Minnesota Session Laws - 1993, Regular Session

  
    Laws of Minnesota 1993 

                        CHAPTER 299-H.F.No. 1095 
           An act relating to insurance; regulating investments, 
          assets and liabilities, and annual statements of 
          companies; providing for continuance of coverage upon 
          liquidation; modifying the definition of resident for 
          purposes of the Minnesota insurance guaranty 
          association; regulating dividends and other 
          distributions of insurance holding company systems; 
          regulating risk retention groups; enacting the NAIC 
          model legislation; amending Minnesota Statutes 1992, 
          sections 60A.11, subdivision 9; 60A.12, subdivision 3; 
          60A.13, subdivisions 1 and 6; 60A.23, subdivision 4; 
          60B.22, subdivision 1; 60C.03, subdivision 7; 60D.20, 
          subdivisions 2 and 4; 60E.01; 60E.02, subdivisions 9 
          and 12; 60E.03; 60E.04, subdivisions 1, 2, 3, 4, 7, 8, 
          11, and by adding a subdivision; 60E.05; 60E.07; 
          60E.08; 60E.09; 60E.10; 60E.12; 60E.13; and 79.252, 
          subdivision 1; proposing coding for new law in 
          Minnesota Statutes, chapters 60A; and 60E; repealing 
          Minnesota Statutes 1992, sections 60A.07, subdivision 
          5d; 60A.12, subdivision 10; 60A.13, subdivision 3a; 
          60B.24; 60E.11; Minnesota Rules, parts 2710.0100; 
          2710.0200; 2710.0300; 2710.1100; 2710.1200; 2710.1300; 
          2710.1400; 2710.1500; 2710.1600; 2710.1700; 2710.1800; 
          2710.1900; 2710.2000; 2710.2100; 2710.3100; 2710.3200; 
          and 2710.3300. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
     Section 1.  Minnesota Statutes 1992, section 60A.11, 
subdivision 9, is amended to read: 
    Subd. 9.  [GENERAL CONSIDERATIONS.] The following 
considerations apply in the interpretation of this section: 
    (a) This section applies to the investments of insurance 
companies other than life insurance companies; 
    (b) The purpose of this section is to protect and further 
the interests of policyholders, claimants, creditors and the 
public by providing standards for the development and 
administration of programs for the investment of the assets of 
domestic companies.  These standards and the investment programs 
developed by companies must take into account the safety of 
company's principal, investment yield and growth, stability in 
the value of the investment, the liquidity necessary to meet the 
company's expected business needs, and investment 
diversification; 
    (c) All financial terms relating to insurance companies 
have the meanings assigned to them under statutory accounting 
methods.  All financial terms relating to noninsurance companies 
have the meanings assigned to them under generally accepted 
accounting principles; 
    (d) Investments must be valued in accordance with the 
valuation procedures established by the National Association of 
Insurance Commissioners, unless the commissioner requires or 
finds another method of valuation reasonable under the 
circumstances.  Another method of valuation permitted by the 
commissioner must be at least as conservative as those 
prescribed in the association's manual.  Other invested assets 
must be valued according to the procedures promulgated by the 
National Association of Insurance Commissioners', if not 
addressed in another section, unless the commissioner requires 
or finds another method of valuation reasonable under the 
circumstances; 
    (e) A company may elect to hold an investment which 
qualifies under more than one subdivision, under the subdivision 
of its choice.  Nothing herein prevents a company from electing 
to hold an investment under a subdivision different from the one 
in which it previously held the investment; and 
    (f) An investment which qualifies under any provision of 
the law governing investments of insurance companies when 
acquired will continue to be a qualified investment for as long 
as it is held by the insurance company. 
    Sec. 2.  Minnesota Statutes 1992, section 60A.12, 
subdivision 3, is amended to read: 
    Subd. 3.  [VALUATION OF EVIDENCES OF INDEBTEDNESS.] All 
bonds or other evidences of debt, having a fixed term and rate, 
held by an insurance company or fraternal benefit society 
authorized to do business in this state may, if amply secured 
and not in default as to principal and interest, be valued as 
follows:  If purchased at par, at the par value; if purchased 
above or below par, on the basis of the purchase price adjusted 
so as to bring the value to par at maturity and so as to yield, 
in the meantime, the effective rate of interest at which the 
purchase was made; provided, that the purchase price shall in no 
case be taken at a higher figure than the actual market value at 
the time of purchase; and, provided, that the commissioner shall 
have full discretion in determining the method of calculating 
values according to the foregoing rule.  If the notes or bonds 
secured by mortgage or trust deed in the nature thereof which 
the federal housing administrator has insured, or made a 
commitment to insure, are purchased above par, they may, if not 
in default as to principal and interest, be valued during the 
first five years after purchase on the basis of the purchase 
price adjusted in equal annual installments to bring the value 
to par at the end of five years. 
    Sec. 3.  [60A.129] [LOSS RESERVE CERTIFICATION AND ANNUAL 
AUDIT.] 
    Subdivision 1.  [DEFINITIONS.] The definitions in this 
subdivision apply to this section.  
