

      690B.023  If insurance for the operation of a motor vehicle required pursuant to NRS 485.185 is provided by a contract of insurance, the insurer shall:

      1.  Provide evidence of insurance , which may be provided in paper or electronic format, to the insured on a form or in a format approved by the Commissioner. The evidence of insurance must include:

      (a) The name and address of the policyholder;

      (b) The name and address of the insurer;

      (c) Vehicle information, consisting of:

             (1) The year, make and complete identification number of the insured vehicle or vehicles; or

             (2) The word “Fleet” and the name of the registered owner if the vehicle is covered under a fleet policy written on an any auto basis or blanket policy basis;

      (d) The term of the insurance, including the day, month and year on which the policy:

             (1) Becomes effective; and

             (2) Expires;

      (e) The number of the policy;

 


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      (f) A statement that the coverage meets the requirements set forth in NRS 485.185; and

      (g) The statement “This [card] evidence of insurance must be carried in the insured motor vehicle for production upon demand.” The statement must be prominently displayed.

      2.  Provide new evidence of insurance if:

      (a) The information regarding the insured vehicle or vehicles required pursuant to paragraph (c) of subsection 1 no longer is accurate;

      (b) An additional motor vehicle is added to the policy;

      (c) A new number is assigned to the policy; or

      (d) The insured notifies the insurer that the original evidence of insurance has been lost.

      Sec. 264. Chapter 692C of NRS is hereby amended by adding thereto the provisions set forth as sections 265 to 289, inclusive, of this act.

      Sec. 265. “Insurance group” means, for the purpose of conducting an ORSA, those insurers and affiliates included within an insurance holding company system.

      Sec. 266. “NAIC” means the National Association of Insurance Commissioners.

      Sec. 267. “Own Risk and Solvency Assessment” or “ORSA” means a confidential internal assessment, appropriate to the nature, scale and complexity of an insurer or insurance group, conducted by that insurer or insurance group, of the material and relevant risks associated with the insurer or insurance group’s current business plan, and the sufficiency of capital resources to support those risks.

      Sec. 268. ORSA Guidance Manual” means the current version of the NAIC Own Risk and Solvency Assessment (ORSA) Guidance Manual developed and adopted by the NAIC, as amended. A change in the ORSA Guidance Manual is effective on the first day of January following the calendar year in which the changes were adopted by the NAIC.

      Sec. 269. “ORSA Summary Report” means a confidential high-level summary of an ORSA.

      Sec. 270. An insurer shall maintain a risk management framework to assist the insurer with identifying, assessing, monitoring, managing and reporting on its material relevant risks. This requirement shall be deemed satisfied if the insurance group of which the insurer is a member maintains a risk management framework applicable to the operations of the insurer.

      Sec. 271. Subject to the provisions of sections 275 to 280, inclusive, of this act, an insurer, or the insurance group of which the insurer is a member, shall regularly conduct an ORSA consistent with a process comparable to that set forth in the ORSA Guidance Manual. An ORSA must be conducted not less than annually but also at any time when there are significant changes to the risk profile of the insurer or the insurance group of which the insurer is a member.

      Sec. 272. Upon the request of the Commissioner, and not more than once each year, an insurer shall submit to the Commissioner an ORSA Summary Report or any combination of reports that together contain the information described in the ORSA Guidance Manual, applicable to the insurer and the insurance group of which the insurer is a member. Notwithstanding any request from the Commissioner, if the insurer is a member of an insurance group, the insurer shall submit the report required by this section if the Commissioner is the lead state commissioner of the insurance group as determined by the procedures within the Financial Analysis Handbook, published by the NAIC.

 


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required by this section if the Commissioner is the lead state commissioner of the insurance group as determined by the procedures within the Financial Analysis Handbook, published by the NAIC.

      Sec. 273. The report required by section 272 of this act must include a signature of the insurer or insurance group’s chief risk officer, or other executive having responsibility for the oversight of the insurer’s enterprise risk management process, attesting to the best of his or her belief and knowledge that the insurer applies the enterprise risk management processes described in the ORSA Summary Report and that a copy of the Report has been provided to the insurer’s board of directors or the appropriate committee thereof.

      Sec. 274. An insurer may comply with the requirements of section 272 of this act by providing the most recent and substantially similar report provided by the insurer or another member of an insurance group of which the insurer is a member to the commissioner of another state or to a supervisor or regulator of a foreign jurisdiction, if that report provides information that is comparable to the information described in the ORSA Guidance Manual. Any such report in a language other than English must be accompanied by a translation of that report into the English language.

      Sec. 275. An insurer is exempt from the requirements of sections 270 to 289, inclusive, of this act, if:

      1.  The insurer has annual direct written and unaffiliated assumed premiums, including international direct and assumed premiums, but excluding premiums reinsured with the Federal Crop Insurance Corporation and the National Flood Insurance Program, of less than $500,000,000; and

      2.  The insurance group of which the insurer is a member has annual direct written and unaffiliated assumed premiums, including international direct and assumed premiums but excluding premiums reinsured with the Federal Crop Insurance Corporation and the National Federal Flood Insurance Program, of less than $1 billion.

      Sec. 276. If an insurer qualifies for an exemption pursuant to subsection 1 of section 275 of this act and the insurance group of which the insurer is a member does not qualify for an exemption pursuant to subsection 2 of that section, the ORSA Summary Report that may be required under sections 272, 273 and 274 of this act must include every insurer within the insurance group. This requirement shall be deemed satisfied by the submission of more than one ORSA Summary Report for any combination of insurers, provided that any combination of reports includes every insurer within the insurance group.

      Sec. 277. If an insurer does not qualify for an exemption pursuant to subsection 1 of section 275 of this act and the insurance group of which the insurer is a member qualifies for an exemption pursuant to subsection 2 of that section, the ORSA Summary Report that may be required under sections 272, 273 and 274 of this act is the report applicable to that insurer.

      Sec. 278. An insurer that does not qualify for an exemption pursuant to section 275 of this act may apply to the Commissioner for a waiver from the requirements of sections 270 to 289, inclusive, of this act based on unique circumstances. In deciding whether to grant the insurer’s request for a waiver, the Commissioner may consider the type and volume of business written, ownership and organizational structure, and any other factor the Commissioner considers relevant to the insurer or insurance group of which the insurer is a member.

 


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group of which the insurer is a member. If the insurer is part of an insurance group with insurers domiciled in more than one state, the Commissioner shall coordinate with the lead state commissioner and with the other domiciliary commissioners in considering whether to grant the insurer’s request for a waiver.

      Sec. 279. Notwithstanding the provisions of sections 275 to 278, inclusive, of this act:

      1.  The Commissioner may require that an insurer maintain a risk management framework, conduct an ORSA and file an ORSA Summary Report based on unique circumstances, including, without limitation, the type and volume of business written, ownership and organizational structure, federal agency requests and international supervisor requests.

      2.  The Commissioner may require that an insurer maintain a risk management framework, conduct an ORSA and file an ORSA Summary Report if the insurer has risk-based capital for company action level event, as defined in regulations adopted by the Commissioner, meets one or more of the standards of an insurer deemed to be in hazardous financial condition, as defined in NRS 680A.205, or otherwise exhibits qualities of a troubled insurer as determined by the Commissioner.

      Sec. 280. If an insurer that qualifies for an exemption pursuant to section 275 of this act subsequently no longer qualifies for that exemption as a result of changes in premium as reflected in the insurer’s most recent annual statement, or in the most recent annual statements of the insurers within the insurance group of which the insurer is a member, the insurer shall have 1 year after the date on which the threshold is exceeded to comply with the requirements of sections 270 to 289, inclusive, of this act.

      Sec. 281. An ORSA Summary Report must be prepared consistent with the ORSA Guidance Manual, subject to the requirements of this section and section 282 of this act. Documentation and supporting information must be maintained and made available upon examination or upon request of the Commissioner.

      Sec. 282. The review of an ORSA Summary Report, and any additional requests for information, must be made using similar procedures currently used in analysis and examination of multistate or global insurers and insurance groups.

      Sec. 283. 1.  Except as otherwise provided in this section and NRS 239.0115 and section 273 of this act, any documents, materials and other information, including an ORSA Summary Report, in the possession of or control of the Division that are obtained by, created by or disclosed to the Commissioner or any other person in accordance with the provisions of sections 270 to 289, inclusive, of this act are proprietary and constitute trade secrets. All such documents, materials or other information are:

      (a) Confidential by law and privileged;

      (b) Not subject to subpoena; and

      (c) Not subject to discovery or admissible in evidence in any private civil action.

      2.  Notwithstanding any provision of subsection 1 to the contrary, the Commissioner is authorized to use the documents, materials or other information in the furtherance of any regulatory or legal action brought as a part of the Commissioner’s official duties. The Commissioner shall not otherwise make the documents, materials or other information public without the prior written consent of the insurer.

 


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      Sec. 284. Neither the Commissioner, nor any other person who received documents, materials or other information received pursuant to sections 270 to 289, inclusive, of this act, through examination or otherwise, while acting pursuant to the authority of the Commissioner or with whom such documents, materials and other information are shared in accordance with the provisions of those sections, is allowed or required to testify in any private civil action concerning any such documents, materials and information subject to section 283 of this act.

      Sec. 285. To assist the performance of the Commissioner’s regulatory duties, the Commissioner:

      1.  May, upon request, share documents, materials and other information received pursuant to sections 270 to 289, inclusive, of this act, including, without limitation, any documents, materials and information subject to section 283 of this act and any proprietary and trade secret documents and materials, with other state, federal and international financial regulatory agencies, including members of any supervisory college, as defined in NRS 692C.359, with the NAIC and with third-party consultants designated by the Commissioner, provided that the recipient agrees in writing to maintain the confidentiality and privileged status of the documents, materials and other information received pursuant to sections 270 to 289, inclusive, of this act and has verified in writing the legal authority to maintain confidentiality.

      2.  May receive documents, materials and other information received pursuant to sections 270 to 289, inclusive, of this act, including, without limitation, documents, materials and information which are otherwise confidential and privileged, and proprietary and trade secret information or documents, from regulatory officials of other foreign or domestic jurisdictions, including members of any supervisory college, as defined in NRS 692C.359, and from the NAIC, and shall maintain as confidential or privileged any such documents, materials and information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material or information.

      3.  Shall enter into a written agreement with the NAIC or a third-party consultant governing the sharing and use of information provided pursuant to sections 270 to 289, inclusive, of this act, that must:

      (a) Specify procedures and protocols regarding the confidentiality and security of the information shared with the NAIC or third-party consultant, including procedures and protocols for sharing by the NAIC with other state regulators from states in which the insurance group has domiciled insurers. The agreement must provide that the recipient agrees to maintain the confidentiality and privileged status of the documents, materials and other information and has verified, in writing, the legal authority to maintain confidentiality;

      (b) Specify that ownership of the information shared with the NAIC or third-party consultant remains with the Commissioner and use of the information by the NAIC or third-party consultant is subject to the discretion of the Commissioner;

      (c) Prohibit the NAIC or third-party consultant from storing the information in a permanent database after the underlying analysis is completed;

 


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      (d) Require prompt notice to be given to an insurer whose confidential information in the possession of the NAIC or third-party consultant is subject to a request or subpoena to the NAIC or a third-party consultant for disclosure or production;

      (e) Require the NAIC or third-party consultant to consent to intervention by an insurer in any judicial or administrative action in which the NAIC or third-party consultant may be required to disclose confidential information about the insurer shared with the NAIC or third-party consultant; and

      (f) In the case of an agreement involving a third-party consultant, provide for the insurer’s written consent.

      Sec. 286. The sharing of documents, materials and other information by the Commissioner pursuant to sections 270 to 289, inclusive, of this act does not constitute a delegation of regulatory authority or rulemaking, and the Commissioner is solely responsible for the administration, execution and enforcement of the provisions of sections 270 to 289, inclusive, of this act.

      Sec. 287. No waiver of any applicable privilege or claim of confidentiality in the documents, proprietary and trade secrets materials or other information shall occur as a result of the disclosure of such documents, materials and information to the Commissioner in accordance with the provisions of sections 283 to 288, inclusive, of this act or as a result of sharing as authorized in accordance with the provisions of sections 270 to 289, inclusive, of this act.

      Sec. 288. Documents, materials or other information in the possession or control of the NAIC or a third-party consultant in accordance with the provisions of sections 270 to 289, inclusive, of this act are:

      1.  Confidential by law and privileged;

      2.  Not subject to the provisions of chapter 239 of NRS;

      3.  Not subject to subpoena; and

      4.  Not subject to discovery or admissible in evidence in any private civil action.

      Sec. 289. 1.  The failure to file an ORSA Summary Report required by sections 270 to 289, inclusive, of this act, within the time specified for the filing is a violation of those sections.

      2.  Except as otherwise provided in subsection 3, if an insurer or group insurer fails, without just cause, to file an ORSA Summary Report required by sections 270 to 289, inclusive, of this act, the insurer or group insurer, as applicable, shall, after receiving notice and a hearing, pay a civil penalty of $1,500 for each day the insurer or group insurer fails to file the ORSA Summary Report. The civil penalty may be recovered in a civil action brought by the Commissioner. Any civil penalty paid pursuant to this subsection must be deposited in the State General Fund.

      3.  The maximum civil penalty that may be imposed pursuant to subsection 2 is $100,000. The Commissioner may reduce the amount of the civil penalty if the insurer or group insurer demonstrates to the satisfaction of the Commissioner that the payment of the civil penalty would impose a financial hardship on the insurer or group insurer, as applicable.

 


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      Sec. 290. NRS 692C.020 is hereby amended to read as follows:

      692C.020  As used in this chapter, unless the context otherwise requires, the words and terms defined in NRS 692C.025 to 692C.110, inclusive, and sections 265 to 269, inclusive, of this act have the meanings ascribed to them in those sections.

      Sec. 291. NRS 692C.180 is hereby amended to read as follows:

      692C.180  1.  No person other than the issuer may make a tender for or a request or invitation for tenders of, or enter into any agreement to exchange securities for, seek to acquire or acquire in the open market or otherwise, any voting security of a domestic insurer if, after the consummation thereof, the person would directly or indirectly, or by conversion or by exercise of any right to acquire, be in control of the insurer, nor may any person enter into an agreement to merge with or otherwise acquire control of a domestic insurer, unless, at the time any such offer, request or invitation is made or any such agreement is entered into, or before the acquisition of those securities if no offer or agreement is involved, the person has filed with the Commissioner and has sent to the insurer, and the insurer has sent to its shareholders, a statement containing the information required by NRS 692C.180 to 692C.250, inclusive, and, except as otherwise provided in subsection 4, the offer, request, invitation, agreement or acquisition has been approved by the Commissioner in the manner prescribed in this chapter.

      2.  The pre-acquisition statement required by subsection 1 must be filed with the Commissioner at least 60 days before the proposed date of the acquisition. The statement must set forth, without limitation, the information required by NRS 692C.254. A person who fails to comply with this subsection is subject to the penalties set forth in subsections 6 and 7 of NRS 692C.258.

      3.  A person controlling a domestic insurer who is seeking to divest his or her controlling interest in the domestic insurer shall file with the Commissioner, and send to the insurer, notice of the proposed divestiture at least 30 days before the proposed divestiture, unless a pre-acquisition statement has been filed pursuant to subsection 1 concerning the proposed transaction. Notice filed pursuant to this subsection is confidential until the conclusion, if any, of the divestiture unless the Commissioner determines that such confidentiality will interfere with the enforcement of this section.

      4.  Upon receiving a pre-acquisition statement or notice pursuant to this section by a person seeking to acquire a controlling interest in a domestic insurer or divest a controlling interest in a domestic insurer, the Commissioner shall determine whether or not the person will be required to file for and obtain the approval of the Commissioner for the acquisition or divestiture. As soon as practicable after making that determination, the Commissioner shall notify the person of the results of the determination.

      5.  For purposes of this section, a domestic insurer includes any other person controlling a domestic insurer unless the other person is directly or through affiliates primarily engaged in a business other than the business of insurance. If a person is directly or through affiliates primarily engaged in a business other than the business of insurance, the person shall, at least 60 days before the proposed effective date of the acquisition, file a notice of intent to acquire with the Commissioner setting forth the information required by NRS 692C.254.

      6.  If a transaction is governed by the provisions of this section, the acquiring person shall also file a pre-acquisition notification with the Commissioner which must contain the information set forth in subsection 1.

 


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Commissioner which must contain the information set forth in subsection 1. The Commissioner shall specify by regulation the period within which the notification must be filed. A person who fails to comply with this subsection or any regulations adopted pursuant thereto may be subject to the penalties set forth in subsection 7 of NRS 692C.258.

      7.  As used in this section, “person” does not include a securities broker who, in the regular course of business as a broker, holds less than 20 percent of the voting securities of an insurer or of any person who controls an insurer.

      Sec. 292. NRS 692C.190 is hereby amended to read as follows:

      692C.190  The pre-acquisition statement to be filed with the Commissioner hereunder shall be made under oath or affirmation and shall contain the following:

      1.  The name and address of each person (hereinafter called the “acquiring party”) by whom or on whose behalf the merger or other acquisition of control referred to in subsection 1 of NRS 692C.180 is to be effected and, if such person is:

      (a) An individual, the individual’s principal occupation and all offices and positions held by the individual during the past 5 years, and any conviction of crimes other than for minor traffic violations during the past 10 years.

      (b) Not an individual, a report of the nature of its business operations during the past 5 years or for such lesser period as such person and any predecessors thereof shall have been in existence, together with an informative description of the business intended to be done by such person and such person’s subsidiaries, and a list of all individuals who are or who have been selected to become directors or executive officers of such person or who perform or will perform functions appropriate to such positions. Such list shall include for each such individual the information required by paragraph (a).

      2.  The source, nature and amount of the consideration used or to be used in effecting the merger or other acquisition of control, a description of any transaction wherein funds were or are to be obtained for any such purpose, and the identity of persons furnishing such consideration, but where a source of such consideration is a loan made in the lender’s ordinary course of business, the identity of the lender shall remain confidential, if the person filing such statement so requests.

      3.  Fully audited financial information as to the earnings and financial condition of each acquiring party for the preceding 5 fiscal years of each such acquiring party (or for such lesser period as such acquiring party and any predecessors thereof shall have been in existence), and similar unaudited information as of a date not earlier than 90 days prior to the filing of the statement.

      4.  Any plans or proposals which each acquiring party may have to liquidate such insurer, to sell its assets or merge or consolidate it with any person, or to make any other material change in its business or corporate structure or management.

      5.  The number of shares of any security referred to in subsection 1 of NRS 692C.180 which each acquiring party proposes to acquire, and the terms of the offer, request, invitation, agreement or acquisition referred to in subsection 1 of NRS 692C.180 and a statement as to the method by which the fairness of the proposal was determined.

 


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      6.  The amount of each class of any security referred to in subsection 1 of NRS 692C.180 which is beneficially owned or concerning which there is a right to acquire beneficial ownership by each acquiring party.

      7.  A full description of any contracts, arrangements or understandings with respect to any security referred to in subsection 1 of NRS 692C.180 in which any acquiring party is involved, including but not limited to transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or guarantees of profits, division of losses or profits or the giving or withholding of proxies. Such description shall identify the persons with whom such contracts, arrangements or understandings have been made.

      8.  A description of the purchase of any security referred to in subsection 1 of NRS 692C.180 during the 12 calendar months preceding the filing of the statement by any acquiring party, including the dates of purchase, names of the purchasers and consideration paid or agreed to be paid therefor.

      9.  A description of any recommendations to purchase any security referred to in subsection 1 of NRS 692C.180 made during the 12 calendar months preceding the filing of the statement by any acquiring party, or by anyone based upon interviews with or at the suggestion of such acquiring party.

      10.  Copies of all tenders, offers for, requests or invitations for tenders of, exchange offers for, and agreements to acquire or exchange any securities referred to in subsection 1, and, if distributed, additional soliciting material relating thereto.

      11.  The terms of any agreement, contract or understanding made with any broker-dealer, as to solicitation of securities referred to in subsection 1 of NRS 692C.180, for tender, and the amount of any fees, commissions or other compensation to be paid to broker-dealers with regard thereto.

      12.  An agreement by the person required to file the statement that the person will file the annual report of enterprise risk required by NRS 692C.290 while control exists.

      13.  An acknowledgment by the person required to file the statement that the person, and all subsidiaries within its control in the insurance holding company system, will provide information to the Commissioner upon request as necessary to evaluate enterprise risk to the insurer.

      14.  Such additional information as the Commissioner may by rule or regulation prescribe as necessary or appropriate for the protection of policy holders and security holders of the insurer or for the protection of the public interest.

Ê If the person required to file the statement referred to in this section is a partnership, limited partnership, syndicate or other group, the Commissioner may require that the information required by this section, be given with respect to each partner of such partnership or limited partnership, each member of such syndicate or group, and each person who controls such partner or member. If any such partner, member or person is a corporation or the person required to file the statement referred to in subsection 1 of NRS 692C.180 is a corporation, the Commissioner may require that the information required by this section, be given with respect to such corporation, each officer and director of such corporation, and each person who is directly or indirectly the beneficial owner of more than 10 percent of the outstanding voting securities of such corporation. If any material change occurs in the facts set forth in the statement filed with the Commissioner and sent to such insurer pursuant to this section, an amendment setting forth such change, together with copies of all documents and other material relevant to such change, shall be filed with the Commissioner and sent to such insurer within 2 business days after the person learns of such change.

 


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occurs in the facts set forth in the statement filed with the Commissioner and sent to such insurer pursuant to this section, an amendment setting forth such change, together with copies of all documents and other material relevant to such change, shall be filed with the Commissioner and sent to such insurer within 2 business days after the person learns of such change. Such insurer shall send each such amendment to its shareholders.

      Sec. 293. NRS 692C.200 is hereby amended to read as follows:

      692C.200  If any offer, request, invitation, agreement or acquisition referred to in subsection 1 of NRS 692C.180 is proposed to be made by means of a registration statement under the Securities Act of 1933, 15 U.S.C. §§ 77a to 77aa, inclusive, or in circumstances requiring the disclosure of similar information under the Securities Exchange Act of 1934, 15 U.S.C. §§ 78a et seq., or under any state law requiring similar registration or disclosure, the person required to file the pre-acquisition statement referred to in subsection 1 of NRS 692C.180 may utilize such documents in furnishing the information called for by that statement.

      Sec. 294. NRS 692C.210 is hereby amended to read as follows:

      692C.210  1.  Except as otherwise provided in subsections 5 and 7, the Commissioner shall approve any merger or other acquisition of control referred to in subsection 1 of NRS 692C.180 unless, after a public hearing thereon, the Commissioner finds that:

      (a) After the change of control, the domestic insurer specified in subsection 1 of NRS 692C.180 would not be able to satisfy the requirements for the issuance of a license to write the line or lines of insurance for which it is presently licensed;

      (b) The effect of the merger or other acquisition of control would be substantially to lessen competition in insurance in this state or tend to create a monopoly;

      (c) The financial condition of any acquiring party may jeopardize the financial stability of the insurer, or prejudice the interest of its policyholders or the interests of any remaining security holders who are unaffiliated with the acquiring party;

      (d) The terms of the offer, request, invitation, agreement or acquisition referred to in subsection 1 of NRS 692C.180 are unfair and unreasonable to the security holders of the insurer;

      (e) The plans or proposals which the acquiring party has to liquidate the insurer, sell its assets or consolidate or merge it with any person, or to make any other material change in its business or corporate structure or management, are unfair and unreasonable to policyholders of the insurer or not in the public interest;

      (f) The competence, experience and integrity of those persons who would control the operation of the insurer are such that it would not be in the interest of policyholders of the insurer or of the public to permit the merger or other acquisition of control;

      (g) If approved, the merger or acquisition of control would likely be harmful or prejudicial to the members of the public who purchase insurance; or

      (h) The practices of the applicant in managing claims have evidenced a pattern in which the applicant has knowingly committed, or performed with such frequency as to indicate a general business practice of:

             (1) Misrepresentation of pertinent facts or provisions of policies of insurance as they relate to coverages at issue;

 


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             (2) Failure to affirm or deny coverage of claims within a reasonable time after written proofs of loss have been furnished; or

             (3) Failure to pay claims in a timely manner.

      2.  Except as otherwise provided in subsection 7, the public hearing specified in subsection 1 must be held within 30 days after the pre-acquisition statement required by subsection 1 of NRS 692C.180 has been filed, and at least 20 days’ notice thereof must be given by the Commissioner to the person filing the statement. Not less than 7 days’ notice of the public hearing must be given by the person filing the statement to the insurer and to any other person designated by the Commissioner. The insurer shall give such notice to its security holders. The Commissioner shall make a determination within 60 days after the conclusion of the hearing. If the Commissioner determines that an infusion of capital to restore capital in connection with the change in control is required, the requirement must be met within 60 days after notification is given of the determination. At the hearing, the person filing the statement, the insurer, any person to whom notice of hearing was sent and any other person whose interests may be affected thereby may present evidence, examine and cross-examine witnesses, and offer oral and written arguments and, in connection therewith, may conduct discovery proceedings in the same manner as is presently allowed in the district court of this state. All discovery proceedings must be concluded not later than 3 days before the commencement of the public hearing.

