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H.R.2126 - Risk Retention Modernization Act of 2011
To modernize the Liability Risk Retention Act of 1986 and expand coverage to include commercial property insurance, and for other purposes.
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SECTION 1. SHORT TITLE.
SEC. 2. OVERSIGHT OF COMPLIANCE WITH PREEMPTION OF STATE LAW UNDER THE LIABILITY RISK RETENTION ACT OF 1986.
‘SEC. 8. OVERSIGHT OF COMPLIANCE WITH PREEMPTION OF STATE LAW.
‘(a) Survey- The Director of the Federal Insurance Office shall periodically survey and evaluate the extent to which each State is in compliance with the prohibition under this Act regarding State regulation of risk retention groups and purchasing groups that are not domiciliaries of such State and submit to the President and Congress a report on such compliance.CommentsClose CommentsPermalink
‘(b) Disputes- In any dispute in which an issue arises of whether this Act preempts the regulation of a risk retention group or purchasing group by a State, any party to the dispute may make a written submission to the Director of the Federal Insurance Office to request a determination as to whether the regulation at issue is preempted by this Act.CommentsClose CommentsPermalink
‘(c) Standard- The Director of the Federal Insurance Office may only issue a determination under subsection (b) that the regulation at issue is preempted by this Act if the regulation imposes a requirement upon the risk retention group that is inconsistent with the provisions of this Act.CommentsClose CommentsPermalink
‘(d) Applicability of Administrative Procedures Act- Determinations issued pursuant to subsection (b) shall be subject to the applicable provisions of subchapter II of chapter 5 of title 5, United States Code (relating to administrative procedure).CommentsClose CommentsPermalink
‘(e) Judicial Review- Any party to the dispute described in subsection (b) may seek review of a final order of the Director of the Federal Insurance Office under such subsection in the United States Court of Appeals for the District of Columbia Circuit.CommentsClose CommentsPermalink
‘(f) Regulations, Policies, and Procedures- Not later than 90 days after the effective date described in section 7 of the Risk Retention Modernization Act of 2011, the Director of the Federal Insurance Office shall publish in the Federal Register final regulations, policy statements, guidelines, or procedures to implement this section.’.CommentsClose CommentsPermalink
SEC. 3. CORPORATE GOVERNANCE STANDARDS.
The Liability Risk Retention Act of 1986 (
‘SEC. 9. CORPORATE GOVERNANCE STANDARDS.
‘(a) Governance Standards- The Director of the Federal Insurance Office shall, not later than 30 days after the effective date described in section 7 of the Risk Retention Modernization Act of 2011, issue corporate governance standards for risk retention groups, which shall include the following requirements:CommentsClose CommentsPermalink
‘(3) Unless the insurance commissioner of the State in which the risk retention group is chartered permits the governing body of a risk retention group to exercise the function as a whole, such risk retention group shall have an audit committee of its governing body with a written charter defining the purposes of the committee, which shall include--CommentsClose CommentsPermalink
‘(C) reviewing the annual audited financial statements with the auditor of the risk retention group and, if advisable, reviewing quarterly financial statements with such auditor;CommentsClose CommentsPermalink
‘(E) meeting separately and periodically, either directly or through designated representatives of the committee, with the management and auditor of the risk retention group;CommentsClose CommentsPermalink
‘(F) reviewing with the auditor of the risk retention group any audit problems or difficulties and the response to such problems or difficulties by the management of the risk retention group;CommentsClose CommentsPermalink
‘(H) requiring, through contract or negotiation, the auditor of the risk retention group to rotate partners with primary responsibility for the audit of the risk retention group and the partner responsible for reviewing such audit, in order to assure that no individual performs these services for more than 5 consecutive years; andCommentsClose CommentsPermalink
‘(5) A risk retention group shall adopt a code of business conduct and ethics applicable to directors, officers, and employees of the risk retention group that addresses--CommentsClose CommentsPermalink
‘(6) Any manager or chief executive officer of a risk retention group shall promptly notify the insurance commissioner of the State in which the group is chartered in writing if the manager or officer becomes aware of any material noncompliance with any governance standard required by this section and such noncompliance is not cured within a reasonable period from the time it is detected, but not to exceed 60 days.CommentsClose CommentsPermalink
‘(1) AUDITOR- The term ‘auditor’ means the person providing certification of the annual financial statement of a risk retention group to the insurance commissioner of each State as required by section 3(d)(3).CommentsClose CommentsPermalink
‘(3) INDEPENDENT DIRECTOR- The term ‘independent director’ means a director of a risk retention group that the governing body of such risk retention group determines has no material relationship with--CommentsClose CommentsPermalink
‘(4) MATERIAL RELATIONSHIP- The term ‘material relationship’ means a relationship between an entity or an individual and a risk retention group where such entity or individual, or a member of the immediate family of such individual or any business with which such individual or entity is affiliated, receives compensation or payment from such risk retention group during any 12-month period in an amount of--CommentsClose CommentsPermalink
‘(A) IN GENERAL- The term ‘service provider’ means a provider of regular ongoing insurance, corporate, or regulatory services to a risk retention group, including management companies, auditors, accountants, actuaries, investment advisors, lawyers, manager general underwriters, and any other parties responsible for underwriting, determining rates, collecting premiums, adjusting and settling claims or the preparation of financial statements.CommentsClose CommentsPermalink
‘(B) EXCEPTION- The term ‘service provider’ does not include defense counsel retained by a risk retention group to defend claims, unless the amount of fees paid to such counsel would otherwise result in the counsel having a material relationship with the risk retention group.CommentsClose CommentsPermalink
‘(1) IN GENERAL- The provisions of this section shall supersede any State law relating to the corporate governance standards required for risk retention groups and purchasing groups.CommentsClose CommentsPermalink
SEC. 4. COMMERCIAL PROPERTY INSURANCE.
‘(8) ‘commercial property insurance’ means insurance that indemnifies a business, nonprofit organization, or governmental entity for damage to, loss of, theft of, or destruction of real property or business property, owned by or leased to such business, nonprofit organization, or governmental entity, including insurance that indemnifies a business, nonprofit organization, or governmental entity for damage to, loss of, theft of, or destruction of furniture, fixtures, and inventory, from any and all perils or causes of loss and against consequential loss or damage, including business interruption, other than noncontractual legal liability for such loss or damage.’;CommentsClose CommentsPermalink
SEC. 5. FINANCIAL STATEMENTS; DISCLOSURE REQUIREMENTS; FIDUCIARY DUTY; AND UNDERSCORING THE EXEMPTION.
‘(C) if not prepared in conformity with statutory accounting principles, include appropriate notes for conversion of such statement to statutory accounting principles.’.CommentsClose CommentsPermalink
‘(i) Disclosure Requirements- Each risk retention group shall provide to each member of such group, on the front page and the declaration page of each insurance policy issued by such group, in bold 12-point or larger type, the following notice: ‘This policy is issued by your risk retention group of which you are a part owner. Your risk retention group is primarily regulated under the laws of XXXXXX and may not be subject to all of the insurance laws and consumer protections of your State. If your risk retention group fails, it is not protected by a State insurance insolvency guaranty fund.’. The risk retention group shall insert the name of the State in which the risk retention group is chartered or licensed in place of the blank space.’.CommentsClose CommentsPermalink
(B) PURCHASING GROUPS- In section 4(a) (
(5) FINANCIAL RESPONSIBILITY- Section 6(d) (
SEC. 6. AMENDMENT TO SHORT TITLE.
Section 1 of the Liability Risk Retention Act of 1986 (