    (a) "Qualified actuary," except as it relates to 
subdivision 2, paragraph (c), for companies authorized to 
provide life insurance coverage under section 60A.06, 
subdivision 1, clause (4), is a person who is either: 
    (1) a member in good standing of the Casualty Actuarial 
Society; or 
    (2) a member in good standing of the American Academy of 
Actuaries who has been approved as qualified for signing 
casualty loss reserve opinions by the Casualty Practice Council 
of the American Academy of Actuaries; or 
    (3) a person who otherwise has competency in loss reserve 
evaluation as demonstrated to the satisfaction of the insurance 
regulatory official of the domiciliary state.  In such case, at 
least 90 days prior to the filing of its annual statement, the 
insurer must request approval that the person be deemed 
qualified and that request must be approved or denied.  The 
request must include the NAIC Biographical form and a list of 
all loss reserve opinions issued in the last three years by this 
person. 
    (b) For purposes of subdivision 2, paragraph (c), a 
qualified actuary for companies authorized to write life 
insurance coverage under section 60A.06, subdivision 1, clause 
(4), shall be:  
    (1) a member in good standing of the American Academy of 
Actuaries; 
    (2) qualified to sign statements of actuarial opinion for 
life and health insurance company annual statements in 
accordance with the American Academy of Actuaries qualification 
standards for actuaries signing these statements; 
    (3) familiar with the valuation requirements applicable to 
life and health insurance companies.  
    (c) A qualified actuary as defined by this subdivision is 
an individual who:  
    (1) has not been found by the commissioner, or if so found 
has subsequently been reinstated as a qualified actuary, 
following appropriate notice and hearing to have:  
    (i) violated any provision of, or any obligation imposed 
by, the state insurance law or other law in the course of the 
actuary's dealings as a qualified actuary; 
    (ii) been found guilty of fraudulent or dishonest 
practices; 
    (iii) demonstrated incompetency, lack of cooperation, or 
untrustworthiness to act as a qualified actuary; or 
    (iv) submitted to the commissioner during the past five 
years, pursuant to this chapter, an actuarial opinion that the 
commissioner rejected because it did not meet the provisions of 
this chapter including standards set by the actuarial standards 
board; 
    (2) has resigned or been removed as an actuary within the 
past five years as a result of acts or omissions indicated in 
any adverse report on examination or as a result of failure to 
adhere to generally acceptable actuarial standards of the 
American Academy of Actuaries; and 
    (3) has not failed to notify the commissioner of any action 
taken by any commissioner of any other state similar to that 
under clause (1). 
    (d) "Accountant" and "independent public accountant" mean 
an independent certified public accountant or accounting firm in 
good standing with the American Institute of Certified Public 
Accountants and in all states in which the accountant or firm is 
licensed to practice.  For Canadian and British companies, the 
term means a Canadian-chartered or British-chartered accountant. 
    Subd. 2.  [LOSS RESERVE CERTIFICATION.] (a) Each domestic 
company engaged in providing the types of coverage described in 
section 60A.06, subdivision 1, clause (1), (2), (3), (5)(b), 
(6), (8), (9), (10), (11), (12), (13), or (14), must have its 
loss reserves certified by a qualified actuary.  The company 
must file the certification with the commissioner within 30 days 
of completion of the certification, but not later than June 1.  
The actuary providing the certification must not be an employee 
of the company.  This subdivision does not apply to township 
mutual companies, or to other domestic insurers having less than 
$1,000,000 of premiums written in any year and fewer than 1,000 
policyholders.  The commissioner may allow an exception to the 
stand alone certification where it can be demonstrated that a 
company in a group has a pooling or 100 percent reinsurance 
agreement used in a group which substantially affects the 
solvency and integrity of the reserves of the company, or where 
it is only the parent company of a group which is licensed to do 
business in Minnesota.  If these circumstances exist, the 
company may file a written request with the commissioner for an 
exception.  Companies writing reinsurance alone are not exempt 
from this requirement.  The certification must contain the 
following statement:  "The loss reserves and loss expense 
reserves have been examined and found to be calculated in 
accordance with generally accepted actuarial principles and 
practices and are fairly stated."  
    (b) Each foreign company engaged in providing the types of 
coverage described in section 60A.06, subdivision 1, clause (1), 
(2), (3), (5)(b), (6), (8), (9), (10), (11), (12), (13), or 
(14), required by this section to file an annual audited 
financial report, whose total net earned premium for Schedule P, 
Part 1A to Part 1H plus Part 1R, (Schedule P, Part 1A to Part 1H 
plus Part 1R, Column 4, current year premiums earned, from the 
company's most currently filed annual statement) is equal to 
one-third or more of the company's total net earned premium 
(Underwriting and Investment Exhibit, Part 2, Column 4, total 
line, of the annual statement) must have a reserve certification 
by a qualified actuary at least every three years.  In the year 
that the certification is due, the company must file the 
certification with the commissioner within 30 days of completion 
of the certification, but not later than June 1.  The actuary 
providing the certification must not be an employee of the 
company.  Companies writing reinsurance alone are not exempt 
from this requirement.  The certification must contain the 
following statement:  "The loss reserves and loss expense 
reserves have been examined and found to be calculated in 
accordance with generally accepted actuarial principles and 
practices and are fairly stated."  
    (c) Each company providing life and/or health insurance 
coverages described in section 60A.06, subdivision 1, clause (4) 
or (5)(a), required by this section to file an audited annual 
financial report, whose premiums and annuity considerations (net 
of reinsurance) from Accident and Health equal one-third or more 
of the company's total premiums and annuity considerations (net 
of reinsurance), as reported in the summary of operations, must 
have its aggregate reserve for accident and health policies and 
liability for policy and contract claims for Accident and Health 
certified by a qualified actuary at least once every three 
years.  The actuary providing the certification must not be an 
employee of the company.  Companies writing reinsurance alone 
are not exempt from this requirement.  The certification must 
contain the following statement:  "The policy and contract 
claims reserves for Accident and Health have been examined and 
found to be calculated in accordance with generally accepted 
actuarial principles and practices and are fairly stated." 