      3.  The Commissioner may retain at the acquiring party’s expense attorneys, actuaries, accountants and other experts not otherwise a part of the staff of the Commissioner as may be reasonably necessary to assist the Commissioner in reviewing the proposed acquisition of control.

      4.  The period for review by the Commissioner must not exceed the 60 days allowed between the filing of the notice of intent to acquire required pursuant to subsection 5 of NRS 692C.180 and the date of the proposed acquisition if the proposed affiliation or change of control involves a financial institution, or an affiliate of a financial institution, and an insured.

      5.  When making a determination pursuant to paragraph (b) of subsection 1, the Commissioner:

      (a) Shall require the submission of the information specified in subsection 2 of NRS 692C.254;

      (b) Shall [consider:

             (1) The standards set forth in the Horizontal Merger Guidelines issued by the United States Department of Justice and the Federal Trade Commission and in effect at the time the Commissioner receives the statement required pursuant to subsection 1 of NRS 692C.180; and

             (2) The] not disapprove the merger or other acquisition upon a finding that any of the factors described in subsection [3] 6 of NRS 692C.256 [;] exist; and

      (c) May condition approval of the merger or acquisition of control in the manner provided in subsection 4 of NRS 692C.258.

      6.  If, in connection with a change of control of a domestic insurer, the Commissioner determines that the person who is acquiring control of the domestic insurer must maintain or restore the capital of the domestic insurer in an amount that is required by the laws and regulations of this state, the Commissioner shall make the determination not later than 60 days after the notice of intent to acquire required pursuant to subsection 5 of NRS 692C.180 is filed with the Commissioner.

 


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the notice of intent to acquire required pursuant to subsection 5 of NRS 692C.180 is filed with the Commissioner.

      7.  If the proposed merger or other acquisition of control referred to in subsection 1 of NRS 692C.180 requires the approval of the commissioner of more than one state, the public hearing required pursuant to subsection 1 may, upon the request of the person who filed the pre-acquisition statement required pursuant to subsection 1 of NRS 692C.180, be consolidated with the hearings required in other states. Not more than 5 days after receiving such a request, the Commissioner shall file with the [National Association of Insurance Commissioners] NAIC a copy of the pre-acquisition statement that was filed with the Commissioner pursuant to subsection 1 of NRS 692C.180 by the person requesting a consolidated hearing. The Commissioner may opt out of a consolidated hearing and, if the Commissioner elects to do so, he or she shall provide notice to the person requesting the consolidated hearing not more than 10 days after receiving the pre-acquisition statement filed pursuant to subsection 1 of NRS 692C.180. A consolidated hearing must be public and must be held within the United States before participating commissioners of the states in which the insurers are domiciled. Participating commissioners may hear and receive evidence at the hearing.

      Sec. 295. NRS 692C.254 is hereby amended to read as follows:

      692C.254  1.  An acquisition to which the provisions of NRS 692C.252 apply is subject to an order issued pursuant to NRS 692C.258 unless:

      (a) The acquiring person files a notice of acquisition pursuant to this section; and

      (b) The waiting period specified in subsection 4 has expired.

      2.  The Commissioner shall prescribe the form of the notice required pursuant to subsection 1. A notice of acquisition filed pursuant to this section must include:

      (a) The information required by the [National Association of Insurance Commissioners] NAIC relating to any market that, pursuant to subsection 5 of NRS 692C.252, causes the acquisition not to be exempted from the provisions of this section; and

      (b) Any other material or information required by the Commissioner to determine whether or not the proposed acquisition, if consummated, would violate the provisions of NRS 692C.256.

      3.  The information required pursuant to subsection 2 may include the opinion of an economist relating to the competitive effect of the acquisition on the business of insurance in this state if the opinion is accompanied by a summary of the education and experience of the economist and a statement indicating the ability of the economist to provide an informed opinion.

      4.  Except as otherwise provided in subsection 5, the waiting period for an acquisition required pursuant to subsection 1 begins on the date the Commissioner receives the notice filed pursuant to subsection 1 and ends on the expiration of 30 days after that date or on the expiration of a shorter period prescribed by the Commissioner, whichever is earlier.

      5.  Before the expiration of the waiting period specified in subsection 4, the Commissioner may, not more than once, require a person to submit additional information relating to the proposed acquisition. If the Commissioner requires the submission of additional information, the waiting period for the acquisition ends upon the expiration of 30 days after the Commissioner receives the additional information or upon the expiration of a shorter period prescribed by the Commissioner, whichever is earlier.

 


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Commissioner receives the additional information or upon the expiration of a shorter period prescribed by the Commissioner, whichever is earlier.

      Sec. 296. NRS 692C.256 is hereby amended to read as follows:

      692C.256  1.  The Commissioner may issue an order pursuant to NRS 692C.258 relating to an acquisition if:

      (a) The effect of the acquisition may substantially lessen competition in any line of insurance in this state or tend to create a monopoly; or

      (b) The acquiring person fails to file sufficient materials or information pursuant to NRS 692C.254.

      2.  In determining whether [to issue an order pursuant to subsection 1,] a proposed acquisition would violate the competitive standard, the Commissioner shall consider the [standards set forth in the Horizontal Merger Guidelines issued by the United States Department of Justice and the Federal Trade Commission and in effect at the time the Commissioner receives the notice required pursuant to NRS 692C.254.

      3.]  following:

      (a) Any acquisition to which the provisions of NRS 692C.252 apply involving two or more insurers competing in the same market is prima facie evidence of a violation of the competitive standard if:

             (1) The market is highly concentrated and the involved insurers possess the following shares of the market:

 

Insurer A                                  Insurer B

4 percent                                  4 percent or more

10 percent                                2 percent or more

15 percent                                1 percent or more

 

             (2) The market is not highly concentrated and the involved insurers possess the following shares of the market:

 

Insurer A                                  Insurer B

5 percent                                  5 percent or more

10 percent                                4 percent or more

15 percent                                3 percent or more

19 percent                                1 percent or more

 

      (b) There is a significant trend toward increased concentration when the aggregate market share of any grouping of the largest insurers in the market, from the two largest to the eight largest, has increased by 7 percent or more of the total market over a period of time extending from any base year 5 to 10 years before the acquisition up to the time of the acquisition. Any acquisition to which the provisions of NRS 692C.252 apply, involving two or more insurers competing in the same market is prima facie evidence of a violation of the competitive standard if:

             (1) There is a significant trend toward increased concentration in the market;

             (2) One of the insurers involved is one of the insurers in a grouping of large insurers showing the requisite increase in the market share; and

             (3) Another involved insurer’s market share is 2 percent or more.

      3.  Percentages not shown in the tables in paragraph (a) of subsection 2 must be interpolated proportionately to the percentages that are shown.

 


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      4.  If more than two insurers are involved in an acquisition, exceeding the total of the two columns in the relevant table of paragraph (a) of subsection 2 is prima facie evidence of a violation of the competitive standard. For the purposes of this subsection, the insurer with the largest market share shall be deemed to be Insurer A.

      5.  Irrespective of whether an acquisition constitutes a prima facie violation of the competitive standard set forth in this section, the Commissioner, or a party to the acquisition, may establish the presence or absence of the requisite anticompetitive effect based upon other substantial evidence, including, without limitation, market shares, volatility of ranking market leaders, the number of competitors, concentrations, trend concentration in the industry and ease of entry and exit in the market.

      6.  The Commissioner shall, before issuing an order specified in subsection 1, consider:

      (a) If:

             (1) The acquisition creates substantial economies of scale or economies in the use of resources that may not be created in any other manner; and

             (2) The public benefit received from those economies exceeds the public benefit received from not lessening competition; or

      (b) If:

             (1) The acquisition substantially increases the availability of insurance; and

             (2) The public benefit received by that increase exceeds the public benefit received from not lessening competition.

      [4.] 7.  The public benefits set forth in subparagraph 2 of paragraphs (a) and (b) of subsection [3] 6 may be considered together, as applicable, in assessing whether the public benefits received from the acquisition exceed any benefit to competition that would arise from disapproving the acquisition.

      [5.] 8.  The Commissioner has the burden of establishing that the acquisition will result in a violation of the competitive standard set forth in subsection 1.

      9.  An order may not be entered in accordance with NRS 692C.258 if:

      (a) The acquisition will yield substantial economies of scale or economies in resource utilization that cannot be feasibly achieved in any other way, and the public benefits which would arise from such economies exceed the public benefits which would not arise from lessening competition; or

      (b) The acquisition will substantially increase the availability of insurance, and the public benefits of the increase exceed the public benefits which would arise from not lessening competition.

      10.  As used in this section:

      (a) “Highly concentrated market” means a market in which the combined market share of the four largest insurers totals 75 percent or more of the total market.

      (b) “Insurer” includes any company or group of companies under common management, ownership or control.

      (c) “Market” means the relevant product and geographical markets. In the absence of sufficient information to the contrary, the relevant product market is assumed to be the direct written insurance premium for a line of business, such line being that used in the annual statement required to be filed by an insurer doing business in this State and the relevant geographical market is assumed to be this State.

 


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filed by an insurer doing business in this State and the relevant geographical market is assumed to be this State.

      Sec. 297. NRS 692C.260 is hereby amended to read as follows:

      692C.260  1.  Every insurer which is authorized to do business in this state and which is a member of an insurance holding company system shall register with the Commissioner, except a foreign insurer subject to disclosure requirements and standards adopted by a statute or regulation in the jurisdiction of its domicile which are substantially similar to those contained in NRS 692C.260 to 692C.350, inclusive.

      2.  Any insurer which is subject to registration under NRS 692C.260 to 692C.350, inclusive, shall register not later than September 1, 1973, or 15 days after it becomes subject to registration, whichever is later, and annually thereafter by June 30 of each year for the immediately preceding calendar year, unless the Commissioner for good cause shown extends the time for registration. The Commissioner may require any authorized insurer which is a member of a holding company system which is not subject to registration under this section to furnish a copy of the registration statement or other information filed by the insurance company with the insurance regulatory authority of domiciliary jurisdiction.

      3.  Any person within an insurance holding company system subject to registration shall, upon request by an insurer, provide complete and accurate information to the insurer if the information is reasonably necessary to enable the insurer to comply with the provisions of this section.

      Sec. 298. NRS 692C.270 is hereby amended to read as follows:

      692C.270  Every insurer subject to registration shall file:

      1.  A registration statement [on a form provided by] with the Commissioner, on a form and in a format prescribed by the Commissioner, which must contain current information about:

      (a) The capital structure, general financial condition, ownership and management of the insurer and any person controlling the insurer.

      (b) The identity of every member of the insurance holding company system.

      (c) The following agreements in force, relationships subsisting and transactions currently outstanding between the insurer and its affiliates:

             (1) Loans, other investments or purchases, sales or exchanges of securities of the affiliates by the insurer or of the insurer by its affiliates.

             (2) Purchases, sales or exchanges of assets.

             (3) Transactions not in the ordinary course of business.

             (4) Guarantees or undertakings for the benefit of an affiliate which result in an actual contingent exposure of the insurer’s assets to liability, other than insurance contracts entered into in the ordinary course of the insurer’s business.

             (5) All management and service contracts and all cost-sharing arrangements, other than cost allocation arrangements based upon generally accepted accounting principles.

             (6) Reinsurance agreements covering all or substantially all of one or more lines of insurance of the ceding company.

             (7) Any dividend or other distribution made to a shareholder.

             (8) Any consolidated agreement to allocate taxes.

      (d) Any pledge of the insurer’s stock, including the stock of any subsidiary or controlling affiliate of the insurer, for a loan made to any member of the insurance holding company system.

 


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      (e) Any other matters concerning transactions between registered insurers and any affiliates as may be included from time to time in any registration forms adopted or approved by the Commissioner.

      2.  A statement verifying that:

      (a) The board of directors of the insurer oversees the corporate governance and internal controls of the insurer; and

      (b) Officers or senior management of the insurer have approved, implemented and continue to maintain and monitor the corporate governance and internal controls of the insurer.

      3.  Financial statements of the insurance holding company system and all affiliates, if requested by the Commissioner. This requirement may be satisfied by providing the most recent statement filed with the United States Securities and Exchange Commissioner pursuant to the Securities Act of 1933, 15 U.S.C. §§ 78a et seq., by the insurance holding company system or its parent corporation.

      Sec. 299. NRS 692C.290 is hereby amended to read as follows:

      692C.290  1.  Each registered insurer shall keep current the information required to be disclosed in its registration statement by reporting all material changes or additions on forms provided by the Commissioner within 15 days after the end of the month in which it learns of each such change or addition, and not less often than annually, except that, subject to the provisions of NRS 692C.390, each registered insurer shall report all dividends and other distributions to shareholders within 5 business days following the declaration and 10 days before payment.

      2.  The principal of a registered insurer shall file an annual report of enterprise risk pursuant to this subsection. If the principal of a registered insurer does not file a report of enterprise risk with the commissioner of the lead state of the insurance company system, as determined by the most recent edition of the Financial Analysis Handbook, published by the [National Association of Insurance Commissioners,] NAIC, in a calendar year, the principal shall file a report of enterprise risk with the Commissioner. The principal shall include in the report the material risks within the insurance holding company system that, to the best of his or her knowledge and belief, may pose enterprise risk to the registered insurer.

      3.  Whenever it appears to the Commissioner that any person has committed a violation of subsection 2 which prevents the full understanding of the enterprise risk to the insurer by affiliates or by the insurance holding company system, the violation may serve as an independent basis for disapproving dividends or distributions and for conducting an examination of the insurer pursuant to NRS 679B.230 to 679B.287, inclusive.

      Sec. 300. NRS 692C.330 is hereby amended to read as follows:

      692C.330  1.  Any person may file with the Commissioner:

      (a) A disclaimer of affiliation with any authorized insurer specified in the disclaimer; or

      (b) A request for a termination of registration on the basis that the person does not, or will not after taking an action specified in the request for termination, control another person specified in the request.

      2.  A disclaimer of affiliation or request for a termination of registration specified in subsection 1 may be filed by the authorized insurer or any member of an insurance holding company system.

 


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member of an insurance holding company system. A disclaimer of affiliation or request for a termination of registration filed pursuant to subsection 1 must include:

      (a) A statement indicating the number of authorized, issued and outstanding voting securities of the person specified in the disclaimer of affiliation or request for a termination of registration;

      (b) A statement indicating the number and percentage of shares of the person specified in the disclaimer of affiliation or request for a termination of registration that are owned or beneficially owned by the person disclaiming control, and the number of those shares for which the person disclaiming control has a direct or indirect right to acquire;

      (c) A statement setting forth all material relationships and bases for affiliation between the person specified in the disclaimer of affiliation or request for a termination of registration and the person and any affiliate of the person who is disclaiming control of the person specified in the disclaimer of affiliation or request for a termination of registration; and

      (d) An explanation of why the person who is disclaiming control does not control the person specified in the disclaimer of affiliation or request for a termination of registration.

      3.  A request for a termination of registration filed pursuant to subsection 1 shall be deemed granted upon filing unless the Commissioner, within 30 days after receipt of the request for a termination of registration, notifies the person, authorized insurer or member of an insurance holding company system that the request is denied.

      4.  [After a disclaimer of affiliation has been filed, the insurer is relieved of any duty to register or report under NRS 692C.260 to 692C.350, inclusive, which may arise out of the insurer’s relationship with the person unless the Commissioner disallows the disclaimer. The Commissioner may disallow the disclaimer only after furnishing all parties in interest with a notice and opportunity to be heard and after making specific findings of fact to support the disallowance.] A disclaimer of affiliation filed pursuant to subsection 1 shall be deemed granted unless the Commissioner, within 30 days after receipt of a complete disclaimer of affiliation, notifies the filing party that the disclaimer of affiliation is disallowed. In the event of disallowance, the disclaiming party may request an administrative hearing, which shall be granted. The disclaiming party is relieved of its duty to register pursuant to NRS 692C.260 to 692C.350, inclusive, if approval of the disclaimer of affiliation has been granted by the Commissioner, or if the disclaimer of affiliation is deemed approved.

      Sec. 301. NRS 692C.350 is hereby amended to read as follows:

      692C.350  1.  The failure to file a registration statement or summary or any amendment thereto , or a report of enterprise risk, required by NRS 692C.260 to 692C.350, inclusive, within the time specified for the filing is a violation of NRS 692C.260 to 692C.350, inclusive.

      2.  Except as otherwise provided in subsection 3, if an insurer fails, without just cause, to file a registration statement required pursuant to NRS 692C.270 [,] to 692C.350, inclusive, the insurer shall, after receiving notice and a hearing, pay a civil penalty of $100 for each day the insurer fails to file the registration statement. The civil penalty may be recovered in a civil action brought by the Commissioner. Any civil penalty paid pursuant to this subsection must be deposited in the State General Fund.

 


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      3.  The maximum civil penalty that may be imposed pursuant to subsection 2 is $20,000. The Commissioner may reduce the amount of the civil penalty if the insurer demonstrates to the satisfaction of the Commissioner that the payment of the civil penalty would impose a financial hardship on the insurer.

      4.  Any officer, director or employee of an insurance holding company system who willfully and knowingly subscribes to or makes or causes to be made any false statement, false report or false filing with the intent to deceive the Commissioner in the performance of his or her duties pursuant to NRS 692C.260 to 692C.350, inclusive, is guilty of a category D felony and shall be punished as provided in NRS 193.130. The officer, director or employee is personally liable for any fine imposed against the officer, director or employee pursuant to that section.

      Sec. 302. NRS 692C.380 is hereby amended to read as follows:

      692C.380  For purposes of NRS 692C.360 to 692C.400, inclusive, an extraordinary dividend or distribution includes any dividend or distribution of cash or other property, whose fair market value together with that of other dividends or distributions made within the preceding 12 months exceeds the [greater] lesser of:

      1.  Ten percent of the insurer’s surplus as regards policyholders as of December 31 next preceding the dividend or distribution; or

      2.  The net gain from operations of the insurer, if the insurer is a life insurer, or the net income, not including realized capital gains if the insurer is not a life insurer, for the 12-month period ending December 31 next preceding the dividend or distribution,

Ê but does not include pro rata distributions of any class of the insurer’s own securities.

      Sec. 303. NRS 692C.420 is hereby amended to read as follows:

      692C.420  1.  Except as otherwise provided in NRS 239.0115, all information, documents and copies thereof obtained by or disclosed to the Commissioner or any other person in the course of an examination or investigation made pursuant to NRS 692C.410, and all information reported pursuant to subsections 12 and 13 of NRS 692C.190 and NRS 692C.260 to 692C.350, inclusive, [must be given] is confidential , [treatment and] is not subject to subpoena , is not subject to discovery, is not admissible in evidence in any private civil action and must not be made public by the Commissioner or any other person, except to insurance departments of other states, without the prior written consent of the insurer to which it pertains unless the Commissioner, after giving the insurer and its affiliates who would be affected thereby notice and an opportunity to be heard, determines that the interests of policyholders, shareholders or the public will be served by the publication thereof, in which event he or she may publish all or any part thereof in any manner as he or she may deem appropriate.

      2.  The Commissioner or any person who receives any documents, materials or other information while acting under the authority of the Commissioner must not be permitted or required to testify in a private civil action concerning any information, document or copy thereof specified in subsection 1.

      3.  The Commissioner may share or receive any information, document or copy thereof specified in subsection 1 in accordance with NRS 679B.122. The sharing or receipt of the information, document or copy pursuant to this subsection does not waive any applicable privilege or claim of confidentiality in the information, document or copy.

 


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subsection does not waive any applicable privilege or claim of confidentiality in the information, document or copy.

      4.  The Commissioner shall enter into a written agreement with the NAIC governing the sharing and use of information specified in subsection 1 that must:

      (a) Specify procedures and protocols regarding the confidentiality and security of information shared with the NAIC and its affiliates and subsidiaries, including procedures and protocols for sharing by the NAIC with other state, federal and international regulators;

      (b) Specify that ownership of the information shared with the NAIC and its affiliates and subsidiaries remains with the Commissioner and the NAIC’s use of the information is subject to the discretion of the Commissioner;

      (c) Require prompt notice to be given to an insurer whose confidential information in the possession of the NAIC is subject to a request or subpoena to the NAIC for disclosure or production; and

      (d) Require the NAIC and its affiliates and subsidiaries to consent to intervention by an insurer in any judicial or administrative action in which the NAIC and its affiliates or subsidiaries may be required to disclose confidential information about the insurer shared with the NAIC and its affiliates and subsidiaries.

      5.  The sharing of information by the Commissioner does not constitute a delegation of regulatory authority or rulemaking, and the Commissioner is solely responsible for the administration, execution and enforcement of the provisions of this section.

      6.  No waiver of any applicable privilege or claim of confidentiality in the documents, materials or information shall occur as a result of disclosure to the Commissioner in accordance with this section or as a result of sharing as authorized in this section.

      7.  Documents, materials and other information in the possession or control of the NAIC in accordance with this section are:

      (a) Confidential by law and privileged;

      (b) Not subject to the provisions of chapter 239 of NRS;

      (c) Not subject to subpoena; and

      (d) Not subject to discovery or admissible in evidence in any private civil action.

      Sec. 304. NRS 692C.485 is hereby amended to read as follows:

      692C.485  1.  A director or officer of an insurance holding company system who knowingly violates, or knowingly participates in or assents to a violation of, NRS 692C.350, 692C.360, 692C.363 or 692C.390, or section 289 of this act, or who knowingly [permits] allows any officer or agent of the insurance holding company to engage in a transaction in violation of NRS 692C.360 or 692C.363 or to pay a dividend or make an extraordinary distribution in violation of NRS 692C.390 shall pay, after receiving notice and a hearing before the Commissioner, a fine of not more than $10,000 for each violation. In determining the amount of the fine, the Commissioner shall consider the appropriateness of the fine in relation to:

      (a) The gravity of the violation;

      (b) The history of any previous violations committed by the director or officer; and

      (c) Any other matters as justice may require.

 


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      2.  Whenever it appears to the Commissioner that an insurer or any director, officer, employee or agent of the insurer has engaged in a transaction or entered into a contract to which the provisions of NRS 692C.363 apply and for which the insurer has not obtained the Commissioner’s approval, the Commissioner may order the insurer to cease and desist immediately from engaging in any further activity relating to the transaction or contract. In addition to issuing such an order, the Commissioner may order the insurer to rescind the contract and return each party to the contract to the position the party was in before the execution of the contract if the issuing of the order is in the best interest of:

      (a) The policyholders or creditors of the insurer; or

      (b) The members of the general public.

      Sec. 305. NRS 693A.030 is hereby amended to read as follows:

      693A.030  1.  Except as otherwise provided in subsections 2, 3 and 4, a domestic insurer formed before, on or after January 1, 1972, shall not engage in any business other than the insurance business and in business activities reasonably and necessarily incidental to the insurance business.

      2.  A title insurer may also engage in business as an escrow agent.

      3.  Any insurer may also engage in business activities reasonably related to the management, supervision, servicing of and protection of its interests as to its lawful investments, and to the full utilization of its facilities.

      4.  An insurer may own subsidiaries which may engage in such businesses as are provided for in [NRS 682A.130.] section 174 of this act.

      Sec. 306. Chapter 694C of NRS is hereby amended by adding thereto the provisions set forth as sections 307, 308 and 309 of this act.

      Sec. 307. “State-chartered risk retention group” means any risk retention group, as defined in NRS 695E.110, that is formed in accordance with the laws of this State as an association captive insurer.

      Sec. 308. 1.  In addition to the information required pursuant to NRS 694C.210, a state-chartered risk retention group being formed as an association captive insurer 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;

      (c) The coverages to be offered by the group; and

      (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.

 


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      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 3.

      Sec. 309. 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.

 


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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;

 


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      (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;

      (c) Responsibilities;

      (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;

      (c) Confidentiality;

      (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.

 


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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.

      (c) “Material relationship,” of a person with a risk retention group, includes, without limitation:

             (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 paragraph.

             (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.

      Sec. 310. NRS 694C.010 is hereby amended to read as follows:

      694C.010  As used in this chapter, unless the context otherwise requires, the words and terms defined in NRS 694C.020 to 694C.150, inclusive, and section 307 of this act, have the meanings ascribed to them in those sections.

      Sec. 311.  NRS 695E.140 is hereby amended to read as follows:

      695E.140  1.  A risk retention group seeking to be chartered in this State must obtain a certificate of authority pursuant to chapter 694C of NRS to transact liability insurance and, except as otherwise provided in this chapter, must comply with:

      (a) All of the laws, regulations and requirements applicable to liability insurers in this State, unless otherwise approved by the Commissioner; and

      (b) The provisions of NRS 695E.150 to 695E.210, inclusive, to the extent that those provisions do not limit or conflict with the provisions with which the group is required to comply pursuant to paragraph (a).

      2.  A risk retention group applying to be chartered in this State must submit to the Commissioner [in summary form:

 


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      (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;

      (c) The coverages to be offered by the group; and

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

      3.  Before it may transact insurance in any state, the 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.

      4.  A risk retention group chartered in this State must file with the Commissioner on or before February 1 of each year a statement containing information concerning the immediately preceding year, which must be:

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

      (b) Prepared in accordance with the Accounting Practices and Procedures Manual adopted by the National Association of Insurance Commissioners and effective on January 1, 2001, and as amended by the National Association of Insurance Commissioners after that date; and

      (c) Submitted on a diskette, if required by the Commissioner.