    Subd. 3.  [ANNUAL AUDIT.] (a) Every insurance company doing 
business in this state, including fraternal benefit societies, 
reciprocal exchanges, service plan corporations licensed 
pursuant to chapter 62C, and legal service plans licensed 
pursuant to chapter 62G, unless exempted by the commissioner 
pursuant to subdivision 4, paragraph (a), or by subdivision 7, 
shall have an annual audit of the financial activities of the 
most recently completed fiscal year performed by an independent 
certified public accountant as prescribed by the commissioner, 
and shall file the report of this audit with the commissioner on 
or before June 30 for the year ending December 31.  
    Extensions of the June 30 filing date may be granted by the 
commissioner for 30-day periods upon a showing by the insurer 
and its independent certified public accountant of the reasons 
for requesting the extension and a determination by the 
commissioner of good cause for the extension.  
    The request for extension must be submitted in writing not 
less than ten days before the due date in sufficient detail to 
permit the commissioner to make an informed decision with 
respect to the requested extension.  
    (b) Insurers filing audited financial reports in another 
state under the other state's requirements of audited financial 
reports which have been found by the commissioner to be 
substantially similar to these requirements are exempt from this 
subdivision if a copy of the audited financial report, the 
evaluation of accounting procedures, and systems of internal 
control report, which are filed with the other state, are filed 
with the commissioner in accordance with the filing dates 
specified in paragraphs (a) and (i), (Canadian insurers may 
submit accountants' reports as filed with the Canadian Dominion 
Department of Insurance); and a copy of any notification of 
adverse financial condition report filed with the other state is 
filed with the commissioner within the time specified in 
paragraph (h).  
    (c)(i) The annual audited financial report shall report, in 
conformity with statutory accounting practices required or 
permitted by the commissioner of insurance of the state of 
domicile, the financial condition of the insurer as of the end 
of the most recent calendar year and the results of its 
operations, changes in financial position, and changes in 
capital and surplus for the year ended.  The annual audited 
financial report shall include a report of an independent 
certified public accountant; a balance sheet reporting admitted 
assets, liabilities, capital, and surplus; a statement of gain 
or loss from operations; a statement of cash flows; a statement 
of changes in capital and surplus; any notes to financial 
statements; and any additional information that the commissioner 
may from time to time require to be disclosed.  
    (ii) The notes required under item (i), shall be those 
required by generally accepted accounting principles and shall 
include reconciliation of differences, if any, between the 
audited statutory financial statements and the annual statement 
filed under section 60A.13, subdivision 1, with a written 
description of the nature of these differences; and a narrative 
explanation of all significant intercompany transactions and 
balances.  
    (iii) The financial statements included in the audited 
financial report shall be prepared in a form and using language 
and groupings substantially the same as the relevant sections of 
the annual statement of the insurer filed with the 
commissioner.  The financial statement shall be comparative, 
presenting the amounts as of December 31 of the current year and 
the amounts as of the immediately preceding December 31.  In the 
first year in which an insurer is required to file an audited 
financial report, the comparative data may be omitted.  The 
amounts may be rounded to the nearest $1,000, and all 
insignificant amounts may be combined.  
    (d) Each insurer required by this section to file an annual 
audited financial report must notify the commissioner in writing 
of the name and address of the certified public accountant or 
accounting firm retained to conduct the annual audit within 60 
days after becoming subject to the annual audit requirement.  
The insurer shall obtain from the accountant a letter which 
states that the accountant is aware of the provisions that 
relate to accounting and financial matters in the insurance laws 
and the rules of the insurance regulatory authority of the state 
of domicile.  The letter shall affirm that the opinions on the 
financial statements will be expressed in terms of their 
conformity to the statutory accounting practices prescribed or 
other permitted by that insurance regulatory authority, unless 
exceptions to these practices are appropriate.  The letter shall 
specify all exceptions believed to be appropriate.  A copy of 
this letter shall be filed with the commissioner.  
    (e) If an accountant who was not the accountant for the 
immediately preceding filed audited financial report is engaged 
to audit the insurer's financial statements, the insurer shall 
notify the commissioner of this event within 30 days of the date 
the accountant is engaged.  The insurer shall also furnish the 
commissioner with a separate letter stating whether in the 24 
months preceding this engagement there were any disagreements 
with the former accountant on any matter of accounting 
principles or practices, financial statement disclosure, or 
auditing scope or procedure, which, if not resolved to the 
satisfaction of the former accountant, would have caused that 
person to make reference to the subject matter of the 
disagreement in connection with the opinion.  The insurer shall 
also in writing request the former accountant to furnish a 
letter addressed to the insurer stating whether the accountant 
agrees with the statements contained in the insurer's letter 
and, if not, stating the reasons for any disagreement.  The 
insurer shall furnish this responsive letter from the former 
accountant to the commissioner together with its own. 
    (f) The commissioner shall not recognize any person or firm 
as an independent certified public accountant that is not in 
good standing with the American Institute of Certified Public 
Accountants and in all states in which the accountant is 
licensed to practice, or for a Canadian or British company, that 
is not a chartered accountant.  Except as otherwise provided, a 
certified public accountant shall be recognized as independent 
as long as the person conforms to the standards of the person's 
profession.  The commissioner, after notice and hearing under 
chapter 14, may find that the accountant is not independent for 
purposes of expressing an opinion on the financial statements in 
the annual audited financial report.  The commissioner may 
require the insurer to replace the accountant with another whose 
relationship with the insurer is independent.  
    (g) Financial statements furnished under paragraph (a), 
shall be examined by an independent certified public 
accountant.  The examination of the insurer's financial 
statements shall be conducted in accordance with generally 
accepted auditing standards and consideration should be given to 
other procedures illustrated in the Financial Condition 
Examiners Handbook, issued by the National Association of 
Insurance Commissioners as the independent certified public 
accountant considers necessary.  
    (h) The insurer required to furnish the annual audited 
financial report shall require the independent certified public 
accountant to immediately notify in writing an executive officer 
and all directors of the insurer of the final determination by 
that independent certified public accountant that the insurer 
has materially misstated its financial condition as reported to 
the commissioner as of the balance sheet date currently under 
examination or that the insurer does not meet the minimum 
capital and surplus requirement of section 60A.07 as of that 
date.  An executive officer or director of an insurer required 
to file an annual audited financial report who received a 
notification of adverse financial condition from the accountant 
shall make a written report to the commissioner of the existence 
of the materially misstated financial condition or the failure 
to meet the minimum capital and surplus requirements of the 
commissioner within three business days of the notification.  If 
the accountant becomes aware of facts which might have affected 
this report after the date of the audited financial report filed 
under this section, the accountant shall take the action 
prescribed by Professional Standards issued by the American 
Institute of Certified Public Accountants. 
    (i) In addition to the annual audited financial report, 
each insurer shall furnish the commissioner with a report of the 
evaluation performed by the accountant, in connection with the 
examination, of the accounting procedures of the insurer and its 
system of internal control.  A report of the evaluation by the 
accountant of the accounting procedures of the insurer and its 
system of internal control, including any remedial action taken 
or proposed, shall be filed annually by the insurer with the 
division within 60 days after the filing of the annual audited 
financial report.  This report on internal control shall be in 
the form prescribed by generally accepted auditing standards.  
    (j) Workpapers are the records kept by the independent 
certified public accountant of the procedures followed, tests 
performed, information obtained, and conclusions reached 
pertinent to the examination of the financial statements of an 
insurer.  Workpapers may include work programs, analyses, 
memoranda, letters of confirmation and representation, 
management letters, abstracts of company documents, and 
schedules or commentaries prepared or obtained by the 
independent certified public accountant in the course of the 
examination of the financial statements of an insurer and that 
support the accountant's opinion.  Every insurer required to 
file an audited financial report shall require the accountant, 
through the insurer, to make available for review by the 
examiners the workpapers prepared in the conduct of the 
examination.  The insurer shall require that the accountant 
retain the audit workpapers for a period of not less than five 
years after the period reported upon.  In the conduct of the 
periodic review by the examiners, it shall be agreed that 
photocopies of pertinent audit workpapers may be made and 
retained by the department of commerce.  These copies shall be 
part of the commissioner's workpapers. 
    (k) With the commissioner's approval, an insurer may comply 
with this section by filing the requisite reports that have been 
prepared in accordance with generally accepted accounting 
principles if the notes to the financial statements include a 
reconciliation of differences between net income and capital and 
surplus on the annual statement filed pursuant to section 
60A.13, subdivision 1, and comparable totals on the audited 
financial statements, and a written description of the nature of 
these differences. 
    (l)(i) In the case of Canadian and British insurers, the 
annual audited financial report means the annual statement of 
total business on the form filed by these companies with their 
domiciliary supervision authority and duly audited by an 
independent chartered accountant. 
    (ii) For these insurers, the letter required in paragraph 
(d), shall state that the accountant is aware of the 
requirements relating to the annual audited statement filed with 
the commissioner under paragraph (a), and shall affirm that the 
opinion expressed is in conformity with those requirements. 
    (m) The audit report of the independent certified public 
accountant that performs the audit of an insurer's annual 
statement as required under paragraph (a), shall contain a 
statement as to whether anything, in connection with the audit, 
came to the accountant's attention that caused the accountant to 
believe that the insurer failed to adopt and consistently apply 
the valuation procedures as required by sections 60A.122 and 
60A.123. 
    Subd. 4.  [EXAMINATIONS.] (a) The commissioner or a 
designated representative shall determine the nature, scope, and 
frequency of examinations under this section conducted by 
examiners under section 60A.031.  These examinations may cover 
all aspects of the insurer's assets, condition, affairs, and 
operations and may include and be supplemented by audit 
procedures performed by independent certified public 
accountants.  Scheduling of examinations will take into account 
all relevant matters with respect to the insurer's condition, 
including results of the National Association of Insurance 
Commissioner, Insurance Regulatory Information Systems, changes 
in management, results of market conduct examinations, and 
audited financial reports.  The type of examinations performed 
by examiners under this section shall be compliance 
examinations, targeted examinations, and comprehensive 
examinations. 
    (b) Compliance examinations will consist of a review of the 
accountant's workpapers defined under this section and a general 
review of the insurer's corporate affairs and insurance 
operations to determine compliance with the Minnesota insurance 
laws and the rules of the department of commerce.  The examiners 
may perform alternative or additional examination procedures to 
supplement those performed by the accountant when the examiners 
determine that the procedures are necessary to verify the 
financial condition of the insurer. 