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

      (a) All information submitted by a risk retention group to the Commissioner pursuant to subsections 2 and 4; and

      (b) Any revisions to a plan of operation submitted to the Commissioner pursuant to subsection 3.

      6.]  an application for licensure as an association captive insurer in accordance with NRS 694C.210.

      3.  A risk retention group chartered in a state other than Nevada that is seeking to transact insurance as a risk retention group in this State must comply with the provisions of NRS 695E.150 to 695E.210, inclusive [.] , and section 308 of this act.

      Sec. 312. NRS 179.259 is hereby amended to read as follows:

      179.259  1.  Except as otherwise provided in subsections 3 , 4 and [4,] 5, 5 years after an eligible person completes a program for reentry, the court may order sealed all documents, papers and exhibits in the eligible person’s record, minute book entries and entries on dockets, and other documents relating to the case in the custody of such other agencies and officers as are named in the court’s order. The court may order those records sealed without a hearing unless the Division of Parole and Probation of the Department of Public Safety petitions the court, for good cause shown, not to seal the records and requests a hearing thereon.

 


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      2.  If the court orders sealed the record of an eligible person, the court shall send a copy of the order to each agency or officer named in the order. Each such agency or officer shall notify the court in writing of its compliance with the order.

      3.  A professional licensing board is entitled, for the purpose of determining suitability for a license or liability to discipline for misconduct, to inspect and to copy from a record sealed pursuant to this section.

      4.  The Division of Insurance of the Department of Business and Industry is entitled, for the purpose of determining suitability for a license or liability to discipline for misconduct, to inspect and to copy from a record sealed pursuant to this section.

      5.  A person may not petition the court to seal records relating to a conviction of a crime against a child or a sexual offense.

      [5.] 6.  As used in this section:

      (a) “Crime against a child” has the meaning ascribed to it in NRS 179D.0357.

      (b) “Eligible person” means a person who has:

             (1) Successfully completed a program for reentry to which the person participated in pursuant to NRS 209.4886, 209.4888, 213.625 or 213.632; and

             (2) Been convicted of a single offense which was punishable as a felony and which did not involve the use or threatened use of force or violence against the victim. For the purposes of this subparagraph, multiple convictions for an offense punishable as a felony shall be deemed to constitute a single offense if those offenses arose out of the same transaction or occurrence.

      (c) “Program for reentry” means:

             (1) A correctional program for reentry of offenders and parolees into the community that is established by the Director of the Department of Corrections pursuant to NRS 209.4887; or

             (2) A judicial program for reentry of offenders and parolees into the community that is established in a judicial district pursuant to NRS 209.4883.

      (d) “Sexual offense” has the meaning ascribed to it in paragraph (b) of subsection 7 of NRS 179.245.

      Sec. 313. NRS 179.301 is hereby amended to read as follows:

      179.301  1.  The State Gaming Control Board and the Nevada Gaming Commission and their employees, agents and representatives may inquire into and inspect any records sealed pursuant to NRS 179.245 or 179.255, if the event or conviction was related to gaming, to determine the suitability or qualifications of any person to hold a state gaming license, manufacturer’s, seller’s or distributor’s license or registration as a gaming employee pursuant to chapter 463 of NRS. Events and convictions, if any, which are the subject of an order sealing records:

      (a) May form the basis for recommendation, denial or revocation of those licenses.

      (b) Must not form the basis for denial or rejection of a gaming work permit unless the event or conviction relates to the applicant’s suitability or qualifications to hold the work permit.

      2.  The Division of Insurance of the Department of Business and Industry and its employees may inquire into and inspect any records sealed pursuant to NRS 179.245 or 179.255, if the event or conviction was related to insurance, to determine the suitability or qualifications of any person to hold a license, certification or authorization issued in accordance with title 57 of NRS.

 


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to insurance, to determine the suitability or qualifications of any person to hold a license, certification or authorization issued in accordance with title 57 of NRS. Events and convictions, if any, which are the subject of an order sealing records may form the basis for recommendation, denial or revocation of those licenses, certifications and authorizations.

      3.  A prosecuting attorney may inquire into and inspect any records sealed pursuant to NRS 179.245 or 179.255 if:

      (a) The records relate to a violation or alleged violation of NRS 202.575; and

      (b) The person who is the subject of the records has been arrested or issued a citation for violating NRS 202.575.

      [3.] 4.  The Central Repository for Nevada Records of Criminal History and its employees may inquire into and inspect any records sealed pursuant to NRS 179.245 or 179.255 that constitute information relating to sexual offenses, and may notify employers of the information in accordance with NRS 179A.180 to 179A.240, inclusive.

      [4.] 5.  Records which have been sealed pursuant to NRS 179.245 or 179.255 and which are retained in the statewide registry established pursuant to NRS 179B.200 may be inspected pursuant to chapter 179B of NRS by an officer or employee of the Central Repository for Nevada Records of Criminal History or a law enforcement officer in the regular course of his or her duties.

      [5.] 6.  The State Board of Pardons Commissioners and its agents and representatives may inquire into and inspect any records sealed pursuant to NRS 179.245 or 179.255 if the person who is the subject of the records has applied for a pardon from the Board.

      [6.] 7.  As used in this section:

      (a) “Information relating to sexual offenses” means information contained in or concerning a record relating in any way to a sexual offense.

      (b) “Sexual offense” has the meaning ascribed to it in NRS 179A.073.

      Sec. 314. NRS 239.010 is hereby amended to read as follows:

      239.010  1.  Except as otherwise provided in this section and NRS 1.4683, 1A.110, 49.095, 62D.420, 62D.440, 62E.516, 62E.620, 62H.025, 62H.030, 62H.170, 62H.220, 62H.320, 76.160, 78.152, 80.113, 81.850, 82.183, 86.246, 86.54615, 87.515, 87.5413, 87A.200, 87A.580, 87A.640, 88.3355, 88.5927, 88.6067, 88A.345, 88A.7345, 89.045, 89.251, 90.730, 91.160, 116.757, 116A.270, 116B.880, 118B.026, 119.260, 119.265, 119.267, 119.280, 119A.280, 119A.653, 119B.370, 119B.382, 120A.690, 125.130, 125B.140, 126.141, 126.161, 126.163, 126.730, 127.007, 127.057, 127.130, 127.140, 127.2817, 130.312, 159.044, 172.075, 172.245, 176.015, 176.0625, 176.09129, 176.156, 176A.630, 178.39801, 178.4715, 178.5691, 179.495, 179A.070, 179A.165, 179A.450, 179D.160, 200.3771, 200.3772, 200.5095, 200.604, 202.3662, 205.4651, 209.392, 209.3925, 209.419, 209.521, 211A.140, 213.010, 213.040, 213.095, 213.131, 217.105, 217.110, 217.464, 217.475, 218E.625, 218F.150, 218G.130, 218G.240, 218G.350, 228.270, 228.450, 228.495, 228.570, 231.069, 233.190, 237.300, 239.0105, 239.0113, 239B.030, 239B.040, 239B.050, 239C.140, 239C.210, 239C.230, 239C.250, 239C.270, 240.007, 241.020, 241.030, 242.105, 244.264, 244.335, 250.087, 250.130, 250.140, 250.150, 268.095, 268.490, 268.910, 271A.105, 281.195, 281A.350, 281A.440, 281A.550, 284.4068, 286.110, 287.0438, 289.025, 289.080, 289.387, 293.5002, 293.503, 293.558, 293B.135, 293D.510, 331.110, 332.061, 332.351, 333.333, 333.335, 338.070, 338.1379, 338.1725, 338.1727, 348.420, 349.597, 349.775, 353.205, 353A.085, 353A.100, 353C.240, 360.240, 360.247, 360.255, 360.755, 361.044, 361.610, 365.138, 366.

 


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338.070, 338.1379, 338.1725, 338.1727, 348.420, 349.597, 349.775, 353.205, 353A.085, 353A.100, 353C.240, 360.240, 360.247, 360.255, 360.755, 361.044, 361.610, 365.138, 366.160, 368A.180, 372A.080, 378.290, 378.300, 379.008, 386.655, 387.626, 387.631, 388.5275, 388.528, 388.5315, 388.750, 391.035, 392.029, 392.147, 392.264, 392.271, 392.652, 392.850, 394.167, 394.1698, 394.447, 394.460, 394.465, 396.3295, 396.405, 396.525, 396.535, 398.403, 408.3885, 408.3886, 412.153, 416.070, 422.290, 422.305, 422A.320, 422A.350, 425.400, 427A.1236, 427A.872, 432.205, 432B.175, 432B.280, 432B.290, 432B.407, 432B.430, 432B.560, 433.534, 433A.360, 439.270, 439.840, 439B.420, 440.170, 441A.195, 441A.220, 441A.230, 442.330, 442.395, 445A.665, 445B.570, 449.209, 449.245, 449.720, 453.1545, 453.720, 453A.610, 453A.700, 458.055, 458.280, 459.050, 459.3866, 459.555, 459.7056, 459.846, 463.120, 463.15993, 463.240, 463.3403, 463.3407, 463.790, 467.1005, 467.137, 481.063, 482.170, 482.5536, 483.340, 483.363, 483.800, 484E.070, 485.316, 503.452, 522.040, 534A.031, 561.285, 571.160, 584.583, 584.655, 598.0964, 598.0979, 598.098, 598A.110, 599B.090, 603.070, 603A.210, 604A.710, 612.265, 616B.012, 616B.015, 616B.315, 616B.350, 618.341, 618.425, 622.310, 623.131, 623A.353, 624.110, 624.265, 624.327, 625.425, 625A.185, 628.418, 629.069, 630.133, 630.30665, 630.336, 630A.555, 631.368, 632.121, 632.125, 632.405, 633.283, 633.301, 633.524, 634.212, 634.214, 634A.185, 635.158, 636.107, 637.085, 637A.315, 637B.288, 638.087, 638.089, 639.2485, 639.570, 640.075, 640A.220, 640B.730, 640C.400, 640C.745, 640C.760, 640D.190, 640E.340, 641.090, 641A.191, 641B.170, 641C.760, 642.524, 643.189, 644.446, 645.180, 645.625, 645A.050, 645A.082, 645B.060, 645B.092, 645C.220, 645C.225, 645D.130, 645D.135, 645E.300, 645E.375, 645G.510, 645H.320, 645H.330, 647.0945, 647.0947, 648.033, 648.197, 649.065, 649.067, 652.228, 654.110, 656.105, 661.115, 665.130, 665.133, 669.275, 669.285, 669A.310, 671.170, 673.430, 675.380, 676A.340, 676A.370, 677.243, 679B.122, 679B.152, 679B.159, 679B.190, 679B.285, 679B.690, 680A.270, 681A.440, 681B.260, 681B.280, 683A.0873, 685A.077, 686A.289, 686B.170, 686C.306, 687A.110, 687A.115, 687C.010, 688C.230, 688C.480, 688C.490, 692A.117, 692C.190, 692C.420, 693A.480, 693A.615, 696B.550, 703.196, 704B.320, 704B.325, 706.1725, 710.159, 711.600, and sections 38, 283, 284 and 285 of this act, sections 35, 38 and 41 of chapter 478, Statutes of Nevada 2011 and section 2 of chapter 391, Statutes of Nevada 2013 and unless otherwise declared by law to be confidential, all public books and public records of a governmental entity must be open at all times during office hours to inspection by any person, and may be fully copied or an abstract or memorandum may be prepared from those public books and public records. Any such copies, abstracts or memoranda may be used to supply the general public with copies, abstracts or memoranda of the records or may be used in any other way to the advantage of the governmental entity or of the general public. This section does not supersede or in any manner affect the federal laws governing copyrights or enlarge, diminish or affect in any other manner the rights of a person in any written book or record which is copyrighted pursuant to federal law.

      2.  A governmental entity may not reject a book or record which is copyrighted solely because it is copyrighted.

      3.  A governmental entity that has legal custody or control of a public book or record shall not deny a request made pursuant to subsection 1 to inspect or copy or receive a copy of a public book or record on the basis that the requested public book or record contains information that is confidential if the governmental entity can redact, delete, conceal or separate the confidential information from the information included in the public book or record that is not otherwise confidential.

 


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inspect or copy or receive a copy of a public book or record on the basis that the requested public book or record contains information that is confidential if the governmental entity can redact, delete, conceal or separate the confidential information from the information included in the public book or record that is not otherwise confidential.

      4.  A person may request a copy of a public record in any medium in which the public record is readily available. An officer, employee or agent of a governmental entity who has legal custody or control of a public record:

      (a) Shall not refuse to provide a copy of that public record in a readily available medium because the officer, employee or agent has already prepared or would prefer to provide the copy in a different medium.

      (b) Except as otherwise provided in NRS 239.030, shall, upon request, prepare the copy of the public record and shall not require the person who has requested the copy to prepare the copy himself or herself.

      Sec. 315. NRS 482.215 is hereby amended to read as follows:

      482.215  1.  All applications for registration, except applications for renewal of registration, must be made as provided in this section.

      2.  Except as otherwise provided in NRS 482.294, applications for all registrations, except renewals of registration, must be made in person, if practicable, to any office or agent of the Department or to a registered dealer.

      3.  Each application must be made upon the appropriate form furnished by the Department and contain:

      (a) The signature of the owner, except as otherwise provided in subsection 2 of NRS 482.294, if applicable.

      (b) The owner’s residential address.

      (c) The owner’s declaration of the county where he or she intends the vehicle to be based, unless the vehicle is deemed to have no base. The Department shall use this declaration to determine the county to which the governmental services tax is to be paid.

      (d) A brief description of the vehicle to be registered, including the name of the maker, the engine, identification or serial number, whether new or used, and the last license number, if known, and the state in which it was issued, and upon the registration of a new vehicle, the date of sale by the manufacturer or franchised and licensed dealer in this State for the make to be registered to the person first purchasing or operating the vehicle.

      (e) Except as otherwise provided in this paragraph, if the applicant is not an owner of a fleet of vehicles or a person described in subsection 5:

             (1) Proof satisfactory to the Department or registered dealer that the applicant carries insurance on the vehicle provided by an insurance company licensed by the Division of Insurance of the Department of Business and Industry and approved to do business in this State as required by NRS 485.185; and

             (2) A declaration signed by the applicant that he or she will maintain the insurance required by NRS 485.185 during the period of registration. If the application is submitted by electronic means pursuant to NRS 482.294, the applicant is not required to sign the declaration required by this subparagraph.

      (f) If the applicant is an owner of a fleet of vehicles or a person described in subsection 5, evidence of insurance provided by an insurance company licensed by the Division of Insurance of the Department of Business and Industry and approved to do business in this State as required by NRS 485.185:

 


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             (1) In the form of a certificate of insurance on a form approved by the Commissioner of Insurance;

             (2) In the form of a card issued pursuant to NRS 690B.023 or in an electronic format allowed pursuant to that section, which identifies the vehicle or the registered owner of the vehicle; or

             (3) In another form satisfactory to the Department.

Ê The Department may file that evidence, return it to the applicant or otherwise dispose of it.

      (g) If required, evidence of the applicant’s compliance with controls over emission.

      (h) If the application for registration is submitted via the Internet, a statement which informs the applicant that he or she may make a nonrefundable monetary contribution of $2 for each vehicle registered for the Complete Streets Program, if any, created pursuant to NRS 244.2643, 277A.285 or 403.575, as applicable, based on the declaration made pursuant to paragraph (c). The application form must state in a clear and conspicuous manner that a contribution for a Complete Streets Program is nonrefundable and voluntary and is in addition to any fees required for registration, and must include a method by which the applicant must indicate his or her intention to opt in or opt out of making such a contribution.

      4.  The application must contain such other information as is required by the Department or registered dealer and must be accompanied by proof of ownership satisfactory to the Department.

      5.  For purposes of the evidence required by paragraph (f) of subsection 3:

      (a) Vehicles which are subject to the fee for a license and the requirements of registration of the Interstate Highway User Fee Apportionment Act, and which are based in this State, may be declared as a fleet by the registered owner thereof on his or her original application for or application for renewal of a proportional registration. The owner may file a single certificate of insurance covering that fleet.

      (b) Other fleets composed of 10 or more vehicles based in this State or vehicles insured under a blanket policy which does not identify individual vehicles may each be declared annually as a fleet by the registered owner thereof for the purposes of an application for his or her original or any renewed registration. The owner may file a single certificate of insurance covering that fleet.

      (c) A person who qualifies as a self-insurer pursuant to the provisions of NRS 485.380 may file a copy of his or her certificate of self-insurance.

      (d) A person who qualifies for an operator’s policy of liability insurance pursuant to the provisions of NRS 485.186 and 485.3091 may file evidence of that insurance.

      Sec. 316. NRS 485.034 is hereby amended to read as follows:

      485.034  “Evidence of insurance” means:

      1.  The form , or electronic format, provided by an insurer pursuant to NRS 690B.023 as evidence of a contract of insurance for a motor vehicle liability policy; or

      2.  The certificate of self-insurance issued to a self-insurer by the Department pursuant to NRS 485.380.

      Sec. 317. NRS 485.187 is hereby amended to read as follows:

      485.187  1.  Except as otherwise provided in subsection 5, the owner of a motor vehicle shall not:

 


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ê2015 Statutes of Nevada, Page 3515 (Chapter 522, SB 67)ê

 

      (a) Operate the motor vehicle, if it is registered or required to be registered in this State, without having insurance as required by NRS 485.185.

      (b) Operate or knowingly permit the operation of the motor vehicle without having evidence of insurance of the operator or the vehicle in the vehicle.

      (c) Fail or refuse to surrender, upon demand, to a peace officer or to an authorized representative of the Department the evidence of insurance. The surrender, upon demand, of an evidence of insurance issued in electronic format does not constitute consent for a peace officer or authorized representative of the Department to access other contents of any device used to display the evidence of insurance and surrendered in compliance with this section.

      (d) Knowingly permit the operation of the motor vehicle in violation of subsection 3 of NRS 485.186.

      2.  A person shall not operate the motor vehicle of another person unless the person who will operate the motor vehicle:

      (a) First ensures that the required evidence of insurance is present in the motor vehicle [;] or available electronically; or

      (b) Has his or her own evidence of insurance which covers that person as the operator of the motor vehicle.

      3.  Except as otherwise provided in subsection 4, any person who violates subsection 1 or 2 is guilty of a misdemeanor. Except as otherwise provided in this subsection, in addition to any other penalty, a person sentenced pursuant to this subsection shall be punished by a fine of not less than $600 nor more than $1,000 for each violation. The fine must be reduced to $100 for the first violation if the person obtains a motor vehicle liability policy by the time of sentencing, unless:

      (a) The person has registered the vehicle as part of a fleet of vehicles pursuant to subsection 5 of NRS 482.215; or

      (b) The person has been issued a certificate of self-insurance pursuant to NRS 485.380.

      4.  A court:

      (a) Shall not find a person guilty or fine a person for a violation of paragraph (a), (b) or (c) of subsection 1 or for a violation of subsection 2 if the person presents evidence to the court that the insurance required by NRS 485.185 was in effect at the time demand was made for it.

      (b) Except as otherwise provided in paragraph (a), may impose a fine of not more than $1,000 for a violation of paragraph (a), (b) or (c) of subsection 1, and suspend the balance of the fine on the condition that the person presents proof to the court each month for 12 months that the insurance required by NRS 485.185 is currently in effect.

      5.  The provisions of paragraphs (b) and (c) of subsection 1 do not apply if the motor vehicle in question displays a valid permit issued by the Department pursuant to subsection 1 or 2 of NRS 482.3955, or NRS 482.396 or 482.3965 authorizing the movement or operation of that vehicle within the State for a limited time.

      Sec. 318. NRS 616B.336 is hereby amended to read as follows:

      616B.336  1.  Each self-insured employer shall furnish [audited] financial statements [, certified by an auditor licensed to do business in this State,] audited by an independent certified public accountant, or foreign equivalent, to the Commissioner annually within 120 days after the expiration of the self-insured employer’s fiscal year [.] , or within such other timeframe as the Commissioner may allow.

 


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ê2015 Statutes of Nevada, Page 3516 (Chapter 522, SB 67)ê

 

      2.  The Commissioner may examine the records and interview the employees of each self-insured employer as often as the Commissioner deems advisable to determine the adequacy of the deposit which the employer has made with the Commissioner, the sufficiency of reserves and the reporting, handling and processing of injuries or claims. The Commissioner shall examine the records for that purpose at least once every 3 years. The self-insured employer shall reimburse the Commissioner for the cost of the examination.

      Sec. 319. NRS 682A.010, 682A.030, 682A.040, 682A.050, 682A.060, 682A.070, 682A.080, 682A.090, 682A.100, 682A.110, 682A.120, 682A.130, 682A.140, 682A.150, 682A.160, 682A.170, 682A.180, 682A.190, 682A.200, 682A.210, 682A.220, 682A.230, 682A.240, 682A.250, 682A.260, 682A.270, 682A.280, 682A.290, 689A.695, 689B.115 and 689C.250 are hereby repealed.

      Sec. 320.  This act becomes effective on July 1, 2015.

________

CHAPTER 523, SB 185

Senate Bill No. 185–Senator Kieckhefer

 

CHAPTER 523

 

[Approved: June 10, 2015]

 

AN ACT relating to suppression of fires; temporarily requiring the entity that is responsible for the closest emergency fire-fighting vehicle to respond to and suppress certain fires in certain counties; exempting an airport authority located in certain counties from this requirement; requiring certain entities to negotiate an automatic aid agreement concerning certain matters; and providing other matters properly relating thereto.

Legislative Counsel’s Digest:

      Existing law authorizes the municipalities of this State to provide fire protection services. (NRS 268.730) Existing law also authorizes the creation of districts for a fire department by boards of county commissioners and the creation of fire protection districts and county fire protection districts. (NRS 244.2961, 473.034, 474.110, 474.460) Section 1 of this bill requires, in a county whose population is 100,000 or more but less than 700,000 (currently Washoe County), the entity that is responsible for the emergency fire-fighting vehicle located closest to a structure or brush fire to respond to and take all actions necessary to suppress the fire regardless of whether the location of the fire falls within the territory served by the entity. Section 1 exempts an airport authority in such a county and any vehicle or firefighter of such an airport authority from this requirement. Section 1 additionally: (1) requires each entity, other than an airport authority which maintains an emergency fire-fighting vehicle in such a county, to negotiate an automatic aid agreement with each other such entity which addresses the reimbursement of costs, geographic areas of coverage or any other relevant issue or any combination thereof; and (2) provides that a failure to reach an automatic aid agreement does not exempt an entity from complying with the requirement to respond to a fire if it is responsible for the emergency fire-fighting vehicle located closest to the fire. Section 2 of this bill provides that the provisions of section 1 expire by limitation on June 30, 2017.

 


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ê2015 Statutes of Nevada, Page 3517 (Chapter 523, SB 185)ê

 

EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted.

 

      Whereas, The provision of fire protection and related emergency services is fundamental to what the people of this State expect from their local governments; and

      Whereas, Providing such services in a timely, effective and efficient manner is critical to the protection of life and property; and

      Whereas, The infighting that has continuously occurred for several years between the entities that provide fire protection and related emergency services in Washoe County threatens the lives and property of the people of this State who reside in that county; and

      Whereas, The failure of the local governments in Washoe County to resolve this dispute in a timely manner now requires the Nevada Legislature to intervene and ensure that the lives and property of the people of this State who reside in Washoe County are no longer put at risk by the reluctance of these entities to find an agreement that protects their residents; now, therefore,

 

THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN

SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:

 

      Section 1. Chapter 475 of NRS is hereby amended by adding thereto a new section to read as follows:

      1.  Notwithstanding any provision of law to the contrary, in a county whose population is 100,000 or more but less than 700,000, the entity that is responsible for the emergency fire-fighting vehicle located closest to a structure or brush fire, unless that entity is described in subsection 4, shall respond to and take all actions necessary to suppress the fire regardless of whether the fire occurs within the territory served by the entity.

      2.  Each entity, other than an airport authority which maintains an emergency fire-fighting vehicle in a county whose population is 100,000 or more but less than 700,000, shall negotiate an automatic aid agreement with each other such entity to address:

      (a) The reimbursement of costs for actions to suppress fires pursuant to subsection 1;

      (b) Geographic areas to be covered by each entity, except that any such geographic areas must be established so that, at a minimum, the entity responsible for the emergency fire-fighting vehicle located closest to a structure or brush fire is required to respond to the fire as described in subsection 1; or

      (c) Any other issues relating to the requirements of subsection 1 identified by the entities.

      3.  The failure of an entity to enter into an automatic aid agreement pursuant to subsection 2 does not exempt the entity from the requirements imposed by subsection 1.

      4.  The provisions of subsection 1 do not apply to an airport authority or to any emergency fire-fighting vehicle or firefighter of an airport authority.

      Sec. 2.  This act expires by limitation on June 30, 2017.

________

 


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ê2015 Statutes of Nevada, Page 3518ê

 

CHAPTER 524, SB 484

Senate Bill No. 484–Committee on Judiciary

 

CHAPTER 524

 

[Approved: June 10, 2015]

 

AN ACT relating to personal financial administration; revising provisions relating to the distribution and administration of the estate of a deceased person; revising provisions governing certain nonprobate transfers; revising provisions relating to the creation and administration of trusts; providing for the creation and administration of public benefit trusts; revising the powers that may be exercised by a trustee; revising provisions relating to directed trusts; revising provisions relating to the jurisdiction of a court in cases concerning the administration of the estate of a deceased person and the administration of trusts; and providing other matters properly relating thereto.