    (c) Targeted examinations may cover limited areas of the 
insurer's operations as the commissioner may deem appropriate. 
    (d) Comprehensive examinations will be performed when the 
report of the accountant as provided for in subdivision 3, 
paragraph (g), the notification required by subdivision 3, 
paragraph (h), the results of compliance or targeted 
examinations, or other circumstances indicate in the judgment of 
the commissioner or a designated representative that a complete 
examination of the condition and affairs of the insurer is 
necessary. 
    (e) Upon completion of each targeted, compliance, or 
comprehensive examination, the examiner appointed by the 
commissioner shall make a full and true report on the results of 
the examination.  Each report shall include a general 
description of the audit procedures performed by the examiners 
and the procedures of the accountant that the examiners may have 
utilized to supplement their examination procedures and the 
procedures that were performed by the registered independent 
certified public accountant if included as a supplement to the 
examination. 
    Subd. 5.  [CONSOLIDATED FILING.] (a) The commissioner may 
allow an exception to the stand alone loss reserve certification 
required by subdivision 2, and audited financial statements 
required by subdivision 3, paragraph (a), where it can be 
demonstrated that a company in a group has a pooling or 100 
percent reinsurance agreement used in a group which 
substantially affects the solvency and integrity of the reserves 
of the company or where it is only the parent company of a group 
which is licensed to do business in Minnesota.  If these 
circumstances exist, then the company may file a written 
application to file loss reserve certification and a report of 
an annual audit.  This application shall be for a specified 
period. 
    (b) A consolidated annual audit filing shall include an 
organizational chart of the companies together with a columnar 
consolidated or combining worksheet.  Amounts shown on the 
audited consolidated or combined financial statement shall be 
shown on the worksheet.  Amounts for each insurer shall be 
stated separately.  Noninsurance operations may be shown on the 
worksheet on a combined or individual basis.  Explanations of 
consolidating or eliminating entries shall be shown on the 
worksheet.  A reconciliation of any differences between the 
amounts shown in the individual insurer columns of the worksheet 
and comparable amounts shown on the annual statement of the 
insurers shall be included on the worksheet. 
    Subd. 6.  [PENALTIES.] No annual statement, report, or 
document related to the business of insurance shall be filed 
with the commissioner or issued to the public if it is signed by 
anyone who is represented in the instrument as an "actuary" or 
"accountant," unless the person is qualified as defined by this 
section.  A violation of this subdivision is a violation of 
section 72A.19 and punishable in accordance with section 72A.25. 
    Subd. 7.  [EXEMPTIONS.] (a) Upon written application of any 
company, the commissioner may grant an exemption from compliance 
with the provisions of this section.  In order to receive an 
exemption, a company must demonstrate to the satisfaction of the 
commissioner that compliance would constitute a financial 
hardship upon the company.  An exemption may be granted at any 
time and from time to time for specified periods.  Within ten 
days from the denial of an insurer's written request for an 
exemption, the insurer may request in writing a hearing on its 
application for an exemption.  This hearing shall be held in 
accordance with chapter 14.  Upon written application of any 
insurer, the commissioner may permit an insurer to file annual 
audited financial reports on some basis other than a calendar 
year basis for a specified period.  No exemption shall be 
granted until the insurer presents an alternative method 
satisfying the purposes of this section.  Within ten days from a 
denial of a written request for an exemption, the insurer may 
request in writing a hearing on its application.  The hearing 
shall be held in accordance with chapter 14. 
    (b) This section applies to all insurers, unless otherwise 
indicated, required to file an annual audit by subdivision 3, 
paragraph (a), except insurers having less than $1,000,000 of 
direct written premiums in any year and fewer than 1,000 
policyholders in this state at the end of any year, are exempt 
from this section for that year. 
    Sec. 4.  Minnesota Statutes 1992, section 60A.13, 
subdivision 1, is amended to read: 
    Subdivision 1.  [ANNUAL STATEMENTS REQUIRED.] Every 
insurance company, including fraternal benefit societies, and 
reciprocal exchanges, doing business in this state, shall 
transmit to the commissioner, annually, on or before March 1, 
the appropriate verified National Association of Insurance 
Commissioners' annual statement blank, prepared in accordance 
with the association's instructions handbook and following those 
accounting procedures and practices prescribed by the 
association's accounting practices and procedures manual, unless 
the commissioner requires or finds another method of valuation 
reasonable under the circumstances.  Another method of valuation 
permitted by the commissioner must be at least as conservative 
as those prescribed in the association's manual.  In addition, 
the commissioner may require the filing of any other information 
determined to be reasonably necessary for the continual 
enforcement of these laws.  The statement may be limited to the 
insurer's business and condition in the United States unless the 
commissioner finds that the business conducted outside the 
United States may detrimentally affect the interests of 
policyholders in this state.  The statements shall also contain 
a verified schedule showing all details required by law for 
assessment and taxation. The statement or schedules shall be in 
the form and shall contain all matters the commissioner may 
prescribe, and it may be varied as to different types of 
insurers so as to elicit a true exhibit of the condition of each 
insurer. 