Legislative Counsel’s Digest:

      Sections 1 and 2 of this bill provide methods for recording the termination of a life estate in a manner similar to existing law for terminating a joint tenancy.

      Section 3 of this bill establishes the effective date for the existing law concerning the effect of divorce on certain instruments.

      Existing law provides that, with one exception, a domestic partner has the identical rights and responsibilities as those granted to or imposed upon a spouse. (NRS 122A.200) Sections 5, 7 and 10 of this bill clarify that any reference to a spouse in title 12 of NRS is equally a reference to a domestic partner. Sections 35.3-35.7 of this bill provide that same clarification with respect to title 13 of NRS.

      Existing law defines the term “interested person” for the purpose of determining who is entitled to receive notice of, and participate in, a proceeding relating to the estate of a deceased person. (NRS 132.185) Sections 9 and 11 of this bill amend this definition to include all persons whose interest in an estate or trust will be materially affected by a decision of a fiduciary or a decision of the court and that a person’s status as an interested person is determined according to the particular purposes of, and the matter involved in, each proceeding.

      Existing law provides that if a decedent executed a will before his or her marriage, the will is revoked as to the surviving spouse of the decedent unless the spouse is provided for in the will or is mentioned in the will in such a way that indicates an intent not to make a provision for the spouse. (NRS 133.110) Section 12 of this bill revises this provision so that such a will is not revoked if the will refers to a future spouse by name.

      Section 13 of this bill provides that if a declaratory judgment establishing the validity of a will is entered during the lifetime of the person executing the will, the validity of the will cannot be challenged after the death of the person executing the will. Section 13 does not prohibit an action to establish that the will was revoked or that the decedent executed a valid later will.

      Existing law establishes the qualifications for a person to serve as executor or administrator of a decedent’s estate. (NRS 138.020, 139.010) Sections 14 and 16 of this bill authorize a court to disqualify a person from acting as the executor or administrator of a decedent’s estate upon proof of any compelling reason.

      Existing law establishes the authority of administrators with the will annexed and the order of appointment for such administrators. (NRS 138.090) Section 15 of this bill provides certain discretionary powers to administrators with the will annexed. Section 15 also provides that a person who is expressly excluded as a beneficiary or as a fiduciary in a will is ineligible to serve as an administrator with the will annexed and that the court has discretion to disregard the order of priority for the appointment of an administrator under existing law to favor the appointment of certain beneficiaries of the will as administrators with the will annexed.

 


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ê2015 Statutes of Nevada, Page 3519 (Chapter 524, SB 484)ê

 

and that the court has discretion to disregard the order of priority for the appointment of an administrator under existing law to favor the appointment of certain beneficiaries of the will as administrators with the will annexed.

      Section 17 of this bill provides a technical correction to NRS 143.380 concerning the sale of property held in an estate after the personal representative is granted full authority under the Independent Administration of Estates Act.

      Existing law requires an appraisal of certain property of the estate of a deceased person and an inventory of all estate property. (NRS 144.010, 144.020, 144.040) Sections 18 and 19 of this bill authorize the waiver of such an appraisal or inventory in certain circumstances.

      Existing law provides that if a person dies leaving an estate the gross value of which, after deducting encumbrances, is $100,000 or less, the estate must not be administered and must be assigned and set apart, after directing such payments as the court deems just, for the support of the surviving spouse or any minor children of the decedent. (NRS 146.070) Section 20 of this bill authorizes the court to reduce the amount assigned and set apart for the surviving spouse or any minor children of the decedent by the amount of certain nonprobate transfers to those persons.

      Sections 25 and 63 of this bill enact provisions governing personal jurisdiction over certain persons in proceedings related to the estate of a deceased person and the administration of a trust and governing the law to be applied in certain proceedings related to trusts.

      Existing law creates a presumption that certain transfers at death are void due to fraud, undue influence or coercion. (NRS 155.097, 155.0975) Sections 33 and 34 of this bill create the same presumption for certain transfers that occur during the lifetime of the transferor and further define the applicability of when the presumption of undue influence arises. Existing law authorizes the court to impose certain sanctions on a person whom the court finds to be a vexatious litigant in a proceeding related to the administration of the estate of a deceased person or a trust. (NRS 155.165) Section 35 of this bill includes a trustee or a personal representative as a person who may be a vexatious litigant.

      Existing law enumerates the powers of a trustee. (Chapter 163 of NRS) Sections 40 and 41 of this bill add to the powers of a trustee the power to combine or divide trusts and the power to change the name of a trust in certain circumstances. Section 46.5 of this bill authorizes certain trustees to terminate certain trusts that have a value less than $100,000 or are uneconomical to administer if the trustee concludes that the value of the property held by the trust is insufficient to justify the cost of administering the trust. Existing law governs the administration of directed trusts, which are trusts under which someone other than the trustee has the authority to direct the trustee to take certain actions. (NRS 163.553-163.556) Sections 42, 43, 55 and 56 of this bill amend provisions governing directed trusts. Section 55 provides that a trustee of a directed trust is not liable individually or as a fiduciary for a loss resulting from the trustee’s compliance with certain directions or failure to take any proposed action that required an approval which was not given or was contingent upon a condition that was not satisfied. Section 44 of this bill provides for the creation and administering of public benefit trusts, which are trusts without identifiable beneficiaries that are not charitable trusts and are established to further one or more specifically declared religious, scientific, literary, educational, community development, personal improvement or philanthropic purpose that is not illegal or against public policy. Existing law provides that a trust may be created by a declaration by the owner of property that he or she holds the property as trustee. (NRS 163.002, 163.004, 163.006) Section 48 of this bill provides that regardless of the formal title to the property, in the absence of a contrary declaration by the owner or a transfer of the property to a third party: (1) property declared to be trust property and all the income and reinvestment thereof remains trust property; and (2) any additions or contributions to accounts or certain other property declared to be trust property are also trust property. Section 49 of this bill clarifies the powers a settlor has in creating terms of a trust and establishes a default position that a trust is irrevocable unless and to the extent a settlor specifically reserves the right to amend such trust.

 


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      Section 45 of this bill provides for the appointment of a successor trustee where a trust contains no provision for such appointment. Section 46 of this bill authorizes a fiduciary to classify gains from the sale or exchange of trust assets as income for tax purposes. Section 53 of this bill provides that a beneficiary holding a discretionary interest in a trust has no enforceable right to a distribution. Section 50 of this bill provides for the creation of charitable and public benefit trusts. Sections 55 and 56 of this bill further extend the provisions establishing the situations in which a directed fiduciary is not liable for actions taken on behalf of the trust. Existing law permits a trustee with discretion or authority to distribute trust income or principal to decant such income or principal to a second trust. (NRS 163.556) Section 59 of this bill provides choice of law provisions applicable to the construction and administration of trusts. Section 60 of this bill allows a settlor to include language in the trust requiring that disputes arising thereunder are subject to arbitration and provides a method for such arbitration. Under existing law, in order for a court to assume jurisdiction over a case involving a trust, a petition to confirm a trustee must be filed. (NRS 164.010) Sections 61 and 62 of this bill provide for the creation and enforcement of nonjudicial settlement agreements between all indispensable parties to a trust. Section 63 of this bill provides for a petition requesting the court to assume jurisdiction without confirming the trustee.

      Section 64 of this bill provides a court with exclusive jurisdiction to determine whether property not formally titled in the name of the trust constitutes trust property and where a person contests the validity of the trust in a declaratory judgment action. Section 64 further defines the circumstances and situations in which a trustee may decant a trust to a second trust in light of federal taxation laws. Section 66 of this bill authorizes a trustee presenting a certification of trust to include a declaration of a trust’s domicile and governing law. Under the Uniform Prudent Investor Act, as adopted by this State, a trustee is authorized to take certain action without court approval if all interested persons consent or acquiesce in such action. (NRS 164.725) Section 67 of this bill authorizes a trustee, trust protector or trust advisor to use that same procedure for any aspect of trust administration. Existing law provides that a trustee who invests and manages trust property owes a duty to the beneficiaries to comply with the prudent investor rule set forth in existing law, but that a trustee is not liable to a beneficiary to the extent the trustee acted in reasonable reliance on the terms of the trust. (NRS 164.740) Section 68 of this bill provides that such a trustee is not liable to a beneficiary if the trustee determined in good faith not to diversify the investments of the trust in accordance with existing law.

      Existing law governs the duty of a trustee to inform and account to a trust’s beneficiaries. (Chapter 165 of NRS) Sections 70-85 of this bill revise chapter 165 of NRS to restructure the trust accounting rules applicable to testamentary and nontestamentary trusts. Nevada’s current law provides different requirements for accountings applicable to testamentary trusts and nontestamentary trusts; these revisions establish one set of accounting rules for both types of trusts.

 

EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted.

 

THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN

SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:

 

      Section 1. NRS 40.515 is hereby amended to read as follows:

      40.515  1.  If any person has died, or shall hereafter die, who at the time of the person’s death was the owner of a life estate which terminates by reason of the person’s death, any person interested in the property, or in the title thereto, in which such life estate was held, may file in the district court of the county in which the property is situated, the person’s verified petition, setting forth such facts, and thereupon and after such notice by publication or otherwise, as the court or judge may order, the court or judge shall hear such petition and the evidence offered in support thereof, and if upon such hearing it shall appear that such life estate of such deceased person absolutely terminated by reason of the person’s death, the court or judge shall make an order to that effect, and thereupon a certified copy of such order may be recorded in the office of the county recorder.

 


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petition and the evidence offered in support thereof, and if upon such hearing it shall appear that such life estate of such deceased person absolutely terminated by reason of the person’s death, the court or judge shall make an order to that effect, and thereupon a certified copy of such order may be recorded in the office of the county recorder.

      2.  As an alternative method of terminating the interest of any person who has died, or will hereafter die, and who at the time of the person’s death was the owner of a life estate which terminates by reason of the person’s death, any person who has knowledge of the facts may record in the office of the county recorder in the county where the property is situated an affidavit meeting the requirements of NRS 111.365, accompanied by a certified copy of the death certificate of the deceased person.

      Sec. 2. NRS 111.365 is hereby amended to read as follows:

      111.365  1.  In the case of real property owned by two or more persons as joint tenants or as community property with right of survivorship, it is presumed that all title or interest in and to that real property of each of one or more deceased joint tenants or the deceased spouse has terminated, and vested solely in the surviving joint tenant or spouse or vested jointly in the surviving joint tenants, if there has been recorded in the office of the recorder of the county or counties in which the real property is [situate] situated an affidavit, subscribed and sworn to by a person who has knowledge of the facts required in this subsection, which is accompanied by a certified copy of the death certificate of each deceased joint tenant or deceased spouse and sets forth the following:

      (a) The family relationship, if any, of the affiant to each deceased joint tenant or the deceased spouse;

      (b) A description of the instrument or conveyance by which the joint tenancy or right of survivorship was created;

      (c) A description of the property subject to the joint tenancy or right of survivorship; and

      (d) The date and place of death of each deceased joint tenant or the deceased spouse.

      2.  In the case of real property owned by a person as a life tenant, with the ownership of the real property passing to the owner of the remainder interest upon the death of the life tenant, it is presumed that all title or interest in and to that real property of the life tenant has terminated, and vested solely in the owner of the remainder interest, if there has been recorded in the office of the recorder of the county or counties in which the real property is situated, an affidavit, subscribed and sworn to by a person who has knowledge of the facts required in this subsection, which is accompanied by a certified copy of the death certificate of the deceased life tenant and which sets forth the following:

      (a) The relationship of the affiant to each deceased life tenant;

      (b) A description of the instrument or conveyance by which the life estate was created;

      (c) A description of the property subject to the life estate; and

      (d) The date and place of death of each deceased life tenant.

      3.  Each month, a county recorder shall send all the information contained in each affidavit received by the county recorder pursuant to subsection 1 or 2 during the immediately preceding month to the Department of Health and Human Services in any format and by any medium approved by the Department.

 


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subsection 1 or 2 during the immediately preceding month to the Department of Health and Human Services in any format and by any medium approved by the Department.

      Sec. 3. NRS 111.781 is hereby amended to read as follows:

      111.781  1.  Except as otherwise provided by the express terms of a governing instrument, a court order or a contract relating to the division of the marital estate made between the divorced persons before or after the marriage, divorce or annulment, the divorce or annulment of a marriage:

      (a) Revokes any revocable:

             (1) Disposition or appointment of property made by a divorced person to his or her former spouse in a governing instrument and any disposition or appointment created by law or in a governing instrument to a relative of the divorced person’s former spouse;

             (2) Provision in a governing instrument conferring a general or nongeneral power of appointment on the divorced person’s former spouse or on a relative of the divorced person’s former spouse; and

             (3) Nomination in a governing instrument that nominates a divorced person’s former spouse or a relative of the divorced person’s former spouse to serve in any fiduciary or representative capacity, including a personal representative capacity, including a personal representative, executor, trustee, conservator, agent or guardian; and

      (b) Severs the interest of the former spouses in property held by them at the time of the divorce or annulment as joint tenants with the right of survivorship or as community property with a right of survivorship and transforms the interests of the former spouses into equal tenancies in common.

      2.  A severance under paragraph (b) of subsection 1 does not affect any third-party interest in property acquired for value and in good faith reliance on an apparent title by survivorship in the survivor of the former spouses unless a writing declaring the severance has been noted, registered, filed or recorded in records appropriate to the kind and location of the property which records are relied upon, in the ordinary course of transactions involving such property, as evidence of ownership.

      3.  The provisions of a governing instrument are given effect as if the former spouse and relatives of the former spouse disclaimed all provisions revoked by this section or, in the case of a revoked nomination in a fiduciary or representative capacity, as if the former spouse and relatives of the former spouse died immediately before the divorce or annulment.

      4.  Any provisions revoked solely by this section are revived by the divorced person’s remarriage to the former spouse or by a nullification of the divorce or annulment.

      5.  Unless a court in an action commenced pursuant to chapter 125 of NRS specifically orders otherwise, a restraining order entered pursuant to NRS 125.050 does not preclude a party to such an action from making or changing beneficiary designations that specify who will receive the party’s assets upon the party’s death.

      6.  A payor or other third party is not liable for having made a payment or transferred an item of property or any other benefit to a beneficiary designated in a governing instrument affected by the provisions of this section or for having taken any other action in good faith reliance on the validity of the governing instrument before the payor or other third party received written or actual notice of any event affecting a beneficiary designation.

 


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designation. A payor or other third party is liable for a payment made or other action taken after the payor or other third party received written or actual notice of a claimed forfeiture or revocation under this section.

      7.  Written notice of the divorce, annulment or remarriage or written notice of a complaint or petition for divorce or annulment must be mailed to the payor’s or other third party’s main office or home by registered or certified mail, return receipt requested, or served upon the payor or other third party in the same manner as a summons in a civil action. Upon receipt of written notice of the divorce, annulment or remarriage, a payor or other third party may pay any amount owed or transfer or deposit any item of property held by it to or with the court having jurisdiction of the probate proceedings relating to the decedent’s estate or, if no proceedings have been commenced, to or with the court having jurisdiction of probate proceedings relating to decedents’ estates located in the county of the decedent’s residence. The court shall hold the funds or item of property and, upon its determination under this section, shall order disbursement or transfer in accordance with the determination. Payments, transfers or deposits made to or with the court discharge the payor or other third party from all claims for the value of amounts paid to or items of property transferred to or deposited with the court.

      8.  A person who purchases property from a former spouse, relative of a former spouse or any other person for value and without notice, or who receives from a former spouse, relative of a former spouse or any other person a payment or other item of property in partial or full satisfaction of a legally enforceable obligation, is neither obligated under this section to return the payment, item of property or benefit nor is liable under this section for the amount of the payment or the value of the item of property or benefit. A former spouse, relative of a former spouse or other person who, not for value, received a payment, item of property or any other benefit to which that person is not entitled under this section is obligated to return the payment, item of property or benefit or is personally liable for the amount of the payment or the value of the item of property or benefit to the person who is entitled to it under this section.

      9.  If this section or any part of this section is preempted by federal law with respect to a payment, an item of property or any other benefit covered by this section, a former spouse, relative of the former spouse or any other person who, not for value, received a payment, item of property or any other benefit to which that person is not entitled under this section is obligated to return that payment, item of property or benefit or is personally liable for the amount of the payment or the value of the item of property or benefit to the person who would have been entitled to it were this section or part of this section not preempted.

      10.  This section applies only to nonprobate transfers which become effective because of the death of a person on or after October 1, 2011, regardless of when the divorce or annulment occurred.

      11.  As used in this section:

      (a) “Disposition or appointment of property” includes a transfer of an item of property or any other benefit to a beneficiary designated in a governing instrument.

 


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      (b) “Divorce or annulment” means any divorce or annulment or any dissolution or declaration of invalidity of a marriage. A decree of separation that does not terminate the status of husband and wife is not a divorce for purposes of this section.

      (c) “Divorced person” includes a person whose marriage has been annulled.

      (d) “Governing instrument” means a governing instrument executed by a divorced person before the divorce or annulment of the person’s marriage to the person’s former spouse.

      (e) “Relative of the divorced person’s former spouse” means a person who is related to the divorced person’s former spouse by blood, adoption or affinity and who, after the divorce or annulment, is not related to the divorced person by blood, adoption or affinity.

      (f) “Revocable,” with respect to a disposition, appointment, provision or nomination, means one under which the divorced person, at the time of the divorce or annulment, was alone empowered, by law or under the governing instrument, to cancel the designation in favor of the person’s former spouse or former spouse’s relative, whether or not the divorced person was then empowered to designate himself or herself in place of his or her former spouse or in place of his or her former spouse’s relative and whether or not the divorced person then had the capacity to exercise the power.

      Sec. 4. Chapter 132 of NRS is hereby amended by adding thereto the provisions set forth as sections 5 to 9, inclusive, of this act.

      Sec. 5. “Domestic partners” has the meaning ascribed to it in NRS 122A.030.

      Sec. 6. “Foreign jurisdiction” means any jurisdiction other than this State.

      Sec. 7. “Spouse” includes a domestic partner as set forth in NRS 122A.200.

      Sec. 8. “Testamentary trust” means a trust created by the terms of the will of a person.

      Sec. 9. 1.  For the purposes of this title, a person is an interested person with respect to:

      (a) A judicial proceeding, a notice of a proposed action or a nonjudicial settlement, if the person has or claims to have an enforceable right or interest that may be materially affected by the outcome of that proceeding, proposed action or nonjudicial settlement. While living, a settlor or a testator shall be deemed to have an enforceable right with respect to any trust or will that he or she created. For the purposes of this paragraph, a person may not claim to have a right or interest under an estate or trust after the entry of an order of the court declaring the right or interest invalid.

      (b) An estate of a decedent, if the person:

             (1) Is an heir, devisee, child, spouse, creditor, settlor or beneficiary;

             (2) Has a property right in or claim against the estate of a decedent, including, without limitation, the Director of the Department of Health and Human Services in any case in which money is owed to the Department of Health and Human Services as a result of the payment of benefits for Medicaid;

             (3) Has priority for appointment as a personal representative; or

             (4) Is any other fiduciary representing an interested person.

      (c) A trust, if the person:

 


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             (1) Is a living settlor or, if a court has appointed a guardian of the estate of the settlor, the guardian of the estate appointed by the court;

             (2) Is the trustee, including, without limitation, each acting cotrustee;

             (3) Holds the presently exercisable right to remove or replace the trustee or a cotrustee;

             (4) Asserts the right to serve as the trustee or as a cotrustee;

             (5) Is a current beneficiary or a remainder beneficiary of that trust;

             (6) Holds a presently exercisable power of appointment that permits the holder to designate or change the designation of a current beneficiary or a remainder beneficiary of that trust;

             (7) Holds a presently exercisable power that permits the holder to designate, remove or otherwise change the designation of a person who, pursuant to this paragraph, would be an interested person;

             (8) Is a creditor of the settlor who has a claim which has been accepted by the trustee or who has asserted the trustee’s liability therefor in a probate proceeding or in a civil action under subsection 8 or 9 of NRS 111.779; or

             (9) Is a creditor of the trust who has given the trustee written notice of its claim.

      (d) A revocable trust that is the subject of a petition under NRS 164.015 relating to the validity of the trust or any trust-related document, if the person, after the death of the settlor, under the terms of any version of the trust documents in dispute, would be:

             (1) A current beneficiary or a remainder beneficiary of that trust; or

             (2) A trustee or a successor trustee, including, without limitation, a cotrustee.

      (e) A will that, while the testator is still living, is the subject of a petition under subsection 2 of NRS 30.040, if the person, after the death of the testator, would be:

             (1) A beneficiary of that will; or

             (2) A fiduciary designated in or pursuant to the terms of that will.

      2.  For the purposes of this title, the following persons are not interested persons:

      (a) With respect to a motion, petition or proceeding, any person holding or claiming an interest or right that is not affected by the motion, petition or proceeding.

      (b) The Director of the Department of Health and Human Services after any money owed to the Department has been paid in full or with respect to the estate or trust of a decedent who did not receive any benefits from Medicaid.

      (c) A vexatious litigant with regard to a motion, petition or proceeding for which the vexatious litigant has been denied standing pursuant to NRS 155.165.

      (d) As to the estate of a decedent:

             (1) After a will has been admitted to probate, an heir, child or spouse who is not a beneficiary of the will, except for the purposes of NRS 133.110, 133.160 and 137.080.

 


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             (2) A creditor whose claim has not been accepted by the personal representative, if the enforcement of the claim of the creditor is barred under the provisions of chapter 11 or 147 of NRS or any other applicable statute of limitations.

      (e) As to a trust:

             (1) The guardian of the person of an interested person, unless the guardian is expressly permitted to act for the interested person under the terms of the trust instrument;

             (2) A beneficiary or creditor whose right or claim is barred by any applicable statute of limitations, including, without limitation, the statute of limitations found in chapter 11 of NRS or NRS 164.021, 164.025 or 166.170;

             (3) Any beneficiary of a revocable trust, except as expressly provided in paragraph (d) of subsection 1; or

             (4) Any disclaimant as to a disclaimed interest, except with respect to the enforcement of the disclaimer.

      3.  As used in this section:

      (a) “Current beneficiary” has the meaning ascribed to it in NRS 165.128.

      (b) “Remainder beneficiary” has the meaning ascribed to it in NRS 165.132.

      Sec. 10. NRS 132.025 is hereby amended to read as follows:

      132.025  As used in this title, unless the context otherwise requires, the words and terms defined in NRS 132.030 to 132.370, inclusive, and sections 5 to 8, inclusive, of this act have the meanings ascribed to them in those sections.

      Sec. 11. NRS 132.185 is hereby amended to read as follows:

      132.185  [1.]  “Interested person” [includes, without limitation, an heir, devisee, child, spouse, creditor, settlor, beneficiary and any other person having a property right in or claim against a trust estate or the estate of a decedent, including, without limitation, the Director of the Department of Health and Human Services in any case in which money is owed to the Department of Health and Human Services as a result of the payment of benefits for Medicaid. The term includes a person having priority for appointment as a personal representative and other fiduciaries representing interested persons. The meaning as it relates to particular persons must be determined] means a person whose right or interest under an estate or trust may be materially affected by a decision of a fiduciary or a decision of the court. The fiduciary or court shall determine who is an interested person according to the particular purposes of, and matter involved in, a proceeding.

      [2.  The term does not include:

      (a) After a will has been admitted to probate, an heir, child or spouse who is not a beneficiary of the will, except for purposes of NRS 133.110, 133.160 and 137.080.

      (b) A person with regard to a motion, petition or proceeding that does not affect an interest of that person.

      (c) A creditor whose claim has not been accepted by the personal representative if the enforcement of the claim of the creditor is barred under the provisions of chapter 11 or 147 of NRS or any other applicable statute of limitation.]

 


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      Sec. 12. NRS 133.110 is hereby amended to read as follows:

      133.110  1.  If a person marries after making a will and the spouse survives the maker, the will is revoked as to the spouse, unless:

      (a) Provision has been made for the spouse by marriage contract;

      (b) The spouse is provided for in the will, or in such a way mentioned therein as to show an intention not to make such provision [;] , including, without limitation, by a reference in the will to a future spouse by name; or

      (c) The spouse is provided for by a transfer of property outside of the will and it appears that the maker intended the transfer to be in lieu of a testamentary provision.

      2.  When a will is revoked as to the spouse pursuant to subsection 1:

      (a) The spouse is entitled to the same share in the estate of the deceased spouse as if the deceased spouse had died intestate; and

      (b) The remaining provisions of the will remain intact to the extent those provisions are not inconsistent with paragraph (a), including, without limitation, any provision concerning the appointment of a personal representative.

      Sec. 13. Chapter 136 of NRS is hereby amended by adding thereto a new section to read as follows:

      1.  Except as otherwise provided in this section, if a declaratory judgment is entered under subsection 2 of NRS 30.040 during the lifetime of a decedent, declaring a document to be the valid will of the decedent, the validity of that will is not subject to challenge after the death of the decedent.

      2.  Nothing in this section shall be construed to:

      (a) Prevent the appeal of a declaratory judgment entered pursuant to subsection 1; or

      (b) Prohibit evidence that the will has been revoked or that the decedent executed a valid later will.

      Sec. 14. NRS 138.020 is hereby amended to read as follows:

      138.020  1.  No person is qualified to serve as an executor who, at the time the will is probated:

      (a) Is under the age of majority;

      (b) Has been convicted of a felony, unless the court determines that such a conviction should not disqualify the person from serving in the position of an executor;

      (c) Upon proof, is adjudged by the court disqualified to execute the duties of executor by reason of conflict of interest, drunkenness, improvidence , [or] lack of integrity or understanding [;] or other compelling reason; or

      (d) Is a bank not authorized to do business in the State of Nevada, unless it associates as coexecutor a bank authorized to do business in this State. An out-of-state bank is qualified to appoint a substitute executor, pursuant to NRS 138.045, without forming such an association, but any natural person so appointed must be a resident of this State.

      2.  If a disqualified person is named as the sole executor in a will, or if all persons so named are disqualified or renounce their right to act, or fail to appear and qualify, letters of administration with the will annexed must issue.

      Sec. 15. NRS 138.090 is hereby amended to read as follows:

      138.090  1.  [Administrators] Except as otherwise provided in this section, administrators with the will annexed have the same authority as the executor named in the will would have had if the executor had qualified, and their acts are as effectual for every purpose .

 


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executor named in the will would have had if the executor had qualified, and their acts are as effectual for every purpose . [, but if the] If a power or authority conferred upon the executor is discretionary, and is not [conferred by law,] expressly excluded by the will, it is [not] conferred upon an administrator with the will annexed.

      2.  Except to the extent expressly provided for by the will, a provision of the will waiving the bond of a personal representative does not apply to an administrator with the will annexed.

      3.  Persons and their nominees and appointees are entitled to appointment as administrators with the will annexed in the same order of priority as in the appointment of administrators, except that [, as to foreign letters, an interested person has priority over one who is not.] :

      (a) An heir who has been eliminated as a beneficiary or as a fiduciary under the terms of the will is not qualified to serve as an administrator with the will annexed; and

      (b) The court has the discretion to disregard the order of priority set forth in subsection 1 of NRS 139.040 to favor the appointment of a beneficiary of the will who is given a larger share of the estate over a beneficiary, or his or her nominee, who is given a lesser share, and the court may exercise this discretion to appoint two or more beneficiaries, or their nominees, who have similar interests in the estate of the decedent as coadministrators with the will annexed.

      Sec. 16. NRS 139.010 is hereby amended to read as follows:

      139.010  No person is entitled to letters of administration if the person:

      1.  Is under the age of majority;

      2.  Has been convicted of a felony, unless the court determines that such a conviction should not disqualify the person from serving in the position of an administrator;

      3.  Upon proof, is adjudged by the court disqualified by reason of conflict of interest, drunkenness, improvidence, [or] lack of integrity or understanding [;] or other compelling reason;

      4.  Is not a resident of the State of Nevada, unless the person:

      (a) Associates as coadministrator a resident of the State of Nevada or a banking corporation authorized to do business in this State; or

      (b) Is named as personal representative in the will if the will is the subject of a pending petition for probate, and the court in its discretion believes it would be appropriate to make such an appointment; or

      5.  Is a banking corporation that is not authorized to do business in this State, unless the banking corporation:

      (a) Associates as coadministrator a resident of the State of Nevada or a banking corporation authorized to do business in this State; or

      (b) Is named as personal representative in the will if the will is the subject of a pending petition for probate, and the court in its discretion believes it would be appropriate to make such an appointment.

      Sec. 17. NRS 143.380 is hereby amended to read as follows:

      143.380  1.  Subject to the limitations and requirements of NRS [143.300 to 143.815, inclusive,] 143.370, when the personal representative exercises the authority to sell property of the estate after being granted full authority pursuant to NRS 143.300 to 143.815, inclusive, the personal representative may sell the property at public auction or private sale, and with or without notice, for cash or on credit, for such price and upon such terms and conditions as the personal representative may determine.

 


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      2.  The requirements applicable to court confirmation of sales of real property referenced in subsection 1 include, without limitation:

      (a) Publication of the notice of sale;

      (b) Court approval of agents’ and brokers’ commissions;

      (c) The sale being not less than 90 percent of appraised value of the real property;

      (d) An examination by the court into the necessity for the sale of the real property, including, without limitation, any advantage to the estate and benefit to interested persons; and

      (e) The efforts of the personal representative to obtain the highest and best price for the property reasonably attainable.

      3.  The requirements applicable to court confirmation of sales of real property and sales of personal property do not apply to a sale pursuant to this section.

      Sec. 18. NRS 144.010 is hereby amended to read as follows:

      144.010  1.  [Every] Except as otherwise provided in this subsection, every personal representative shall make and file with the clerk, within 60 days after appointment, unless the court extends the time, a true inventory and appraisement or record of value of all the estate of the decedent that has come to the possession or knowledge of the personal representative. The requirement of filing an inventory or the requirement of filing an appraisement or verified record of value, or both, may be waived by the unanimous written consent of all interested persons.

      2.  The personal representative, within 10 days after filing the inventory with the clerk, shall mail a copy to all the interested heirs of an intestate estate, or to the devisees of a testate estate, or to both interested heirs and devisees, if a contest of the will of the decedent is pending. Proof of the mailing of the copies must be made and filed in the proceeding.

      Sec. 19. NRS 144.020 is hereby amended to read as follows:

      144.020  1.  A personal representative may engage a qualified and disinterested appraiser to ascertain the fair market value, as of the decedent’s death, of any asset the value of which is subject to reasonable doubt. Different persons may be engaged to appraise different kinds of assets included in the estate.

      2.  Any such appraiser is entitled to a reasonable compensation for the appraisal and may be paid the compensation by the personal representative out of the estate at any time after completion of the appraisal.

      3.  [If] Except as otherwise provided in NRS 144.010, if there is no reasonable doubt as to the value of assets, such as money, deposits in banks or credit unions, bonds, policies of life insurance, or securities for money or evidence of indebtedness, and the asset is equal in value to cash, the personal representative shall file a verified record of value in lieu of the appraisement.

      4.  If it appears beyond reasonable doubt that there will be no need to sell assets of the estate to pay the debts of the estate or expenses of administration, or to divide assets for distribution in kind to the devisees or heirs, the personal representative may petition the court for an order allowing a verified record of value to be filed in lieu of the appraisement [,] or, if no interested person is prejudiced thereby, an order waiving the requirement for filing an appraisement or verified record of value, and the court may enter such an order with or without notice.

 


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      Sec. 20. NRS 146.070 is hereby amended to read as follows:

      146.070  1.  If [a person dies leaving an estate the gross value of which, after deducting any encumbrances, does not exceed $100,000, and there is a surviving spouse or minor child or minor children of the decedent, the estate must not be administered upon, but the whole estate, after directing such payments as may be deemed just, must be, by an order for that purpose, assigned and set apart for the support of the surviving spouse or minor child or minor children, or for the support of the minor child or minor children, if there is no surviving spouse. Even if there is a surviving spouse, the court may, after directing such payments, set aside the whole of the estate to the minor child or minor children, if it is in their best interests.

      2.  If there is no surviving spouse or minor child of the decedent and the gross] the value of a decedent’s estate [, after deducting any encumbrances,] does not exceed $100,000, [upon good cause shown, the court shall order that the estate not be administered upon, but the] the estate may be set aside without administration by the order of the court.

      2.  Except as otherwise provided in subsection 3, the whole estate must be assigned and set apart in the following order:

      (a) To the payment of the petitioner’s attorney’s fees and costs incurred relative to the proceeding under this section;

      (b) To the payment of funeral expenses, expenses of last illness, money owed to the Department of Health and Human Services as a result of payment of benefits for Medicaid and creditors, if there are any; [and

      (b)] (c) To the payment of other creditors, if any; and

      (d) Any balance remaining to the claimant or claimants entitled thereto pursuant to a valid will of the decedent, and if there is no valid will, pursuant to intestate succession [.] in accordance with chapter 134 of NRS.

      3.  If the decedent is survived by a spouse or one or more minor children, the court must set aside the estate for the benefit of the surviving spouse or the minor child or minor children of the decedent, subject to any reduction made pursuant to subsection 4 or 5. The court may allocate the entire estate to the surviving spouse, the entire amount to the minor child or minor children, or may divide the estate among the surviving spouse and minor child or minor children.

      4.  As to any amount set aside to or for the benefit of the surviving spouse or minor child or minor children of the decedent pursuant to subsection 3, the court must set aside the estate without the payment of creditors except as the court finds necessary to prevent a manifest injustice.

      5.  To prevent an injustice to creditors when there are nonprobate transfers that already benefit the surviving spouse or minor child or minor children of the decedent, the court has the discretion to reduce the amount set aside under subsection 3 to the extent that the value of the estate, when combined with the value of nonprobate transfers, as defined in NRS 111.721, from the decedent to or for the benefit of the surviving spouse or minor child or minor children of the decedent exceeds $100,000.

      6.  In exercising the discretion granted in this section, the court shall consider the needs and resources of the surviving spouse and minor child or minor children, including any assets received by or for the benefit of the surviving spouse or minor child or minor children from the decedent by nonprobate transfers.

      7.  For the purpose of this section, a nonprobate transfer from the decedent to one or more trusts or custodial accounts for the benefit of the surviving spouse or minor child or minor children shall be considered a transfer for the benefit of such spouse or minor child or minor children.

 


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surviving spouse or minor child or minor children shall be considered a transfer for the benefit of such spouse or minor child or minor children.

      8.  Proceedings taken under this section [, whether or not the decedent left a valid will,] must not begin until at least 30 days after the death of the decedent and must be originated by a petition containing:

      (a) A specific description of all property in the decedent’s [property.] estate;

      (b) A list of all [the] known liens and [mortgages of record] encumbrances against estate property at the date of the decedent’s death [.] , with a description of any that the petitioner believes may be unenforceable;

      (c) An estimate of the value of the property [.] , together with an explanation of how the estimated value was determined;

      (d) A statement of the debts of the decedent so far as known to the petitioner ; [.]

      (e) The names and residences of the heirs and devisees of the decedent and the age of any who is a minor and the relationship of the heirs and devisees to the decedent, so far as known to the petitioner [.

      4.] ; and

      (f) If the decedent left a will, a statement concerning all evidence known to the petitioner that tends to prove that the will is valid.

      9.  If the petition seeks to have the estate set aside for the benefit of the decedent’s surviving spouse or minor child or minor children without payment to creditors, the petition must also contain:

      (a) A specific description and estimated value of property passing by one more nonprobate transfers from the decedent to the surviving spouse or minor child or minor children; or

      (b) An allegation that the estimated value of the property sought to be set aside, combined with the value of all nonprobate transfers from the decedent to the surviving spouse or minor child or minor children who are seeking to receive property pursuant to this section is less than $100,000.

      10.  When property is distributed pursuant to an order granted under this section, the court may allocate the property on a pro rata basis or a non-pro rata basis.

      11.  The clerk shall set the petition for hearing and the petitioner shall give notice of the petition and hearing in the manner provided in NRS 155.010 to the decedent’s heirs and devisees and to the Director of the Department of Health and Human Services. If a complete copy of the petition is not enclosed with the notice, the notice must include a statement setting forth to whom the estate is being set aside.

      [5.] 12.  No court or clerk’s fees may be charged for the filing of any petition in, or order of court thereon, or for any certified copy of the petition or order in an estate not exceeding $2,500 in value.

      [6.  If the court finds that the gross value of the estate, less encumbrances, does not exceed the sum of $100,000, the court may direct that the estate be distributed to the father or mother of a minor heir or devisee, with or without the filing of any bond, or to a custodian under chapter 167 of NRS, or may require that a general guardian be appointed and that the estate be distributed to the guardian, with or without bond, as in the discretion of the court is deemed to be in the best interests of the minor. The court may direct the manner in which the money may be used for the benefit of the minor.]

 


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      13.  At the hearing on a petition under this section, the court may require such additional evidence as the court deems necessary to make the findings required under subsection 14.

      14.  The order granting the petition shall include:

      (a) The court’s finding as to the validity of any will presented;

      (b) The court’s finding as to the value of the estate and, if relevant for the purposes of subsection 5, the value of any property subject to nonprobate transfers;

      (c) The court’s determination of any property set aside under subsection 2;

      (d) The court’s determination of any property set aside under subsection 3, including, without limitation, the court’s determination as to any reduction made pursuant to subsection 4 or 5; and

      (e) The name of each distributee and the property to be distributed to the distributee.

      15.  As to the distribution of the share of a minor child set aside pursuant to this section, the court may direct the manner in which the money may be used for the benefit of the minor child as is deemed in the court’s discretion to be in the best interests of the minor child, and the distribution of the minor child’s share shall be made as permitted for the minor child’s share under the terms of the decedent’s will or to one or more of the following:

      (a) A parent of such minor child, with or without the filing of any bond;

      (b) A custodian under chapter 167 of NRS; or

      (c) A court-appointed guardian of the estate, with or without bond.

      16.  For the purposes of this section, the value of property must be the fair market value of that property, reduced by the value of all enforceable liens and encumbrances. Property values and the values of liens and encumbrances must be determined as of the date of the decedent’s death.

      Sec. 21. NRS 153.031 is hereby amended to read as follows:

      153.031  1.  A trustee or beneficiary may petition the court regarding any aspect of the affairs of the trust, including:

      (a) Determining the existence of the trust;

      (b) Determining the construction of the trust instrument;

      (c) Determining the existence of an immunity, power, privilege, right or duty;

      (d) Determining the validity of a provision of the trust;

      (e) Ascertaining beneficiaries and determining to whom property is to pass or be delivered upon final or partial termination of the trust, to the extent not provided in the trust instrument;

      (f) Settling the accounts and reviewing the acts of the trustee, including the exercise of discretionary powers;

      (g) Instructing the trustee;

      (h) Compelling the trustee to report information about the trust or account, to the beneficiary;

      (i) Granting powers to the trustee;

      (j) Fixing or allowing payment of the trustee’s compensation, or reviewing the reasonableness of the trustee’s compensation;

      (k) Appointing or removing a trustee;

      (l) Accepting the resignation of a trustee;

      (m) Compelling redress of a breach of the trust;

 


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      (n) Approving or directing the modification or termination of the trust;

      (o) Approving or directing the combination or division of trusts;

      (p) Amending or conforming the trust instrument in the manner required to qualify the estate of a decedent for the charitable estate tax deduction under federal law, including the addition of mandatory requirements for a charitable-remainder trust;

      (q) Compelling compliance with the terms of the trust or other applicable law; and

      (r) Permitting the division or allocation of the aggregate value of community property assets in a manner other than on a pro rata basis.

      2.  A petition under this section must state the grounds of the petition and the name and address of each interested person, including the Attorney General if the petition relates to a charitable trust, and the relief sought by the petition. Except as otherwise provided in this chapter, the clerk shall set the petition for hearing and the petitioner shall give notice for the period and in the manner provided in NRS 155.010. The court may order such further notice to be given as may be proper.

      3.  If the court grants any relief to the petitioner, the court may, in its discretion, order any or all of the following additional relief if the court determines that such additional relief is appropriate to redress or avoid an injustice:

      (a) Order a reduction in the trustee’s compensation.

      (b) Order the trustee to pay to the petitioner or any other party all reasonable costs incurred by the party to adjudicate the affairs of the trust pursuant to this section, including, without limitation, reasonable attorney’s fees. [Except as otherwise provided in NRS 165.139, the] The trustee may not be held personally liable for the payment of such costs unless the court determines that the trustee was negligent in the performance of or breached his or her fiduciary duties.

      Sec. 22. Chapter 155 of NRS is hereby amended by adding thereto the provisions set forth as sections 23, 24 and 25 of this act.

      Sec. 23. “Dependent adult” means a person who at the time of executing a transfer instrument pursuant to this chapter is 18 years of age or older and:

      1.  Is unable, without assistance, to provide properly for his or her personal needs for physical health, food, clothing or shelter; or

      2.  Has difficulty managing his or her own financial resources without assistance or resisting fraud or undue influence.

      Sec. 24. “Health and social services” means services provided to a dependent adult because of his or her dependent condition, including, without limitation, the administration of medicine, medical testing, wound care, assistance with hygiene, companionship, housekeeping, shopping, cooking or assistance with finances.

      Sec. 25. 1.  In a proceeding involving the estate of a decedent or a testamentary trust, the court has jurisdiction over the assets of the estate or trust as a proceeding in rem.

      2.  In addition to any other basis for claiming jurisdiction over a person, the court has personal jurisdiction over each person:

      (a) Who is appointed as a personal representative by the court;

      (b) Whose appointment as a trustee is confirmed by the court;

 


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      (c) Who files with the court a petition, a motion, other than a motion for dismissal for lack of jurisdiction, an objection or a joinder to a petition or motion;

      (d) Who makes an appearance at a hearing of a proceeding involving the estate of a decedent or a testamentary trust, unless the appearance is made solely for the purpose of objecting to the jurisdiction of the court; or

      (e) Who is a party to a proceeding commenced by a petition filed pursuant to NRS 153.031 if notice is given pursuant to NRS 155.010.

      3.  Sanctions against a person that are imposed by the court pursuant to any provision of law or the terms of a will or testamentary trust are limited to that person’s interest in the estate or trust unless the court has personal jurisdiction over that person.

      Sec. 26. NRS 155.010 is hereby amended to read as follows:

      155.010  1.  Except as otherwise provided in this section or a specific statute relating to the kind of notice required or otherwise ordered by the court in a particular instance, a petitioner shall cause notice of the time and place of the hearing of a petition to be given to each interested person and to every other person entitled to notice pursuant to this title or his or her attorney if the person has appeared by attorney or requested that notice be sent to his or her attorney. Notice must be given:

      (a) By mailing a copy thereof at least 10 days before the time set for the hearing by certified, registered or ordinary first-class mail addressed to the person being notified at the post office address given in the person’s demand for notice, if any, or at his or her office or place of residence, if known, or by personally delivering a copy thereof to the person being notified at least 10 days before the time set for the hearing; or

      (b) If the address or identity of the person is not known and cannot be ascertained with reasonable diligence, by publishing at least once a week for 3 consecutive weeks a copy thereof in a newspaper having general circulation in the county where the hearing is to be held, the last publication of which must be at least 10 days before the date set for the hearing.

      2.  A person who, for the purposes of the matter to be considered at a hearing, is not an interested person is not entitled to notice of that hearing.

      3.  The court, for good cause shown, may provide for a different method or time of giving notice for any hearing, or may dispense with the notice otherwise required to be given to a person under this title.

      [3.]4.  Proof of the giving of notice must be made on or before the hearing and filed in the proceeding.

      [4.]5.  A person entitled to notice may, in writing, waive notice of the hearing of a petition.

      Sec. 27. NRS 155.093 is hereby amended to read as follows:

      155.093  As used in NRS 155.093 to 155.098, inclusive, and sections 23, 24 and 25 of this act, unless the context otherwise requires, the words and terms defined in NRS 155.0935 to 155.0965, inclusive, and sections 23 and 24 of this act have the meanings ascribed to them in those sections.

      Sec. 28. NRS 155.0935 is hereby amended to read as follows:

      155.0935  “Caregiver” means [any] a person who [has provided significant assistance or services to or for a person, regardless of whether the person is incompetent, incapacitated or of limited capacity and regardless of whether the person is being compensated for the assistance or services provided.]

 


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provided.] provides health or social services to a dependent adult for remuneration other than a donative transfer pursuant to this chapter or the reimbursement of expenses.

      Sec. 29. NRS 155.094 is hereby amended to read as follows:

      155.094  “Independent attorney” means an attorney, other than an attorney who:

      1.  Is a transferee described in subsection 2 of NRS 155.097; or

      2.  [Has served] Served as an attorney for a person who is described in subsection 2 of NRS 155.097 [.] at the time of the execution of the transfer instrument.

      Sec. 30. NRS 155.0945 is hereby amended to read as follows:

      155.0945  “Related to, affiliated with or subordinate to any person” includes, without limitation:

      1.  The person’s spouse;

      2.  A relative of the person within the third degree of consanguinity ; [or the spouse of such a relative;]

      3.  A co-owner of a business with the person;

      4.  An employee of a business if the person:

      (a) Has an ownership interest in the business; or

      (b) Holds a supervisory position with the business;

      5.  An attorney or employee of a law firm for which the person is or was a client; [and]

      6.  The spouse of any person described in subsections 2 to 5, inclusive; and

      7.  Any entity owned or controlled by a person described in subsections 1 to [5,] 6, inclusive.

      Sec. 31. NRS 155.0955 is hereby amended to read as follows:

      155.0955  “Transfer instrument” means [the] a legal document intended to effectuate a transfer of property for less than fair market value, whether such transfer becomes effective during the life of the transferor or on or after the transferor’s death and includes, without limitation [, a] :

      1.  A will [,] ;

      2.  A trust [,] ;

      3.  A deed [,] ; and

      4.  Any form , [designated as payable on death,] contract or other [beneficiary designation form.] document which:

      (a) Creates, conveys or transfers any interest in property;

      (b) Creates any type of joint ownership;

      (c) Establishes a right of survivorship;

      (d) Designates a beneficiary;

      (e) Adds an authorized signer on any bank or brokerage account;

      (f) Creates or attempts to effectuate a nonprobate transfer to be effective upon the death of the transferor; or

      (g) Is intended to amend, modify, eliminate, supersede or revoke any other transfer instrument.

      Sec. 32. NRS 155.096 is hereby amended to read as follows:

      155.096  “Transferee” means a devisee, a beneficiary of trust, a grantee of a deed, including a grantee of a deed pursuant to NRS 111.655 to 111.699, inclusive, and any other person designated in a transfer instrument to receive a nonprobate transfer [.] or other interest in property for less than fair market value.

 


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      Sec. 33. NRS 155.097 is hereby amended to read as follows:

      155.097  1.  [To] Regardless of when a transfer instrument is made, to the extent the court finds that a transfer was the product of fraud, duress or undue influence, the transfer is void and each transferee who is found responsible for the fraud, duress or undue influence shall bear the costs of the proceedings, including, without limitation, reasonable attorney’s fees.

      2.  Except as otherwise provided in subsection 4 and NRS 155.0975, a transfer is presumed to be void if the transfer is [effective on or after a transferor’s death and the transfer is] to a transferee who is:

      (a) The person who drafted the transfer instrument;

      (b) A caregiver of the transferor [;] who is a dependent adult;

      (c) A person who [arranged for] materially participated in formulating the dispositive provisions of the transfer instrument or paid for the drafting of the transfer instrument; or

      (d) A person who is related to, affiliated with or subordinate to any person described in paragraph (a), (b) or (c).

      3.  The presumption created by this section is a presumption concerning the burden of proof and may be rebutted by proving, by clear and convincing evidence that the donative transfer was not the product of fraud, duress or undue influence.

      4.  The provisions of subsection 2 do not apply to a transfer instrument that is intended to effectuate a transfer:

      (a) After the transferor’s death, unless the transfer instrument is made on or after October 1, 2011; or

      (b) During the transferor’s lifetime, unless the transfer instrument is made on or after October 1, 2015.

      Sec. 34. NRS 155.0975 is hereby amended to read as follows:

      155.0975  The presumption established by NRS 155.097 does not apply:

      1.  To the spouse of the transferor;

      2.  To a transfer of property [under a will] which is triggered by the transferor’s death if the transferee is an heir of the [testator whose share in the estate of the testator under the terms of the testator’s will] transferor and the combined value of all transfers received by that transferee is not greater than the share the transferee would be entitled to pursuant to chapter 134 of NRS if the testator had died intestate [.

      2.] and the transferor’s estate included all nonprobate transfers which are triggered by the death of the transferor.

      3.  Except as otherwise provided in this subsection, if the court determines, upon clear and convincing evidence, that the transfer was not the product of fraud, duress or undue influence. The determination of the court pursuant to this subsection must not be based solely upon the testimony of a person described in subsection 2 of NRS 155.097.

      [3.] 4.  If the transfer instrument is reviewed by an independent attorney who:

      (a) Counsels the transferor about the nature and consequences of the intended transfer;

      (b) Attempts to determine if the intended consequence is the result of fraud, duress or undue influence; and

      (c) Signs and delivers to the transferor an original certificate of that review in substantially the following form:

 


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CERTIFICATE OF INDEPENDENT REVIEW

 

I, .............................. (attorney’s name), have reviewed .............................. (name of transfer instrument) and have counseled my client, .............................. (name of client), on the nature and consequences of the transfer or transfers of property to .............................. (name of transferee) contained in the transfer instrument. I am disassociated from the interest of the transferee to the extent that I am in a position to advise my client independently, impartially and confidentially as to the consequences of the transfer. On the basis of this counsel, I conclude that the transfer or transfers of property in the transfer instrument that otherwise might be invalid pursuant to NRS 155.097 are valid because the transfer or transfers are not the product of fraud, duress or undue influence.

 

                                                                          

(Name of Attorney)                            (Date)

 

      [4.] 5.  To a transferee that is:

      (a) A federal, state or local public entity; or

      (b) An entity that is recognized as exempt under section 501(c)(3) or 501(c)(19) of the Internal Revenue Code, 26 U.S.C. § 501(c)(3) or 501(c)(19), or a trust holding an interest for such an entity but only to the extent of the interest of the entity or the interest of the trustee of the trust.