    Sec. 5.  Minnesota Statutes 1992, section 60A.13, 
subdivision 6, is amended to read: 
    Subd. 6.  [COMPANY OR AGENT CANNOT CONTINUE BUSINESS UNLESS 
STATEMENT IS FILED.] No company shall transact any new business 
in this state after May thirty-first in any year unless it shall 
have previously transmitted its annual statement to the 
commissioner and filed a copy of its statement with the National 
Association of Insurance Commissioners.  The commissioner may by 
order annually require that each insurer pay the required fee to 
the National Association of Insurance Commissioners for the 
filing of annual statements, but the fee shall not be more than 
50 percent greater than the fee set by the National Association 
of Insurance Commissioners on January 1, 1984.  Failure to file 
the annual statement with the commissioner or the National 
Association of Insurance Commissioners is a violation of section 
72A.061, subdivision 1.  The fee shall be based on the relative 
premium volume of each insurer.  The commissioner's order shall 
not be subject to chapter 14.  
    Sec. 6.  Minnesota Statutes 1992, section 60A.23, 
subdivision 4, is amended to read: 
    Subd. 4.  [DIVIDENDS; LIMITATIONS.] No domestic stock 
company shall declare a dividend either in cash or stock, except 
from its actual net surplus computed as required by law in its 
annual statement; nor shall any such company which has ceased to 
do new business divide any portion of its assets, except 
surplus, until it shall have performed or canceled its policy 
obligations.  It may declare and pay, annually, semiannually or 
quarterly from its surplus, cash dividends of not more than ten 
percent of its capital stock and surplus in any year and, if the 
dividends in any one year are less than ten percent, the 
difference may be made up in any subsequent year or years from 
surplus accumulations.  It may pay such dividend as the 
directors deem prudent out of any surplus remaining after 
charging, in addition to all liabilities except unearned 
premiums, an amount equal to the whole amount of premiums on 
unexpired risks and deducting from the assets all securities and 
accounts receivable on which no part of the principal or 
interest has been paid within the preceding year, or for which 
foreclosure or suit has been commenced, or upon which judgment 
obtained has remained more than two years unsatisfied and on 
which interest has not been paid, and also deducting all liens 
due and unpaid on any of its property. Stock companies shall 
follow the dividend limitation and reporting requirements set 
forth in chapter 60D. 
    Sec. 7.  Minnesota Statutes 1992, section 60B.22, 
subdivision 1, is amended to read: 
    Subdivision 1.  [LENGTH OF CONTINUED COVERAGE.] All 
insurance policies or similar contracts of coverage issued by 
the insurer shall continue in force: 
    (a) For a period of 15 30 days from the date of entry of 
the liquidation order; 
    (b) Until the normal expiration of the policy or contract 
coverage; 
    (c) Until the insured has replaced the coverage with 
equivalent coverage in another insurer; or 
    (d) Until the liquidator has effected a transfer of the 
policy or contract obligation pursuant to section 60B.25, clause 
(8), whichever time is less.  
    Sec. 8.  Minnesota Statutes 1992, section 60C.03, 
subdivision 7, is amended to read: 
    Subd. 7.  [RESIDENT.] "Resident" means: 
    (a) An individual person who fixes habitation in this state 
without any intention of removing therefrom and who, whenever 
absent therefrom, intends to return; or 
    (b) Any other person whose principal place of business is 
located in this state at the time of the insured event; or 
    (c) A person whose principal place of business is in 
Wisconsin, Iowa, North Dakota, or South Dakota, but who 
maintains substantial business in Minnesota. 
    Sec. 9.  Minnesota Statutes 1992, section 60D.20, 
subdivision 2, is amended to read: 
    Subd. 2.  [DIVIDENDS AND OTHER DISTRIBUTIONS.] (a) Subject 
to the limitations and requirements of this subdivision, the 
board of directors of any domestic insurer within an insurance 
holding company system may authorize and cause the insurer to 
declare and pay any dividend or distribution to its shareholders 
as the directors deem prudent from the earned surplus of the 
insurer.  An insurer's earned surplus, also known as unassigned 
funds, shall be determined in accordance with the accounting 
procedures and practices governing preparation of its annual 
statement, minus 25 percent of earned surplus attributable to 
unrealized capital gains.  Dividends which are paid from sources 
other than an insurer's earned surplus or are extraordinary 
dividends or distributions may be paid only as provided in 
paragraphs (d), (e), and (f). 
    (b) The insurer shall notify the commissioner within five 
business days following declaration of a dividend declared 
pursuant to paragraph (a) and at least ten days prior to its 
payment.  The commissioner shall promptly consider the 
notification filed pursuant to this paragraph, taking into 
consideration the factors described in subdivision 4. 
    (c) The commissioner shall review at least annually the 
dividends paid by an insurer pursuant to paragraph (a) for the 
purpose of determining if the dividends are reasonable based 
upon (1) the adequacy of the level of surplus as regards 
policyholders remaining after the dividend payments, and (2) the 
quality of the insurer's earnings and extent to which the 
reported earnings include extraordinary items, such as surplus 
relief reinsurance transactions and reserve destrengthening. 
    (d) No domestic insurer shall pay any extraordinary 
dividend or make any other extraordinary distribution to its 
shareholders until:  (1) 30 days after the commissioner has 
received notice of the declaration of it and has not within the 
period disapproved the payment; or (2) the commissioner has 
approved the payment within the 30-day period. 
    (b) (e) For purposes of this section, 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 of (1) ten percent of 
the insurer's surplus as regards policyholders as of the 31st 
day of December next preceding; or (2) the net gain from 
operations of the insurer, if the insurer is a life insurer, or 
the net income, if the insurer is not a life insurer, not 
including realized capital gains, for the 12-month period ending 
the 31st day of December next preceding, but does not include 
pro rata distributions of any class of the insurer's own 
securities.  In determining whether a dividend or distribution 
is extraordinary, an insurer other than a life insurer may carry 
forward net income from the previous two calendar years that has 
not already been paid out as dividends.  This carry-forward is 
computed by taking the net income from the second and third 
preceding calendar years, not including realized capital gains, 
less dividends paid in the second and immediate preceding 
calendar years. 