      [5.  A]

      6.  To a transfer of property if the fair market value of the property does not exceed $3,000. The exclusion provided by this subsection does not apply more than once in each calendar year to transfers made during the transferor’s lifetime. For the purposes of this subsection, regardless of the number of transfer instruments involved, the value of property transferred to a transferee pursuant to a transfer that is triggered by the transferor’s death must include the value of all property transferred to that transferee or for such transferee’s benefit after the transferor’s death.

      Sec. 35. NRS 155.165 is hereby amended to read as follows:

      155.165  1.  The court may find that a person , including, without limitation, a personal representative or trustee, is a vexatious litigant if the person files a petition, objection, motion or other pleading which is without merit , [or] intended to harass or annoy the personal representative or a trustee [.] or intended to unreasonably oppose or frustrate the efforts of an interested person who is acting in good faith to enforce his or her rights. The court may find that a personal representative or trustee is a vexatious litigant if the personal representative or trustee has expended the funds of the estate or trust to unreasonably oppose the good faith efforts of an interested person to enforce his or her rights. In determining whether the person is a vexatious litigant, the court may take into consideration whether the person has previously filed pleadings in a proceeding that were without merit , [or] intended to harass or annoy a fiduciary [.] or intended to unreasonably oppose or frustrate the efforts of an interested person who is acting in good faith to enforce his or her rights.

      2.  If a court finds that a person is a vexatious litigant pursuant to subsection 1, the court may impose sanctions on the person in an amount sufficient to reimburse the estate or trust for all or part of the expenses , including, without limitation, reasonable attorney’s fees, incurred by the estate or trust to respond to the petition, objection, motion or other pleading and for any other pecuniary losses which are associated with the actions of the vexatious litigant.

 


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including, without limitation, reasonable attorney’s fees, incurred by the estate or trust to respond to the petition, objection, motion or other pleading and for any other pecuniary losses which are associated with the actions of the vexatious litigant. If a court finds that a personal representative or trustee is a vexatious litigant, the court may remove the personal representative or trustee and any sanctions imposed by the court must be imposed against the personal representative or trustee personally and not against the estate or trust. The court may make an order directing entry of judgment for the amount of such sanctions.

      3.  The court may deny standing to an interested party to bring a petition or motion if the court finds that:

      (a) The subject matter of the petition or motion is unrelated to the interests of the interested party;

      (b) The interests of the interested party are minimal as it relates to the subject matter of the petition or motion; or

      (c) The interested party is a vexatious litigant pursuant to subsection 1.

      4.  If a court finds that a person is a vexatious litigant pursuant to subsection 1, that person does not have standing to:

      (a) Object to the issuance of letters; or

      (b) Request the removal of a personal representative or a trustee.

      Sec. 35.1. Title 13 of NRS is hereby amended by adding thereto a new chapter to consist of the provisions set forth as sections 35.3, 35.5 and 35.7 of this act.

      Sec. 35.3. As used in this title, unless the context otherwise requires, the words and terms defined in sections 35.5 and 35.7 of this act have the meanings ascribed to them in those sections.

      Sec. 35.5. “Domestic partners” has the meaning ascribed to it in NRS 122A.030.

      Sec. 35.7. “Spouse” includes a domestic partner as set forth in NRS 122A.200.

      Sec. 36. Chapter 163 of NRS is hereby amended by adding thereto the provisions set forth as sections 37 to 46.5, inclusive, of this act.

      Sec. 37. “Nontestamentary trust” means a trust that is created and takes effect during the lifetime of the settlor.

      Sec. 38. “Testamentary trust” means a trust that is created by the terms of the will of a person.

      Sec. 39. “Trust instrument” means a will, trust agreement, declaration, or other instrument that creates or defines the duties and powers of a trustee and shall include a court order or any instrument that modifies a trust instrument or, in effect, alters the duties and powers of a trustee or other terms of a trust instrument.

      Sec. 40. 1.  Except as otherwise provided by the terms of the trust instrument, a trustee may combine two or more trusts into a single trust or divide a trust into two or more separate trusts if the combination or division does not:

      (a) Impair the rights of any beneficiary;

      (b) Substantially affect the accomplishment of the purposes of the trust or trusts; or

      (c) Violate the rule against perpetuities applicable to the trust or trusts.

      2.  The combination or division of trusts must be made only after giving notice of the proposed action and following the procedure set forth in NRS 164.725.

 


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in NRS 164.725. The notice of the proposed action must include a summary of the anticipated tax consequences, if any, of the proposed combination or division.

      Sec. 41. Except as otherwise specifically provided in the trust instrument and except to the extent it would be materially detrimental to the administration of the trust or to the furtherance of its purposes, a trustee may change the name of an irrevocable trust or give a name to an irrevocable trust that does not have one.

      Sec. 42. “Directing trust adviser” means a trust adviser, trust protector or other person designated in the trust instrument who has the authority to give directives that must be followed by the fiduciary. The term does not include a trust adviser, trust protector or other person who gives recommendations, counsel or advice that the fiduciary is not required to follow under the terms of the trust instrument.

      Sec. 43. For the purposes of NRS 163.553 to 163.556, inclusive, and sections 42 and 43 of this act, a fiduciary is a “directed fiduciary” with respect to any action that the fiduciary:

      1.  Has no power to take under the terms of the governing instrument;

      2.  Is mandated by the governing instrument and for which the fiduciary has no discretion to act otherwise; and

      3.  Is directed to take or prohibited from taking by a directing trust adviser.

      Sec. 44. 1.  A public benefit trust must be administered in accordance with the terms of the trust instrument. Except to the extent otherwise provided for in the trust instrument:

      (a) Any person appointed by the terms of the trust instrument may enforce the terms of the public benefit trust or, if there is no such person or if such a person is no longer willing or able to serve as a person appointed to enforce the trust, the terms of the trust may be enforced by the Attorney General, the district attorney of the county in which the trust is domiciled or a person appointed by the district court in the county in which the trust is domiciled.

      (b) A petition for an order that appoints a person to enforce the terms of the public benefit trust or to remove the person who has been appointed to enforce the terms of the trust may be filed with the district court in the county in which the trust is domiciled by the Attorney General, by the district attorney in the county in which the trust is domiciled or by any person who has an interest, other than a general public interest, in the declared purpose of the trust.

      (c) The principal and income of the public benefit trust may be applied only to its intended use.

      (d) Upon the termination of the public benefit trust, any assets of the trust and any undistributed income must be distributed in accordance with the terms of the trust or, in the absence of such terms, to the estate of the settlor.

      (e) If a specific purpose of the public benefit trust becomes illegal under the United States Constitution or the Nevada Constitution, the trust must continue in force as if the illegal purpose was not included in the trust instrument. If no purpose of the public benefit trust is lawful, the district court in the county in which the trust is domiciled may, upon the petition of an interested person or upon its own motion, reform the trust to continue for lawful purposes similar to those intended by the settlor. If the court determines that a reformation of the public benefit trust is not practical or will not accomplish the objectives of the settlor, the trust must terminate and its assets and undistributed income must be distributed pursuant to paragraph (d).

 


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court determines that a reformation of the public benefit trust is not practical or will not accomplish the objectives of the settlor, the trust must terminate and its assets and undistributed income must be distributed pursuant to paragraph (d).

      (f) Except as ordered by the district court or required by the trust instrument, no filing, report, registration, periodic accounting, separate maintenance of funds, appointment or fee is required by reason of the existence of the fiduciary relationship of the trustee or trustees of the public benefit trust.

      (g) If no trustee is designated or no designated trustee is willing or able to act, the district court in the county in which the trust is domiciled shall name one or more trustees and may make such other orders and determinations as are advisable to carry out the interest of the settlor and the purposes of the public benefit trust.

      2.  As used in this section, “public benefit trust” means a valid trust without identifiable beneficiaries that is not a charitable trust, but which:

      (a) Is established to further one or more specifically declared religious, scientific, literary, educational, community development, personal improvement or philanthropic purposes that is not illegal or against public policy;

      (b) Provides that the trust principal or income, or both, will provide a benefit, but not necessarily principal or income, to the general public or to one or more classes or groups of persons, including, without limitation, a government, a governmental agency and any political subdivision of a government, that are to be identified in the trustee’s discretion;

      (c) Does not allow any benefit to the trustee or any cotrustee, except as to the payment of reasonable compensation and the reimbursement of expenses incurred for the benefit of the trust; and

      (d) Does not violate the rule against perpetuities as set forth in NRS 111.103 to 111.1039, inclusive.

      Sec. 45. If a trust has no serving trustee because of the death, incapacity or resignation of the last serving trustee of the trust, and if the provisions of the trust instrument do not include any provisions which can be effectively used to appoint a successor trustee, then the current beneficiaries of the trust, by unanimous vote, may name and appoint a successor trustee of the trust without the approval of the court so long as the successor trustee of the trust is not a person described in NRS 138.020 and is not a “related or subordinate person” with respect to the settlor of the trust or any beneficiary thereof within the meaning of section 672(c) of the Internal Revenue Code, 26 U.S.C. § 672(c), as amended. If a current beneficiary is a minor, the minor’s guardian or guardian ad litem may vote on the minor’s behalf. NRS 164.038 shall apply with respect to the appointment of a trustee under this section. For the purposes of this section, the person entitled to vote with respect to a beneficiary which is another trust, which has a serving trustee, is the trustee or trustees of such trust.

      Sec. 46. A fiduciary may take such actions as are necessary to cause gains from the sale or exchange of trust assets, as determined for federal income tax purposes, to be taxed for federal income tax purposes as part of a distribution of income, including, without limitation, income which has been increased by an adjustment from principal to income under NRS 164.795, a unitrust distribution or a distribution of principal to a beneficiary.

 


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been increased by an adjustment from principal to income under NRS 164.795, a unitrust distribution or a distribution of principal to a beneficiary.

      Sec. 46.5. 1.  After notice to the beneficiaries, the trustee of a trust that consists of trust property having a total value of less than $100,000 or that is uneconomical to administer may terminate the trust if the trustee concludes that the value of the trust property is insufficient to justify the cost of administration. This subsection does not apply to an interested trustee.

      2.  The court may modify or terminate a trust, in accordance with NRS 163.185, or remove the trustee and appoint a different trustee if the court determines that the value of the trust property is insufficient to justify the cost of administration.

      3.  On termination of a trust under this section, the trustee shall distribute the trust property in a manner consistent with the purposes of the trust.

      4.  This section does not apply to a trust whose trust property includes an easement for conservation.

      5.  As used in this section:

      (a) “Easement for conservation” has the meaning ascribed to it in NRS 111.410.

      (b) “Interested trustee” means:

             (1) An individual trustee to whom the net income or principal of the trust can currently be distributed or would be distributed if the trust were then to terminate and be distributed.

             (2) Any trustee who may be removed and replaced by an interested distributee.

             (3) An individual trustee whose legal obligation to support a beneficiary may be satisfied by distributions of income and principal of the trust.

      Sec. 47. NRS 163.001 is hereby amended to read as follows:

      163.001  As used in this chapter, unless the context otherwise requires, the words and terms defined in NRS 163.0011 to 163.0017, inclusive, and sections 37, 38 and 39 of this act have the meanings ascribed to them in those sections.

      Sec. 48. NRS 163.002 is hereby amended to read as follows:

      163.002  Except as otherwise provided by specific statute, a trust may be created by any of the following methods:

      1.  A declaration by the owner of property that he or she holds the property as trustee. In the absence of a contrary declaration by the owner of the property or of a transfer of the property to a third party and regardless of formal title to the property:

      (a) Property declared to be trust property, together with all income therefrom and the reinvestment thereof, must remain trust property; and

      (b) If the property declared to be trust property includes an account, contract, certificate, note, judgment, business interest, contents of a safe deposit box or other property interest that is subject to additions or contributions, all subsequent additions and contributions to the property are also trust property.

      2.  A transfer of property by the owner during his or her lifetime to another person as trustee.

 


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      3.  A testamentary transfer of property by the owner to another person as trustee.

      4.  An exercise of a power of appointment in trust.

      5.  An enforceable promise to create a trust.

      Sec. 49. NRS 163.004 is hereby amended to read as follows:

      163.004  1.  [A trust may be created for any purpose that is not illegal or against public policy.

      2.]  Except as otherwise provided by [a specific statute, federal law or common] law, the terms of a trust instrument may expand, restrict, eliminate or otherwise vary the rights and interests of beneficiaries in any manner that is not illegal or against public policy, including, without limitation : [, specifying:]

      (a) The right to be informed of the beneficiary’s interest for a period of time;

      (b) The grounds for [removing] the removal of a fiduciary;

      [(b)] (c) The circumstances, if any, in which the fiduciary must diversify investments; [and

      (c)] (d) A fiduciary’s powers, duties, standards of care, rights of indemnification and liability to persons whose interests arise from the trust instrument [.

      3.] ; and

      (e) The provisions of general applicability to trusts and trust administration.

      2.  A trust is irrevocable by the settlor except to the extent that a right to amend the trust or a right to revoke the trust is expressly reserved by the settlor.

      3.  Nothing in this section shall be construed to:

      (a) Authorize the exculpation or indemnification of a fiduciary for the fiduciary’s own willful misconduct or gross negligence; or

      (b) Preclude a court of competent jurisdiction from removing a fiduciary because of the fiduciary’s willful misconduct or gross negligence.

      4.  The rule that statutes in derogation of the common law are to be strictly construed has no application to this section. This section must be liberally construed to give maximum effect to the principle of freedom of disposition and to the enforceability of trust instruments.

      Sec. 50. NRS 163.006 is hereby amended to read as follows:

      163.006  A trust [, other than a charitable trust,] is created only if there is a beneficiary. This requirement is satisfied if the trust instrument provides for:

      1.  A beneficiary or class of beneficiaries that is ascertainable with reasonable certainty or that is sufficiently described so that it can be determined whether a person meets the description or is within the class; [or]

      2.  A grant of power to the trustee or some other person to select the beneficiary based on a standard or in the discretion of the trustee or other person [.] ;

      3.  A charitable trust as defined in NRS 163.460;

      4.  A trust for the care of one or more animals created pursuant to NRS 163.0075; or

      5.  A public benefit trust as defined in section 44 of this act.

 


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      Sec. 51. NRS 163.020 is hereby amended to read as follows:

      163.020  As used in NRS 163.010 to 163.200, inclusive, and sections 40, 41 and 46.5 of this act, unless the context or subject matter otherwise requires:

      1.  “Affiliate” means any person directly or indirectly controlling or controlled by another person, or any person under direct or indirect common control with another person. It includes any person with whom a trustee has an express or implied agreement regarding the purchase of trust investments by each from the other, directly or indirectly, except a broker or stock exchange.

      2.  “Relative” means a spouse, ancestor, descendant, brother or sister.

      3.  “Trust” means an express trust only.

      4.  “Trustee” means the person holding property in trust and includes trustees, a corporate as well as a natural person and a successor or substitute trustee.

      Sec. 52. NRS 163.4157 is hereby amended to read as follows:

      163.4157  “Power of appointment” means an inter vivos or testamentary power [, held by a person other than the settlor,] to direct the disposition of trust property, other than a distribution decision by a trustee to a beneficiary.

      Sec. 53. NRS 163.419 is hereby amended to read as follows:

      163.419  Except as otherwise provided in the trust instrument, with respect to a discretionary interest as described in NRS 163.4185:

      1.  A beneficiary who has a discretionary interest in a trust does not have an enforceable right to a distribution from the trust, and a court may review a trustee’s exercise of discretion concerning a discretionary interest only if the trustee acts dishonestly, with [improper motive or fails to act.] bad faith or willful misconduct.

      2.  A trustee given discretion in a trust instrument that is described as sole, absolute, uncontrolled, unrestricted or unfettered discretion, or with similar words, has no duty to act reasonably in the exercise of that discretion.

      3.  Absent express language in a trust to the contrary, if a discretionary interest permits unequal distributions between beneficiaries or to the exclusion of other beneficiaries, the trustee may distribute all of the undistributed income and principal to one beneficiary in the trustee’s discretion.

      4.  Regardless of whether a beneficiary has an outstanding creditor, a trustee of a discretionary interest may directly pay any expense on the beneficiary’s behalf and may exhaust the income and principal of the trust for the benefit of such beneficiary.

      Sec. 54. NRS 163.553 is hereby amended to read as follows:

      163.553  As used in NRS 163.553 to 163.556, inclusive, and sections 42 and 43 of this act, unless the context otherwise requires, the words and terms defined in NRS 163.5533 to 163.5547, inclusive, and section 42 of this act have the meanings ascribed to them in those sections.

      Sec. 55. NRS 163.5549 is hereby amended to read as follows:

      163.5549  1.  [An excluded] A directed fiduciary is not liable, individually or as a fiduciary for any loss which results from:

      (a) Complying with a direction of a directing trust adviser, [custodial account owner or authorized designee of a custodial account owner;] whether the direction is to act or to not act; or

 


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      (b) [A failure] Failing to take any action proposed by [an excluded] a directed fiduciary [which requires prior authorization of the trust adviser if the excluded fiduciary timely sought but failed to obtain such authorization; or

      (c) Any action taken at the direction of a trust protector.] if the action:

             (1) Required the approval, consent or authorization of a person who did not provide the approval, consent or authorization; or

             (2) Was contingent upon a condition that was not met or satisfied.

      2.  [An excluded] A directed fiduciary is not liable for any obligation to perform an investment or suitability review, inquiry or investigation or to make any recommendation or evaluation with respect to any investment, to the extent that the investment is made by a directing trust adviser . [, custodial account owner or authorized designee of a custodial account owner had authority to direct the acquisition, disposition or retention of such investment.]

      3.  The provisions of this section do not impose an obligation or liability on a custodian of a custodial account for providing any authorization.

      Sec. 56. NRS 163.555 is hereby amended to read as follows:

      163.555  If the instrument provides, [an excluded] a directed fiduciary may continue to follow the direction of a directing trust adviser upon the incapacity or death of the settlor of the trust.

      Sec. 57. NRS 163.556 is hereby amended to read as follows:

      163.556  1.  [Unless] Except as otherwise provided in this section, unless the terms of a testamentary instrument or irrevocable trust provide otherwise, a trustee with discretion or authority to distribute trust income or principal to or for a beneficiary of the trust may exercise such discretion or authority by appointing the property subject to such discretion or authority in favor of a second trust [for the benefit of one or more of those beneficiaries.] as provided in this section.

      2.  [Notwithstanding subsection 1, a] The second trust to which a trustee appoints property of the first trust may only have as beneficiaries one or more of the beneficiaries of the original trust:

      (a) To or for whom a distribution of income or principal may be made from the original trust;

      (b) To or for whom a distribution of income or principal may be made in the future from the original trust at a time or upon the happening of an event specified under the first trust; or

      (c) Both paragraphs (a) and (b).

Ê For purposes of this subsection, a permissible appointee of a power of appointment exercised by a beneficiary of the second trust is not considered a beneficiary of the second trust.

      3.  A trustee may not appoint property of the original trust to a second trust if:

      (a) [The second trust includes a beneficiary who is not a beneficiary of the original trust. For purposes of this paragraph, a permissible appointee of a power of appointment exercised by a beneficiary of the second trust is not considered a beneficiary of the second trust.

      (b)] Appointing the property will reduce any [current fixed] income interest [, annuity interest or unitrust interest of a beneficiary of the original trust.] of any income beneficiary of the original trust if the original trust is:

             (1) A trust for which a marital deduction has been taken for federal or state income, gift or estate tax purposes;

 


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             (2) A trust for which a charitable deduction has been taken for federal or state income, gift or estate tax purposes; or

             (3) A grantor-retained annuity trust or unitrust under 27 C.F.R. § 25.2702-3(b) and (c).

Ê As used in this paragraph, “unitrust” has the meaning ascribed to it in NRS 164.700.

      [(c) A contribution made to the original trust qualified for a marital or charitable deduction for federal or state income, gift or estate taxes or qualified for a gift tax exclusion for federal or state tax purposes and the terms of the second trust include a provision which if included in the original trust would prevent the original trust from qualifying for the tax deduction or exclusion.

      (d)](b) The property to be appointed is subject to a power of withdrawal which is held by a beneficiary of the original trust and may be executed at the time of the proposed appointment, unless after the exercise of such appointment, the beneficiary of the original trust’s power of withdrawal is unchanged with respect to the trust property.

      [(e)] (c) Property specifically allocated for one beneficiary of the original trust is no longer allocated for that beneficiary under either or both trusts, unless the beneficiary consents in writing.

      [(f)] (d) Property held for the benefit of one or more beneficiaries under both the original and the second trust has a lower value than the value of the property held for the benefit of the same beneficiaries under only the original trust, unless:

             (1) The benefit provided is limited to a specific amount or periodic payments of a specific amount; and

             (2) The value of the property held in either or both trusts for the benefit of one or more beneficiaries is actuarially adequate to provide the benefit.

      [(g) Under the second trust:

             (1) Discretionary distributions may be made by the trustee to a beneficiary or group of beneficiaries of the original trust;

             (2) Distributions are not limited by an ascertainable standard; and

             (3) A beneficiary or group of beneficiaries has the power to remove and replace the trustee of the second trust with a beneficiary of the second trust or with a trustee that is related to or subordinate to a beneficiary of the second trust.

      (h)] (e) A contribution made to the original trust qualified for a gift tax exclusion as described in section 2503(b) of the Internal Revenue Code, 26 U.S.C. § 2503(b), by reason of the application of section 2503(c) of the Internal Revenue Code, 26 U.S.C. § 2503(c), unless the second trust provides that the beneficiary’s remainder interest must vest not later than the date upon which such interest would have vested under the terms of the original trust.

      [3.  Notwithstanding the provisions of subsection 1, a]

      4.  A trustee who is a beneficiary of the original trust may not exercise the authority to appoint property of the original trust to a second trust if:

      (a) Under the terms of the original trust or pursuant to law governing the administration of the original trust:

             (1) The trustee does not have discretion to make distributions to himself or herself;

 


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             (2) The trustee’s discretion to make distributions to himself or herself is limited by an ascertainable standard, and under the terms of the second trust, the trustee’s discretion to make distributions to himself or herself is not limited by the same ascertainable standard; or

             (3) The trustee’s discretion to make distributions to himself or herself can only be exercised with the consent of a cotrustee or a person holding an adverse interest and under the terms of the second trust the trustee’s discretion to make distributions to himself or herself is not limited by an ascertainable standard and may be exercised without consent; or

      (b) Under the terms of the original trust or pursuant to law governing the administration of the original trust, the trustee of the original trust does not have discretion to make distributions that will discharge the trustee’s legal support obligations but under the second trust the trustee’s discretion is not limited.

      [4.] 5.  Notwithstanding the provisions of subsection 1, a trustee who may be removed by the beneficiary or beneficiaries of the original trust and replaced with a trustee that is related to or subordinate, as described in section 672 of the Internal Revenue Code, 26 U.S.C. § 672(c), to a beneficiary, may not exercise the authority to appoint property of the original trust to a second trust to the extent that the exercise of the authority by such trustee would have the effect of increasing the distributions that can be made from the second trust to such beneficiary or group of beneficiaries that held the power to remove the trustee of the original trust and replace such trustee with a related or subordinate person, unless the distributions that may be made from the second trust to such beneficiary or group of beneficiaries described in paragraph (a) of subsection 4 are limited by an ascertainable standard.

      6.  The provisions of [subsection 3] subsections 4 and 5 do not prohibit a trustee who is not a beneficiary of the original trust or who may not be removed by the beneficiary or beneficiaries and replaced with a trustee that is related to or subordinate to a beneficiary from exercising the authority to appoint property of the original trust to a second trust pursuant to the provisions of subsection 1.

      [5.] 7.  Before appointing property pursuant to subsection 1, a trustee may give notice of a proposed action pursuant to NRS 164.725 or may petition a court for approval pursuant to NRS 153.031, 164.015 or 164.725. Any notice of a proposed action or a petition for a court’s approval must include the trustee’s opinion of how the appointment of property will affect the trustee’s compensation and the administration of other trust expenses.

      [6.] 8.  The trust instrument of the second trust may:

      (a) Grant a general or limited power of appointment to one or more of the beneficiaries of the second trust who are [proper objects of the exercise of the power in] beneficiaries of the original trust. [The power of appointment includes, without limitation, the power to appoint trust property to the holder of the power, the holder’s creditors, the holder’s estate, the creditors of the holder’s estate or any other person.]

      (b) Provide that, at a time or occurrence of an event specified in the trust instrument, the remaining trust assets in the second trust must be held for the beneficiaries of the original trust upon terms and conditions that are substantially identical to the terms and conditions of the original trust.

 


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      [7.] 9.  The power to appoint the property of the original trust pursuant to subsection 1 must be exercised by a writing, signed by the trustee and filed with the records of the trust.

      [8.] 10.  The exercise of the power to invade principal of the original trust pursuant to subsection 1 is considered the exercise of a power of appointment, other than power to appoint the property to the trustee, the trustee’s creditors, the trustee’s estate or the creditors of the trustee’s estate and the provisions of NRS 111.1031 apply to such power of appointment.

      [9.] 11.  The provisions of this section do not abridge the right of any trustee who has the power to appoint property which arises under any other law.

      [10.] 12.  The provisions of this section do not impose upon a trustee a duty to exercise the power to appoint property pursuant to subsection 1.

      [11.] 13.  The power to appoint property to another trust pursuant to subsection 1 is not a power to amend the trust and a trustee is not prohibited from appointing property to another trust pursuant to subsection 1 if the original trust is irrevocable or provides that it may not be amended.

      [12.] 14.  A trustee’s power to appoint property to another trust pursuant to subsection 1 is not limited by the existence of a spendthrift provision in the original trust.

      [13.] 15.  A trustee exercising any power granted pursuant to this section may designate himself or herself or any other person permitted to act as a trustee as the trustee of the second trust.

      [14.] 16.  The trustee of a second trust, resulting from the exercise of the power to appoint property to another trust pursuant to subsection 1, may also exercise the powers granted pursuant to this section with respect to the second trust.

      [15.] 17.  For the purposes of this section, “second trust” means an irrevocable trust that receives trust income or principal appointed by the trustee of the original trust, and may be established by any person, including, without limitation, a new trust created by the trustee, acting in that capacity, of the original trust. If the trustee of the original trust establishes the second trust, then for purposes of creating the new second trust, the requirement of NRS 163.008 that the instrument be signed by the settlor shall be deemed to be satisfied by the signature of the trustee of the second original trust. The second trust may be a trust created under the same trust instrument as the original trust or under a different trust instrument.

      18.  As used in this section, “ascertainable standard” means a standard relating to an individual’s health, education, support or maintenance within the meaning of section 2041(b)(1)(A) or 2514(c)(1) of the Internal Revenue Code, 26 U.S.C. § 2041(b)(1)(A) or 2514(c)(1), and any regulations of the United States Treasury promulgated thereunder.

      19.  This section applies to a trust that is governed by, sitused in or administered under the laws of this State, whether the trust is initially governed by, sitused in or administered under the laws of this State pursuant to the terms of the trust instrument or whether the governing law, situs or administration of the trust is moved to this State from another state or foreign jurisdiction.

 


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      Sec. 58. Chapter 164 of NRS is hereby amended by adding thereto the provisions set forth as sections 59 to 62, inclusive, of this act.

      Sec. 59. 1.  The laws of this State govern the validity and construction of a trust if:

      (a) The trust instrument so provides;

      (b) Designated by a person who, under the terms of the trust instrument, has the right to designate the laws that govern the validity and construction of the trust, at the time the designation is made; or

      (c) The trust instrument does not provide for the law that governs the validity and construction of the trust, a person designated under the terms of the trust instrument to designate the law that governs the validity and construction of the trust, if any, has not made such a designation and the settlor or the trustee of the trust was a resident of this State at the time the trust was created or at the time the trust became irrevocable.

      2.  A person not domiciled in this State may have the right to designate the laws that govern the validity and construction of a trust if properly designated under the trust instrument.

      3.  If the district court, as defined in NRS 132.116, determines that there is a clear and sufficient nexus between a trust and this State, the court may assume jurisdiction during a proceeding conducted pursuant to NRS 164.010 unless:

      (a) Another court has properly assumed jurisdiction in accordance with the laws of that jurisdiction;

      (b) The trust instrument expressly provides that the situs of the trust is outside of this State or that a court of a jurisdiction other than this State has jurisdiction over the trust; or

      (c) A person has designated for the trust a situs or jurisdiction other than this State, if such person made the designation at a time during which he or she held the power to make such a designation under the express terms of the trust instrument.

      4.  For the purposes of this section, there is a clear and sufficient nexus between a trust and this State if:

      (a) The trust owns an interest in real property located in this State;

      (b) The trust owns personal property, wherever situated, if the trustee or cotrustee is:

             (1) A resident of this State;

             (2) Incorporated or authorized to do business in this State;

             (3) A trust company licensed under chapter 669 of NRS;

             (4) A family trust company, as defined in NRS 669A.080; or

             (5) A national association having an office in this State;

      (c) One or more beneficiaries of the trust reside in this State; or

      (d) At least part of the administration of the trust occurs in this State.

      5.  For paragraphs (c) and (d) of subsection 4 to apply with respect to a cotrustee, such cotrustee must have the authority to maintain records for the trust and to prepare income tax returns for the trust, even if such authority may also be exercised by another cotrustee.

      6.  Notwithstanding the provisions of this section, if a court of a jurisdiction other than this State has jurisdiction over a trust and grants an order authorizing a transfer of jurisdiction over the trust to this State, the district court has the power to assume jurisdiction over that trust and to otherwise supervise the administration of that trust in accordance with the procedures set forth in this title if the requirements of subsection 4 are satisfied.

 


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otherwise supervise the administration of that trust in accordance with the procedures set forth in this title if the requirements of subsection 4 are satisfied.

      7.  A trust, the situs of which is outside this State, that moves its situs to this State is valid whether or not the trust complies with the laws of this State at the time of its creation or after its creation.

      Sec. 60. 1.  A provision in a will or trust instrument requiring the arbitration of disputes other than disputes of the validity of all or a part of a will or trust, between or among the beneficiaries and a fiduciary under the will or trust, or any combination of such persons or entities, is enforceable.

      2.  Unless otherwise specified in the will or trust, a will or trust provision requiring arbitration shall be presumed to require binding arbitration under NRS 38.206 to 38.248, inclusive. If an arbitration enforceable under this section is governed under NRS 38.206 to 38.248, inclusive, the arbitration provision in the will or trust shall be treated as an agreement for the purposes of applying the provisions of NRS 38.206 to 38.248, inclusive.

      3.  The court is authorized to appoint a guardian ad litem at any time during the arbitration procedure to represent the interests of a minor or a person who is incapacitated, unborn, unknown or unascertained, or a designated class of persons who are not ascertained or are not in being. If not precluded by a conflict of interest, a guardian ad litem may be appointed to represent several persons or interests. The guardian ad litem is entitled to reasonable compensation for services with such compensation to be paid from the principal of the estate or trust whose beneficiaries are represented. The provisions of NRS 164.038 and the common law relating to the doctrine of virtual representation apply to the dispute resolution procedure unless the common law rule or doctrine is inconsistent with the provisions of NRS 164.038, and any action taken by a court enforcing the judgment is conclusive and binding upon each person receiving actual or constructive notice or who is otherwise virtually represented.

      4.  Such arbitration in a provision in a will or trust may include, without limitation:

      (a) The number, method of selection and minimum qualifications of arbitrators;

      (b) The selection and establishment of arbitration procedures, including, without limitation, the incorporation of the arbitration rules for wills and trusts adopted by the American Arbitration Association;

      (c) The county in which the dispute resolution will take place;

      (d) The scope of discovery;

      (e) The burden of proof;

      (f) Confidentiality of the arbitration process and the evidence produced during arbitration and discovery;

      (g) The awarding of attorney’s fees, expert fees and costs;

      (h) The time period in which the arbitration must be conducted and deciding an award;

      (i) The method of allocating the appointed person’s fees and expenses among the parties;

      (j) The required appointment of guardians ad litem;

      (k) The consequences to a party who fails to act in accordance with such provisions or contests such provisions; and

 


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      (l) Other matters which are not inconsistent with NRS 38.206 to 38.248, inclusive.

      Sec. 61. 1.  Except as otherwise provided in this section, a settlement agreement entered into by all indispensable parties, as described in subsection 1 of section 62 of this act is enforceable with respect to the administration of a trust without approval by the court, as defined in NRS 132.116.

      2.  A nonjudicial settlement agreement is void to the extent it violates a material purpose of the trust and to the extent it includes terms and conditions that could not be properly approved by the court, as defined in NRS 132.116, under the law governing the trust instrument.

      3.  Matters that may be resolved by a nonjudicial settlement agreement include, without limitation:

      (a) The investment or use of trust assets;

      (b) The lending or borrowing of money;

      (c) The addition, deletion or modification of a term or condition of the trust;

      (d) The interpretation or construction of a term of the trust;

      (e) The designation or transfer of the principal place of administration of the trust;

      (f) The approval of a trustee’s report or accounting;

      (g) The choice of law governing the construction of the trust instrument or administration of the trust, or both;

      (h) Direction to a trustee to perform or refrain from performing a particular act;

      (i) The granting of any necessary or desirable power to a trustee;

      (j) The resignation or appointment of a trustee and the determination of a trustee’s compensation;

      (k) The merger or division of trusts;

      (l) The granting of approval or authority, for a trustee to make charitable gifts from a noncharitable trust;

      (m) The transfer of a trust’s principal place of administration;

      (n) Negating the liability of a trustee for an action relating to the trust and providing indemnification therefor; and

      (o) The termination of the trust.

      Sec. 62. 1.  Except as otherwise provided in this section, a nonjudicial settlement agreement is effective when the agreement has been signed by all indispensable parties. A party who is represented by another person pursuant to NRS 164.038 shall be deemed to have signed an agreement when the person who represents that party has signed the agreement.

      2.  Except as otherwise provided in this section, if an indispensable party neither signs the agreement nor provides the trustee with a written objection, the trustee may follow the procedure provided in NRS 164.725 by giving a notice of proposed action to all indispensable parties who have not signed the settlement agreement, where the proposed action is to accept and comply with the nonjudicial settlement agreement.

      3.  Failure to object to the notice of proposed action constitutes acceptance of the settlement agreement. If the trustee is personally aware that an indispensable party, or a person representing that indispensable party under NRS 164.038, has not received the notice of proposed action, the trustee may not proceed to honor the agreement pursuant to subsection 6 of NRS 164.725, but may proceed under subsection 7 of NRS 164.725 as if that indispensable party had objected.

 


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6 of NRS 164.725, but may proceed under subsection 7 of NRS 164.725 as if that indispensable party had objected. Once all indispensable parties have agreed to a settlement agreement as provided in subsection 1 or 2, it is irrevocable.

      4.  Any indispensable party may petition the court for an order approving a nonjudicial settlement agreement under the procedure set forth in NRS 164.015. In order to approve a nonjudicial settlement, the court must find that the agreement complies with the requirements of this section and section 61 of this act.

      5.  For the purposes of this section, “indispensable parties” refers to all interested persons, as defined in NRS 132.185, whose consent would be required in order to achieve a binding settlement were the settlement to be approved by the court.

      Sec. 63. NRS 164.010 is hereby amended to read as follows:

      164.010  1.  Upon petition of any person appointed as trustee of an express trust by any written instrument other than a will, or upon petition of a settlor or beneficiary of the trust, the district court of the county in which the trustee resides or conducts business, or in which the trust has been domiciled, shall consider the application to [confirm the appointment of the trustee and specify the manner in which the trustee must qualify. Thereafter the court has] assume jurisdiction of the trust as a proceeding in rem.

      2.  If the court grants the petition [, it may consider at the same time any petition for instructions filed with the petition for confirmation.] , the court:

      (a) Has jurisdiction of the trust as a proceeding in rem;

      (b) Shall be deemed to have personal jurisdiction over any person pursuant to section 59 of this act;

      (c) May confirm at the same time the appointment of the trustee and specify the manner in which the trustee must qualify; and

      (d) May consider at the same time granting orders on other matters relating to the trust, including, without limitation, matters that might be addressed in a declaratory judgment relating to the trust under subsection 2 of NRS 30.040 or petitions filed pursuant to NRS 153.031 or 164.015 whether such matters are raised in the petition to assume jurisdiction pursuant to this section or in one or more separate petitions that are filed concurrently with the petition to assume jurisdiction.

      3.  At any time, the trustee may petition the court for removal of the trust from continuing jurisdiction of the court.

      4.  For the purposes of this section, a trust is domiciled:

      (a) In this State if there is a clear and sufficient nexus between the trust and this State pursuant to subsection 4 of section 59 of this act.

      (b) In a county of this State that provides the nexus required pursuant to paragraph (a) giving preference:

             (1) First, to the situs or domicile most recently declared by a person granted the power to make such a declaration under the terms of the trust instrument;

             (2) Second, to the situs or domicile declared in the trust instrument; and

             (3) Finally, to the situs or domicile declared by the trustee in a certification of the trust which complies with subsection 2 of NRS 164.400 and subsection 2 of NRS 164.410 and which contains a declaration of the trust’s situs or domicile as authorized in subsection 1 of NRS 164.410.

 


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      5.  As used in this section, “written instrument” includes, without limitation, an electronic trust as defined in NRS 163.0015.

      Sec. 64. NRS 164.015 is hereby amended to read as follows:

      164.015  1.  The court has exclusive jurisdiction of proceedings initiated by the petition of an interested person concerning the internal affairs of a nontestamentary trust, including a revocable living trust while the settlor is still living if the court determines that the settlor cannot adequately protect his or her own interests or if the interested person shows that the settlor is incompetent or susceptible to undue influence. Proceedings which may be maintained under this section are those concerning the administration and distribution of trusts, the declaration of rights and the determination of other matters involving trustees and beneficiaries of trusts, including petitions with respect to a nontestamentary trust for any appropriate relief provided with respect to a testamentary trust in NRS 153.031 [.] and petitions for a ruling that property not formally titled in the name of a trust or its trustee constitutes trust property pursuant to NRS 163.002.

      2.  A petition under this section or subsection 2 of NRS 30.040 that relates to a trust may be filed in conjunction with a petition under NRS 164.010 or at any time after the court has assumed jurisdiction under that section.

      3.  If an interested person contests the validity of a revocable nontestamentary trust, the interested person is the plaintiff and the trustee is the defendant. The written grounds for contesting the validity of the trust constitutes a pleading and must conform with any rules applicable to pleadings in a civil action. This subsection applies whether the person contesting the validity of the trust is the petitioner or the objector and whether or not the opposition to the validity of the trust is asserted under this section or subsection 2 of NRS 30.040.

      4.  In a proceeding pursuant to subsection 3, the competency of the settlor to make the trust, the freedom of the settlor from duress, menace, fraud or undue influence at the time of execution of the will, the execution and attestation of the trust instrument, or any other question affecting the validity of the trust is a question of fact and must be tried by the court, subject to the provisions of subsection 5.

      5.  A court may consolidate the cases if there is a contest of a revocable nontestamentary trust and a contest relating to a will executed on the same date. If a jury is demanded pursuant to NRS 137.020 for the contest of the will, the court may instruct the jury to render an advisory opinion with respect to an issue of fact pursuant to subsection 4 in the contest of the trust.

      6.  Upon the hearing, the court shall enter such order as it deems appropriate. The order is final and conclusive as to all matters determined and is binding in rem upon the trust estate and upon the interests of all beneficiaries, vested or contingent, except that appeal to the appellate court of competent jurisdiction pursuant to the rules fixed by the Supreme Court pursuant to Section 4 of Article 6 of the Nevada Constitution may be taken from the order within 30 days after notice of its entry by filing notice of appeal with the clerk of the district court. The appellant shall mail a copy of the notice to each person who has appeared of record. If the proceeding was brought pursuant to subsection 3, 4 or 5, the court must also award costs pursuant to chapter 18 of NRS.

      7.  [A] Except as otherwise ordered by the court, a proceeding under this section does not result in continuing supervisory proceedings [. The] , and the administration of the trust must proceed expeditiously in a manner consistent with the terms of the trust, without judicial intervention or the order, approval or other action of any court, unless the jurisdiction of the court is invoked by an interested person or exercised as provided by other law.

 


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and the administration of the trust must proceed expeditiously in a manner consistent with the terms of the trust, without judicial intervention or the order, approval or other action of any court, unless the jurisdiction of the court is invoked by an interested person or exercised as provided by other law.

      8.  As used in this section, “nontestamentary trust” has the meaning ascribed to it in section 37 of this act.

      Sec. 65. NRS 164.025 is hereby amended to read as follows:

      164.025  1.  The trustee of a nontestamentary trust may after the death of the settlor of the trust cause to be published a notice in the manner specified in paragraph (b) of subsection 1 of NRS 155.020 and mail a copy of the notice to known or readily ascertainable creditors.

      2.  The notice must be in substantially the following form:

 

NOTICE TO CREDITORS

 

       Notice is hereby given that the undersigned is the duly appointed and qualified trustee of the ................ trust. ................, the settlor of that trust died on ................. A creditor having a claim against the trust estate must file a claim with the undersigned at the address given below within 90 days after the first publication of this notice.

 

       Dated.................................

 

                                                                                                                            

                                                                                     Trustee

                                                                                                                            

                                                                                    Address

 

      3.  A person having a claim, due or to become due, against a settlor or the trust must file the claim with the trustee within 90 days after the mailing, for those required to be mailed, or 90 days after publication of the first notice to creditors. Any claim against the trust estate not filed within that time is forever barred. After the expiration of the time, the trustee may distribute the assets of the trust to its beneficiaries without personal liability to any creditor who has failed to file a claim with the trustee.

      4.  If the trustee knows or has reason to believe that the settlor received public assistance during the lifetime of the settlor, the trustee shall, whether or not the trustee gives notice to other creditors, give notice within 30 days after the death to the Department of Health and Human Services in the manner provided in NRS 155.010. If notice to the Department is required by this subsection but is not given, the trust estate and any assets transferred to a beneficiary remain subject to the right of the Department to recover public assistance received.

      5.  If a claim is rejected by the trustee, in whole or in part, the trustee must, within 10 days after the rejection, notify the claimant of the rejection by written notice forwarded by registered or certified mail to the mailing address of the claimant. The claimant must bring suit in the proper court against the trustee within 60 days after the notice is given, whether the claim is due or not, or the claim is barred forever and the trustee may distribute the assets of the trust to its beneficiaries without personal liability to any creditor whose claim is barred forever.

 


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      6.  As used in this section, “nontestamentary trust” has the meaning ascribed to it in section 37 of this act.

      Sec. 66. NRS 164.410 is hereby amended to read as follows:

      164.410  1.  A certification of trust may confirm the following facts or contain the following information:

      (a) The existence of the trust and date of execution of any trust instrument;

      (b) The identity of the settlor and each currently acting trustee;

      (c) The powers of the trustee and any restrictions imposed upon the trustee in dealing with assets of the trust;

      (d) The revocability or irrevocability of the trust and the identity of any person holding a power to revoke it;

      (e) If there is more than one trustee, whether all of the currently acting trustees must or less than all may act to exercise identified powers of the trustee;

      (f) [The identifying number of the trust and whether it is a social security number or an employer identification number;] A declaration regarding the situs or domicile of the trust and regarding the law that governs the validity, construction and administration of the trust; and

      (g) The form in which title to assets of the trust is to be taken.

      2.  The certification must contain a statement that the trust has not been revoked or amended to make any representations contained in the certification incorrect, and that the signatures are those of all the currently acting trustees.

      Sec. 67. NRS 164.725 is hereby amended to read as follows:

      164.725  1.  As used in this section, “action” includes a course of action and a decision on whether or not to take action.

      2.  A trustee may provide a notice of proposed action regarding any matter governed by NRS 163.556 or 164.700 to 164.925, inclusive. Except as otherwise provided in the trust instrument, a trustee, trust protector or trust adviser may provide a notice of proposed action regarding any aspect of the trust administration of the trust within his or her scope of authority.

      3.  If a trustee , trust protector or trust adviser provides a notice of proposed action, the trustee , trust protector or trust adviser shall mail the notice of proposed action to every adult beneficiary who, at the time the notice is provided, receives, or is entitled to receive, income under the trust or who would be entitled to receive a distribution of principal if the trust were terminated. A notice of proposed action need not be provided to a person who consents in writing to the proposed action. A consent to a proposed action may be executed before or after the proposed action is taken.

      4.  The notice of proposed action must state:

      (a) That the notice is provided pursuant to this section;

      (b) The name and mailing address of the trustee;

      (c) The name and telephone number of a person with whom to communicate for additional information regarding the proposed action;

      (d) A description of the proposed action and an explanation of the reason for taking the action;

      (e) The time within which objection to the proposed action may be made, which must be not less than 30 days after the notice of proposed action is mailed; and

      (f) The date on or after which the proposed action is to be taken or is to be effective.

 


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      5.  A beneficiary may object to the proposed action by mailing a written objection to the [trustee] person providing notice of the proposed action at the address and within the time stated in the notice.

      6.  If no beneficiary entitled to receive notice of a proposed action objects to the proposed action and the other requirements of this section are met, the trustee is not liable to any present or future beneficiary with respect to that proposed action.

      7.  If the trustee , trust protector or trust adviser received a written objection to the proposed action within the period specified in the notice, the trustee , trust protector or trust adviser or a beneficiary may petition the court for an order to take the action as proposed, take the action with modification or deny the proposed action. A beneficiary who failed to object to the proposed action is not estopped from opposing the proposed action. The burden is on a beneficiary to prove that the proposed action should not be taken or should be modified. If the trustee , trust protector or trust adviser takes the proposed action as approved by the court, the trustee , trust protector or trust adviser is not liable to any beneficiary with respect to that action.

      8.  If the trustee , trust protector or trust adviser decides not to take a proposed action for which notice has been provided, the trustee , trust protector or trust adviser shall notify the beneficiaries of his or her decision not to take the proposed action and the reasons for the decision. The trustee , trust protector or trust adviser is not liable to any present or future beneficiary with respect to the decision not to take the proposed action. A beneficiary may petition the court for an order to take the action as proposed. The burden is on the beneficiary to prove that the proposed action should be taken.

      9.  If the proposed action for which notice has been proved is an adjustment to principal and income pursuant to NRS 164.795 or 164.796, the sole remedy a court may order, pursuant to subsections 7 and 8, is to make the adjustment, to make the adjustment with a modification or to order the adjustment not to be made.

      Sec. 68. NRS 164.740 is hereby amended to read as follows:

      164.740  Except as otherwise provided in chapter 669A of NRS, a trustee who invests and manages trust property owes a duty to the beneficiaries of the trust to comply with the prudent investor rule as set forth in NRS 164.700 to 164.775, inclusive, but a trustee is not liable to a beneficiary to the extent that the trustee [acted] :

      1.  Acted in reasonable reliance on the terms of the trust [.] or a court order; and

      2.  Determined in good faith to not diversify the investments of a trust pursuant to NRS 164.750.

      Sec. 69. NRS 164.950 is hereby amended to read as follows:

      164.950  1.  If two settlors who are married establish a nontestamentary trust jointly, and the trust provides for the pecuniary or fractional division of the community property held by the settlors upon the death of one of the settlors, the trustee has the authority to distribute the community property unless the trust instrument expressly provides otherwise. The trustee may distribute the community property on a non-pro rata basis so long as the fair market value of the distribution is, at the time of the distribution, the same as if the distribution were made pro rata. The provisions of this section do not affect the distribution of assets that are specifically allocated in the trust instrument to be distributed in kind.

 


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provisions of this section do not affect the distribution of assets that are specifically allocated in the trust instrument to be distributed in kind.

      2.  As used in this section, “nontestamentary trust” has the meaning ascribed to it in section 37 of this act.

      Sec. 70. Chapter 165 of NRS is hereby amended by adding thereto the provisions set forth as sections 71 to 77, inclusive, of this act.

      Sec. 71. 1.  Except as otherwise provided in this chapter, the provisions of section 72 of this act apply to a testamentary trust.

      2.  Except as otherwise provided by the will creating a testamentary trust or by a court order, until the termination of a testamentary trust, the trustee shall account for the income and principal of a testamentary trust in the same manner as required by a trustee of a nontestamentary trust pursuant to NRS 165.141 to 165.149, inclusive, and sections 72 and 73 of this act.

      Sec. 72. 1.  The trustee of a nontestamentary trust has a duty to account for the trust estate in accordance with the provisions of NRS 165.141 to 165.149, inclusive, and sections 72 and 73 of this act.

      2.  The trustee of a nontestamentary trust shall satisfy the duty to account by delivery of an account in the form, manner and to the persons as required by the terms and conditions stated in the trust instrument.

      Sec. 73. 1.  To the extent that the trust instrument does not provide otherwise, the trustee of a nontestamentary trust shall satisfy the duty to account for the nontestamentary trust estate by delivery of an account which conforms with the requirements of NRS 165.135, and pursuant to the following:

      (a) Except as otherwise limited by paragraph (b), the trustee shall deliver an account, upon demand pursuant to NRS 165.141, to each current beneficiary, and to each remainder beneficiary of the trust. A trustee is not required to provide an account to a remote beneficiary pursuant to this section.

      (b) Notwithstanding paragraph (a), a trustee may satisfy the duty to account in accordance with subparagraphs (1) to (6), inclusive, where applicable:

             (1) While a trust is revocable by the settlor, the trustee is not required to deliver an account to any person other than the settlor except that a trustee of such a trust shall deliver an account if:

                   (I) A court-appointed guardian of the estate of the settlor or other person having the right of revocation demands an account on behalf of the settlor; or

                   (II) The court, in considering a petition filed under NRS 164.015, determines that the settlor or other person holding the right of revocation is incompetent or is susceptible to undue influence and orders the trustee to provide an account, specifying the nature and extent of the account to be provided and the person or persons who are entitled to receive the account.

             (2) While the trust is irrevocable in its entirety, but is subject to a broad power of appointment, the trustee is not required to provide an account other than to the power holder for the trust or portion of the trust that is subject to a broad power of appointment.

             (3) The trustee is not required to provide an account to a person who has been eliminated as a beneficiary by the effective exercise of a power of appointment.

 


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             (4) The trustee is not required to provide an account of any portion of the trust estate to a beneficiary that does not affect the beneficiary’s interest in the trust, and the trustee may redact the account as to such portions that do not affect the beneficiary’s interest.