    (c) (f) Notwithstanding any other provision of law, an 
insurer may declare an extraordinary dividend or distribution 
that is conditional upon the commissioner's approval, and the 
declaration shall confer no rights upon shareholders until:  (1) 
the commissioner has approved the payment of such a dividend or 
distribution; or (2) the commissioner has not disapproved the 
payment within the 30-day period referred to above. 
    Sec. 10.  Minnesota Statutes 1992, section 60D.20, 
subdivision 4, is amended to read: 
    Subd. 4.  [ADEQUACY OF SURPLUS.] For purposes of this 
chapter, in determining whether an insurer's surplus as regards 
policyholders is reasonable in relation to the insurer's 
outstanding liabilities and adequate to its financial needs, the 
following factors, among others, must be considered: 
    (1) the size of the insurer as measured by its assets, 
capital and surplus, reserves, premium writings, insurance in 
force and other appropriate criteria; 
    (2) the extent to which the insurer's business is 
diversified among the several lines of insurance; 
    (3) the number and size of risks insured in each line of 
business; 
    (4) the extent of the geographical dispersion of the 
insurer's insured risks; 
    (5) the nature and extent of the insurer's reinsurance 
program; 
    (6) the quality, diversification and liquidity of the 
insurer's investment portfolio; 
    (7) the recent past and projected future trend in the size 
of the insurer's investment portfolio; 
    (8) the surplus as regards policyholders maintained by 
other comparable insurers; 
    (9) the adequacy of the insurer's reserves; and 
    (10) the quality and liquidity of investments in affiliates.
The commissioner may treat any such investment as a disallowed 
asset for purposes of determining the adequacy of surplus as 
regards policyholders whenever in the commissioner's judgment 
the investment so warrants; and 
    (11) the quality of the insurer's earnings and the extent 
to which the reported earnings include extraordinary items, such 
as surplus relief reinsurance transactions and reserve 
destrengthening. 
    Sec. 11.  Minnesota Statutes 1992, section 60E.01, is 
amended to read: 
    60E.01 [PURPOSE.] 
    The purpose of sections 60E.01 to 60E.14 is to regulate the 
formation and operation of risk retention groups and purchasing 
groups in this state formed under the federal Liability Risk 
Retention Act of 1986, to the extent permitted by that law. 
    Sec. 12.  Minnesota Statutes 1992, section 60E.02, 
subdivision 9, is amended to read: 
    Subd. 9.  [PLAN OF OPERATION OR FEASIBILITY STUDY.] "Plan 
of operation" or "feasibility study" means an analysis that 
presents the expected activities and results of a risk retention 
group including, at a minimum: 
    (1) information sufficient to verify that its members are 
engaged in business or activities similar or related with 
respect to the liability to which the members are exposed by 
virtue of any related, similar or common business, trade, 
product, services, premises, or operations; 
    (2) for each state in which it intends to operate, the 
coverages, deductibles, coverage limits, rates, and rating 
classification systems for each line of insurance the group 
intends to offer; 
    (2) (3) historical and expected loss experience of the 
proposed members and national experience of similar exposures to 
the extent that this experience is reasonably available; 
    (3) (4) pro forma financial statements and projections; 
    (4) (5) appropriate opinions by a qualified, independent 
casualty actuary, including a determination of minimum premium 
or participation levels required to commence operations and to 
prevent a hazardous financial condition; 
    (5) (6) identification of management, underwriting and 
claims procedures, marketing methods, managerial oversight 
methods, investment policies, and reinsurance agreements; and 
    (6) (7) identification of each state in which the risk 
retention group has obtained, or sought to obtain, a charter and 
license, and a description of its status in each state; and 
    (8) other matters prescribed by the commissioner for 
liability insurance companies authorized by the insurance laws 
of the state. 
    Sec. 13.  Minnesota Statutes 1992, section 60E.02, 
subdivision 12, is amended to read: 
    Subd. 12.  [RISK RETENTION GROUP.] "Risk retention group" 
means a corporation or other limited liability 
association formed under the laws of a state, Bermuda, or the 
Cayman Islands: 
    (1) whose primary activity consists of assuming and 
spreading all, or a portion, of the liability exposure of its 
group members; 
    (2) which is organized for the primary purpose of 
conducting the activity described under clause (1); 
    (3) which: 
    (a) is chartered and licensed as a liability insurance 
company and authorized to engage in the business of insurance 
under the laws of a state; or 
    (b) before January 1, 1985, was chartered or licensed and 
authorized to engage in the business of insurance under the laws 
of Bermuda or the Cayman Islands and, before that date, had 
certified to the insurance commissioner of at least one state 
that it satisfied the capitalization requirements of the state, 
except that the group shall be considered to be a risk retention 
group only if it has been engaged in business continuously since 
that date and only for the purpose of continuing to provide 
insurance to cover product liability or completed operations 
liability, as such terms were defined in the Product Liability 
Risk Retention Act of 1981 before the date of the enactment of 
the Risk Retention Act of 1986; 
    (4) which does not exclude a person from membership in the 
group solely to provide for members of the group a competitive 
advantage over that person; 
    (5) which: 
    (a) has as its members only persons who have an ownership 
interest in the group and which has as its owners only persons 
who are members who are provided insurance by the risk retention 
group; or 
    (b) has as its sole member and sole owner an organization 
which is owned by persons who are provided insurance by the risk 
retention group has as its members only persons who comprise the 
membership of the risk retention group and which has as its 
owners only persons who comprise the membership of the risk 
retention group and who are provided insurance by that group; 
    (6) whose members are engaged in businesses or activities 
similar or related with respect to the liability of which the 
members are exposed by virtue of any related, similar, or common 
business trade, product, services, premises, or operations; 
    (7) whose activities do not include the provision of 
insurance other than: 
    (a) liability insurance for assuming and spreading all or a 
portion of the liability of its group members; and 
    (b) reinsurance with respect to the liability of any other 
risk retention group, or any members of the other group, which 
is engaged in businesses or activities so that the group or 
member meets the requirement described in clause (6) from 
membership in the risk retention group which provides the 
reinsurance; and 
    (8) the name of which includes the phrase "risk retention 
group." 