             (5) A trustee is not required to provide an account to a beneficiary of an irrevocable trust while that beneficiary’s only interest in the trust estate is a discretionary interest, as described in NRS 163.4185.

             (6) A trustee is not required to provide an account to any beneficiary who has waived or is deemed to have waived the right to receive an account in accordance with section 75 of this act. However, if the waiver is partial or only as to form of the account, the trustee shall satisfy the duty to account in accordance with the terms of the waiver.

      2.  Nothing in this section shall be interpreted to prohibit a trustee from petitioning the court for instructions as to the persons entitled to receive an account and the procedures required of the trustee to satisfy the requirements of this section pursuant to subsection 2 of section 77 of this act.

      Sec. 74. 1.  Notwithstanding any provision to the contrary in the trust instrument, but subject to the right of the trustee to petition the court for further instructions pursuant to subsection 2 of section 77 of this act, and subject to the exceptions set forth under paragraph (b) of subsection 1 of section 73 of this act, a trustee shall provide an account conforming with the requirements of NRS 165.135 to a beneficiary pursuant to a demand by such beneficiary pursuant to NRS 165.141.

      2.  A trustee, at the expense of the trust, may provide:

      (a) An account to one or more beneficiaries at any time, with or without demand; and

      (b) More information to beneficiaries, including, without limitation, remote beneficiaries, than is required under the trust instrument or by law.

      Sec. 75. Notwithstanding the provisions of NRS 165.030 to 165.149, inclusive, and sections 71 to 77, inclusive, of this act, any beneficiary may waive the right to receive an account from a trustee by delivering to the trustee a waiver signed by the beneficiary. The waiver may be a limited waiver as to the form of the account, of the right to seek a hearing on the account, or of the right to receive notice of a hearing on the account. Such waiver is applicable to the beneficiary and any other beneficiaries who are represented by the waiving beneficiary pursuant to NRS 164.038 or by order of the court.

      Sec. 76. 1.  Except as may otherwise be required pursuant to the terms of the trust instrument or by order of the court, the trustee shall deliver a required account within 90 days after the end of the period of account, which may be extended by consent of the beneficiary, or by order of the court for good cause shown.

      2.  The trustee shall be deemed to have provided an account to any person on whom the trustee delivers a copy of the account as directed by order of the court or, if not so ordered, pursuant to the following:

      (a) By mailing a copy of the account by certified, registered or ordinary first-class mail, or by overnight delivery through a recognized delivery service company, addressed to the person being served at the post office address or physical address given in the person’s demand for account, if any, or at the person’s last place of residence on file with the trustee, if known, or by personally delivering a copy thereof to the person; or

 


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      (b) By electronic mail or through a secure website on the Internet. For purposes of this paragraph, a person shall be deemed to have received a copy of an account provided by the trustee to the beneficiary by electronic mail or through a secure website on the Internet if the trustee:

             (1) Sent the beneficiary an electronic mail in a manner that complies with subsection 1 of NRS 719.320 and the beneficiary received the electronic mail in a manner that complies with subsection 2 of NRS 719.320; and

             (2) Attached the account to the electronic mail as an electronic record or included in the electronic mail a notice to the beneficiary indicating the availability of the account on the secure website.

      3.  Except as otherwise required by the trust instrument, a trustee is not required to provide an account more than once in any calendar year unless ordered by a court upon good cause shown.

      4.  An account must be deemed approved and final as follows:

      (a) By a beneficiary who received a copy of the account if no written objection is delivered to the trustee in accordance with subsection 2 within 90 days after the date on which the trustee provided the account to that beneficiary; or

      (b) By all beneficiaries who are not required to receive an account, such as nonvested and contingent beneficiaries, remote beneficiaries, minor beneficiaries, and unborn or unknown beneficiaries if the account is deemed approved and final by a beneficiary who has a similar, but preceding interest, in the trust estate, in conformance with NRS 164.038, or as to any beneficiary who has waived an account pursuant to section 75 of this act.

Ê Notwithstanding the foregoing, if an account is submitted to the court for approval under a petition pursuant to chapter 164 of NRS, the account must be deemed final and approved upon by order of the court, subject only to the right of an interested person to appeal.

      5.  Except as otherwise ordered by the court, the cost of preparing an account must be paid from the trust estate, and allocated to income and principal as provided in the trust instrument, and if the trust instrument is otherwise silent, in accordance with NRS 164.780 to 164.925, inclusive.

      6.  As used in this section:

      (a) “Electronic mail” has the meaning ascribed to it in NRS 41.715.

      (b) “Electronic record” has the meaning ascribed to it in NRS 132.117.

      Sec. 77. 1.  Unless the court determines that the trustee was acting in good faith, a trustee who fails to provide an account pursuant to the terms of the trust instrument, or when required pursuant to the provision of this chapter, is personally liable to each person entitled to receive an account who demanded the account in writing pursuant to this chapter or all costs reasonably incurred by each such person to enforce the terms of the trust or this chapter, including, without limitation, reasonable attorney’s fees and court costs. The trustee shall not expend trust funds to satisfy the trustee’s personal liability imposed under this subsection.

      2.  Notwithstanding subsection 1, if the trustee’s failure to account is based upon good cause due to the trustee’s reasonable uncertainty as to the beneficiary’s right to an account or by a provision in the trust instrument that specifically restricts or prohibits the trustee from providing an account to a beneficiary who is otherwise entitled to an account, then the trustee may, at the expense of the trust estate, bring a petition for instructions before the court to confirm:

 


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to a beneficiary who is otherwise entitled to an account, then the trustee may, at the expense of the trust estate, bring a petition for instructions before the court to confirm:

      (a) The right of the beneficiary to receive an account;

      (b) The right of and sufficiency of a demand for an account by a beneficiary; or

      (c) The extent of account required to satisfy the trustee’s duty to account to such beneficiary, if any, including the sufficiency of a confidential account pursuant to NRS 165.145.

      Sec. 78. NRS 165.020 is hereby amended to read as follows:

      165.020  1.  As used in this chapter:

      (a) [“Affiliate” means any person directly or indirectly controlling or controlled by another person, or any person under direct or indirect common control by another person. It includes any person with whom a trustee has an express or implied agreement regarding the purchase of trust investments by each from the other, directly or indirectly.] “Account” means a report of the financial condition of the trust estate prepared by a trustee which:

             (1) Must include the information set forth in NRS 165.135; and

             (2) May include information required by court order, the terms of the trust instrument or NRS 165.030 to 165.149, inclusive, and sections 71 to 77, inclusive, of this act.

      (b) [“Beneficiary” includes a beneficiary under the trust, a person who is entitled to the trust capital at the termination of the trust and a surety on the bond of the trustee.] “Accounting period” means the period for which the trustee is accounting and, except as otherwise provided in this chapter, commencing with the first day following the previous accounting period and ending on the date specified by the trustee or on the date specified by the court if the account is ordered by the court. If the account is an initial account, the initial account commences on the day the trustee became the trustee.

      (c) [“Nontestamentary trustee” means a trustee serving under a trust created in this state otherwise than by a will, or such a trust administered in this state, whether the trustee was appointed by the settlor or by a court or other authority.] “Broad power of appointment” means a power of appointment held by a person, commonly referred to as a power holder, that can be exercised in favor of:

             (1) The power holder, without any restriction or limitation; or

             (2) Any person other than one or more of the following:

                   (I) The power holder;

                   (II) The power holder’s estate;

                   (III) The power holder’s creditors; or

                   (IV) The creditors of the power holder’s estate.

      (d) [“Relative” means a spouse, ancestor, descendant, brother or sister.] “Current beneficiary” means a distribution beneficiary to whom or for whose benefit the trustee is authorized or required to make distributions of income or principal at any time during the accounting period.

      (e) “Distribution beneficiary” has the meaning ascribed to it in NRS 163.415.

      (f) “Remainder beneficiary” means a beneficiary who will become a current beneficiary upon the death of an existing current beneficiary or upon the occurrence of some other event that may occur during the beneficiary’s lifetime, regardless of whether the beneficiary’s share is subject to elimination, but has not been eliminated, under a power of appointment other than a broad power of appointment.

 


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subject to elimination, but has not been eliminated, under a power of appointment other than a broad power of appointment.

      (g) “Remote beneficiary” means a natural person or an entity whose interest in the trust estate is preceded by the priority interest of one or more current beneficiaries and one or more remainder beneficiaries, all of whose interests must be extinguished by death or pursuant to the terms of the trust instrument before the remote beneficiary may become a current beneficiary.

      (h) “Settlor” [includes] means the creator of a testamentary as well as a nontestamentary trust.

      [(f)]The term includes a trustor and a grantor.

      (i) “Successor trustee” means a successor to the acting trustee or substitute trustee named or appointed to succeed a predecessor trustee who has not yet assumed the role of trustee. Upon assuming the role, the successor trustee must thereafter be referred to as the trustee.

      (j) “Testamentary trustee” means a trustee serving under a trust created by a will of a testator domiciled in this state at the time of the testator’s death, whose will has been admitted to probate in this state, whether the trustee was appointed by the testator or by a court or other authority.

      [(g)](k) “Trust” means:

             (1) A trust as defined in section 51 of this act;

             (2) A testamentary trust as defined in section 38 of this act; and

             (3) A nontestamentary trust as defined in section 37 of this act.

      (l) “Trustee” includes [trustees,] a nontestamentary trustee, a testamentary trustee and a corporate trustee, as well as a natural person . [,] The term does not include a successor or substitute trustee, [and the successor in interest of a deceased sole trustee.] until the successor trustee or substitute trustee assumes the role of acting trustee.

      2.  This chapter does not apply to resulting trusts, constructive trusts, business trusts where certificates of beneficial interest are issued to the beneficiaries, investment trusts, voting trusts, insurance trusts prior to the death of the insured, trusts in the nature of mortgages or pledges, trusts created by judgment or decree of a federal court or a state court other than the district court acting in probate matters, liquidation trusts, or trust for the sole purpose of paying dividends, interest or interest coupons, salaries, wages or pensions.

      Sec. 79. NRS 165.030 is hereby amended to read as follows:

      165.030  Within 75 days after a [testamentary] trustee receives possession of trust property, the trustee shall [file with the court where the will was admitted to probate] serve a copy of an inventory [under oath, showing by items] setting forth all the trust property which has come [to] into the possession or knowledge of the trustee. The trustee shall serve the notice in the manner set forth in NRS 155.010 to each interested person and beneficiary to whom the trustee is required to account pursuant to this chapter.

      Sec. 80. NRS 165.135 is hereby amended to read as follows:

      165.135  1.  [The trustee of a nontestamentary trust shall furnish to each beneficiary an account in accordance with the provisions of NRS 165.122 to 165.149, inclusive.

      2.  At a minimum, the trustee shall furnish an account to each beneficiary in accordance with the terms and conditions stated in the trust instrument.

 


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instrument. The cost of each account must be allocated to income and principal as provided in the trust instrument.

      3.  Except as otherwise provided in this section, an] An account [provided by a trustee to a beneficiary who is entitled to an account pursuant to NRS 165.122 to 165.149, inclusive,] must include:

      (a) A statement indicating the accounting period;

      (b) With respect to the trust principal:

             (1) The trust principal held at the beginning of the accounting period, and in what form held, and the approximate market value thereof at the beginning of the accounting period;

             (2) Additions to the trust principal during the accounting period, with the dates and sources of acquisition;

             (3) Investments collected, sold or charged off during the accounting period;

             (4) Investments made during the accounting period, with the date, source and cost of each investment;

             (5) Any deductions from the trust principal during the accounting period, with the date and purpose of each deduction; and

             (6) The trust principal, invested or uninvested, on hand at the end of the accounting period, reflecting the approximate market value thereof at that time;

      (c) With respect to trust income, the trust income:

             (1) On hand at the beginning of the accounting period, and in what form held;

             (2) Received during the accounting period, when and from what source;

             (3) Paid out during the accounting period, when, to whom and for what purpose; and

             (4) On hand at the end of the accounting period and how invested;

      (d) A statement of unpaid claims with the reason for failure to pay them; and

      (e) A brief summary of the account [.

      4.  In lieu of the information required to be provided by a trustee to a beneficiary pursuant to subsection 3, a trustee may provide to such a beneficiary a statement indicating the accounting period and a financial report of the trust which is prepared by a certified public accountant and which summarizes the information required by paragraphs (b) to (e), inclusive, of subsection 3. Upon request, the trustee shall make all the information used in the preparation of the financial report available to each beneficiary who was provided a copy of the financial report.

      5.  For the purposes of NRS 165.122 to 165.149, inclusive, the information provided by a trustee to a beneficiary pursuant to subsection 4 shall be deemed to be an account.] , which must include:

             (1) The beginning value of the trust estate:

                   (I) For the first accounting, the beginning value of the trust estate shall consist of the total of all original assets contained in the beginning inventory.

                   (II) For accountings other than the first account, the beginning value of the trust estate for the applicable accounting period must be the ending value of the prior accounting.

             (2) The total of all receipts received during the accounting period, excluding capital items.

 


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             (3) The total of all gains on sales or other disposition of assets, if any, during the accounting period.

             (4) The total of disbursements and distributions during the accounting period.

             (5) The total of all losses on sales or other disposition of assets, if any, during the accounting period.

             (6) The total value of the trust assets remaining on hand at the end of the accounting period.

      2.  A summary of account pursuant to paragraph (e) of subsection 1 must be in substantially the following form:

 

CHARGES

[Add one of the following alternatives]

[Alternative 1: First, or first and final account]

Amount of inventory and appraisal                         $..........................

Amount of supplemental inventories                       $..........................

[Alternative 2: Subsequent account]

Property on hand at beginning of account             $..........................

Additional property received                                    $..........................

[Continue]

Receipts (Schedule _____)                                         $..........................

Gains on sale or other disposition (Schedule _____)..................... $

Net income from trade or business (Schedule _____) ................... $

Total Charges:                                                              $..........................

 

CREDITS

Disbursements during account period (Schedule _____).............. $

[If applicable, add the following option]

[Option: Distributions to testamentary trust]

Principal Income (Schedule _____)                        $..........................

Losses on sale or other disposition (Schedule ______) ................ $

Net loss from trade or business (Schedule _____) ......................... $

Distributions (Schedule _____)                                $..........................

Property on hand at close of account (Schedule _____) .............. $

Total Credits:                                                                $..........................

 

      3.  In lieu of segregating the report on income and principal pursuant to subsection 1, the trustee may combine income and principal activity in the account so long as the combined report on income and principal does not materially impede a beneficiary’s ability to evaluate the charges to or credits against the beneficiary’s interest.

      4.  Notwithstanding the provisions of subsections 1, 2 and 3, an account may instead consist of:

      (a) A statement indicating the accounting period and a financial report, which must consist of a compilation or financial statement of the trust prepared by a certified public accountant and include summaries of the information required by subsection 1; or

 


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trust prepared by a certified public accountant and include summaries of the information required by subsection 1; or

      (b) A statement prepared by the trustee, the contents of which are agreed to by the trustee and the person receiving such report as sufficient to serve as an account.

Ê An account prepared pursuant to this subsection must be in a writing, signed by the person receiving the information and documentation, delivered to the trustee, and may include a waiver of account pursuant to section 75 of this act.

      Sec. 81. NRS 165.141 is hereby amended to read as follows:

      165.141  A beneficiary who has not otherwise been provided with an account pursuant to this chapter may send a written demand for an account [pursuant to NRS 165.122 to 165.149, inclusive,] to the trustee in accordance with the following procedure:

      1.  The demand on the trustee must be sent to the trustee or to the trustee’s attorney of record and the demand must include, without limitation:

      (a) The identity of the demanding beneficiary, including the beneficiary’s mailing address or the address of the beneficiary’s attorney;

      (b) The accounting period for which an account is demanded; and

      (c) The nature and extent of the account demanded and the legal basis for the demand.

      2.  Within 14 days after the trustee has received a demand for an account from a beneficiary, the trustee shall notify the demanding beneficiary of the trustee’s acceptance or rejection of the demand [.] or that the trustee intends to seek instructions from the court pursuant to subsection 2 of section 77 of this act regarding the sufficiency of the demand or the right of the beneficiary to receive an account. The trustee shall:

      (a) Provide an account within 60 days after receipt of the demand, unless that time is modified by consent of the beneficiary or by order of the court if the trustee accepts the beneficiary’s demand for an account; [or]

      (b) Set forth the grounds for rejecting the beneficiary’s demand for an account in the notice of rejection and inform the beneficiary that the beneficiary has 60 days in which to petition the court to review the rejection if the trustee rejects the beneficiary’s demand for an account [.] ; or

      (c) File a petition with the court pursuant to NRS 164.015 seeking instructions from the court pursuant to subsection 2 of section 77 of this act regarding the sufficiency of the demand or the right of the beneficiary to receive an account within 15 days after the receipt of the demand if the trustee intends to seek instructions from the court.

      3.  The demand by the beneficiary and the notice of [acceptance or rejection of the demand by the trustee] the trustee’s action thereon must be delivered by first-class mail, personal delivery or commercial carrier. If delivery of the demand or of the notice is in dispute, proof of delivery may be established by a return receipt or other proof of delivery provided by the person making the delivery or by affidavit of the person who arranged for the delivery setting forth the delivery address, the method of delivery arranged for and the actions taken by that person to arrange for the delivery.

      4.  If the trustee fails to accept , [or] reject or seek instructions concerning a beneficiary’s demand for an account as required by subsection 2, the beneficiary’s demand shall be deemed rejected.

 


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      5.  A beneficiary is not entitled to demand an account pursuant to this section if the accounting period for which the demand is made is deemed final pursuant to subsection 4 of section 76 of this act.

      Sec. 82. NRS 165.143 is hereby amended to read as follows:

      165.143  1.  A beneficiary whose demand for an account in compliance with NRS 165.141 is rejected or deemed rejected must file a petition seeking the court’s review of the trustee’s rejection within 60 days after the rejection date as described in subsection 2 [.] and is thereafter barred from further right to demand an account for the period subject to the demand. A petition filed pursuant to this section may also seek additional relief pursuant to NRS 153.031 [.] , 164.015 and 164.031.

      2.  If the trustee rejects the beneficiary’s demand for an account, the rejection date is the date on which the trustee provides the beneficiary with a notice of rejection. If the trustee fails to accept or reject the beneficiary’s demand, the rejection date is deemed to be 14 days after the beneficiary [gave] delivered the demand to the trustee . [the demand.]

      3.  If the court has not previously accepted jurisdiction over the trust [,] pursuant to NRS 164.010, the beneficiary must petition the court to confirm the appointment of the trustee pursuant to NRS 164.010 [.] and to admit the trust to the jurisdiction of the court. Such a petition may be combined with the petition for the court’s review of the trustee’s rejection.

      4.  The clerk shall set the petition for hearing, and the petitioner shall give notice to all interested persons for the period and in the manner provided in NRS 155.010. The notice must state the filing of the petition, the object and the time and place of the hearing.

      5.  If one or more other beneficiaries with interests substantially similar to the petitioner request to join the petition at or before the hearing, the court shall consider the other beneficiaries to be additional petitioners without requiring those beneficiaries to file separate petitions or to give separate notices of the hearing.

      6.  At the hearing, as to each petitioner, the court may enter an order:

      (a) Compelling the trustee to provide an account to the petitioner and specifying the nature and extent of the account to be provided;

      (b) Declaring that the petitioner is not entitled to an account and setting forth the reason or reasons the petitioner is not so entitled; or

      (c) Compelling the trustee to provide an account to the petitioner as described in paragraph (a) and authorizing an independent review of the account using the procedure set forth in NRS 165.145.

      7.  Except as otherwise provided in subsection 3 of NRS 153.031 , [and subsection 4 of NRS 165.139,] each petitioner shall pay his or her own expenses, including, without limitation, attorney’s fees, that arise in conjunction with filing a petition pursuant to this section.

      Sec. 83. NRS 165.145 is hereby amended to read as follows:

      165.145  If, while considering a petition filed pursuant to NRS 165.143, the court finds that the beneficiary is entitled to an account pursuant to this section and that the trust instrument authorizes or directs the trustee not to provide the account , [with the disclosures required by this section,] the court shall, upon the beneficiary’s request, compel the trustee to confidentially provide an account in accordance with the following procedure:

      1.  If the beneficiary has not been previously provided with a copy of the trust instrument, the court shall direct the trustee to provide the court and each reviewer selected pursuant to subsection 2 with a copy of the trust instrument, or such portions as the court deems to be pertinent to the determination of the adequacy of the trustee’s account and to the enforcement of the beneficiary’s rights under the trust [.]

 


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instrument, or such portions as the court deems to be pertinent to the determination of the adequacy of the trustee’s account and to the enforcement of the beneficiary’s rights under the trust [.] instrument.

      2.  The court shall direct the account to be provided confidentially to the court and to one or more reviewers selected by the beneficiary. The court may direct that the account be filed with the court clerk under seal or delivered to the court for in camera review. The account provided must contain the information required by this section without regard to any trust provision restricting the information to be provided to the requesting beneficiary.

      3.  A reviewer must be either a certified public accountant or an attorney.

      4.  Subject to the provisions of paragraph (b) of subsection 5, the beneficiary requesting the account must pay for the services of each reviewer. The expense of preparing the account must be paid as an expense of the trust.

      5.  Each reviewer must agree that:

      (a) The account provided must be reviewed confidentially and must not be provided to the beneficiary except as otherwise provided in paragraph (b) or in an order of the court; and

      (b) The reviewer’s duty is to review the account and to prepare a written report, which must be filed with the court clerk under seal or submitted to the court for in camera review, informing the court if there is anything that would indicate that the trust, as it affects the beneficiary’s interest, has not been or may not have been properly administered or accounted for in accordance with applicable law, the trust instrument and generally accepted accounting principles applicable to trusts. At the same time a copy of the reviewer’s report is provided to the court, a copy of each reviewer’s report must be delivered to the trustee or to the trustee’s attorney of record.

      6.  The trustee may submit to the court and to each reviewer an objection to the report of a reviewer within 10 days after the trustee received the reviewer’s report. The trustee shall submit the objections to the court and to each reviewer in the same manner as the trustee provided the account. The court may consider each reviewer’s report and the objections of the trustee with or without a hearing. If the court, after considering the report of any reviewer and any objection submitted by the trustee, finds that the trust, as it affects the beneficiary’s interest, has not been or may not have been properly administered or accounted for in accordance with applicable law, the trust instrument and generally accepted accounting principles applicable to trusts, in addition to any other relief granted by the court pursuant to NRS 153.031 or 165.143, the court shall enter an order granting the relief necessary to protect the beneficiary’s interests or to allow the beneficiary to enforce his or her rights under the trust.

      7.  An order granting relief described in subsection 6 may include one or more of the following:

      (a) A directive to the trustee to provide the beneficiary an account which complies with the provisions of [subsection 3 or 4 of] NRS 165.135, together with such additional information as the beneficiary may require to properly enforce his or her rights under the trust;

      (b) A directive to the trustee to provide further [annual] accounts required under this section without further court order;

 


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      (c) A directive to the trustee to provide the court and each reviewer a more complete account or such additional information as the court deems necessary to determine if the trust is being properly administered in compliance with the trust instrument and applicable law;

      (d) A directive to the trustee to take action to remedy or mitigate the effects of any improper administration of the trust;

      (e) A declaration relieving each reviewer from any further obligation of confidentiality; and

      (f) Any such additional relief as the court deems proper to ensure the trustee’s compliance with the trust instrument and applicable law and to allow enforcement of the beneficiary’s rights.

      8.  If the beneficiary is granted any relief by the court on the basis that the trust was not properly administered or accounted for, the provisions of subsection 3 of NRS 153.031 [and subsection 4 of NRS 165.139] apply with regard to the reimbursement of costs incurred by the beneficiary.

      Sec. 84. NRS 165.147 is hereby amended to read as follows:

      165.147  1.  Upon [request] demand by a beneficiary pursuant to NRS 165.141 who is entitled to receive an account pursuant to the terms of NRS [165.122] 165.030 to 165.149, inclusive, and sections 71 to 77, inclusive, of this act, a trustee shall provide a copy of the trust instrument to that beneficiary except as expressly provided otherwise in the trust instrument.

      2.  Notwithstanding the provisions of subsection 1 or any provision to the contrary in the trust instrument, the court may direct the trustee to provide a beneficiary who is entitled to receive an account pursuant to the terms of NRS [165.122] 165.030 to 165.149, inclusive, and sections 71 to 77, inclusive, of this act a copy of the trust instrument, or such portions as the court deems to be pertinent to the determination of the adequacy of the trustee’s account and to the enforcement of the beneficiary’s rights under the trust.

      3.  Except as otherwise provided in NRS 165.145 or by order of the court for good cause shown, the trustee must not be compelled to provide a copy of the trust instrument to a person who is not a beneficiary of the trust or a person who is not entitled to an account of the trust pursuant to the provisions of NRS [165.122] 165.030 to 165.149, inclusive [.] , and sections 71 to 77, inclusive, of this act.

      Sec. 85. NRS 155.095, 165.040, 165.045, 165.050, 165.055, 165.060, 165.090, 165.100, 165.110, 165.120, 165.122, 165.124, 165.126, 165.128, 165.129, 165.132, 165.134, 165.137 and 165.139 are hereby repealed.

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