    Sec. 14.  Minnesota Statutes 1992, section 60E.03, is 
amended to read: 
    60E.03 [RISK RETENTION GROUPS CHARTERED IN THIS STATE.] 
    A risk retention group seeking to be chartered in this 
state must shall be chartered and licensed as a to write only 
liability insurance company authorized by the insurance laws of 
this state pursuant to sections 60E.01 to 60E.14 and, except as 
provided elsewhere in sections 60E.01 to 60E.14, must comply 
with all of the laws, rules, and requirements applicable to 
insurers chartered and licensed in this state and with section 
60E.04 to the extent those requirements are not a limitation on 
laws, rules, or requirements of this state.  Before it may offer 
insurance in a state, a risk retention group shall also submit 
for approval to the commissioner of commerce a plan of operation 
or a feasibility study and revisions of the plan or study if the 
group intends to offer additional lines of liability insurance. 
    Notwithstanding any other provision to the contrary, all 
risk retention groups chartered in this state shall file with 
the department and the National Association of Insurance 
Commissioners (NAIC), an annual statement in a form prescribed 
by the NAIC, and in diskette form if required by the 
commissioner, and completed in accordance with its instructions 
and the NAIC accounting practices and procedures manual. 
    Before it may offer insurance in a state, each risk 
retention group shall also submit for approval to the 
commissioner of commerce a plan of operation or feasibility 
study.  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 or feasibility study, within ten 
days of a 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 or study is approved by the 
commissioner. 
    At the time of filing its application for charter, the risk 
retention group shall provide to the commissioner in summary 
form the following information:  the identity of the initial 
members of the group, the identity of those individuals who 
organized the group or who will provide administrative services 
or otherwise influence or control the activities of the group, 
the amount and nature of initial capitalization, the coverages 
to be afforded, and the states in which the group intends to 
operate.  Upon receipt of this information, the commissioner 
shall forward the information to the National Association of 
Insurance Commissioners. 
    Providing notification to the NAIC is in addition to and 
shall not be sufficient to satisfy the requirements of section 
60E.04 or any other sections of this chapter. 
    Sec. 15.  Minnesota Statutes 1992, section 60E.04, 
subdivision 1, is amended to read: 
    Subdivision 1.  [REGULATION.] Risk retention groups 
chartered and licensed in states other than this state and 
seeking to do business as a risk retention group in this state 
must observe and abide by the laws of this state as set forth in 
subdivisions 2 to 12. 
    Sec. 16.  Minnesota Statutes 1992, section 60E.04, 
subdivision 2, is amended to read: 
    Subd. 2.  [NOTICE OF OPERATIONS AND DESIGNATION OF 
COMMISSIONER AS AGENT.] (a) Before offering insurance in this 
state, a risk retention group shall submit to the 
commissioner on a form prescribed by the NAIC: 
    (1) a statement identifying the state or states in which 
the risk retention group is chartered and licensed as a 
liability insurance company, date of chartering, its principal 
place of business, and other information including information 
on its membership, the commissioner may require to verify that 
the risk retention group is qualified under section 60E.02, 
subdivision 12; 
    (2) a copy of its plan of operations or a feasibility study 
and revisions of the plan or study submitted to its the state of 
domicile in which the risk retention group is chartered and 
licensed; provided, however, that the provision relating to the 
submission of a plan of operation or a feasibility study shall 
not apply with respect to a line or classification of liability 
insurance that was defined in the Product Liability Risk 
Retention Act of 1981 before October 27, 1986, and was offered 
before that date by a risk retention group that had been 
chartered and operating for not less than three years before 
that date; and. 
    (3) (b) The risk retention group shall submit a copy of any 
revision to its plan of operation or feasibility study required 
by section 60E.03 at the same time that the revision is 
submitted to the commissioner of its chartering state. 
    (c) The risk retention group shall submit a statement of 
registration, for which a filing fee shall be determined by the 
commissioner, that designates the commissioner as its agent for 
the purpose of receiving service of legal documents or process. 
    Sec. 17.  Minnesota Statutes 1992, section 60E.04, 
subdivision 3, is amended to read: 
    Subd. 3.  [FINANCIAL CONDITION.] A risk retention group 
doing business in this state shall submit to the commissioner: 
    (1) a copy of the group's financial statement submitted to 
its the state of domicile in which the risk retention group is 
chartered and licensed, which shall be certified by an 
independent public accountant and contain a statement of opinion 
on loss and loss adjustment expense reserves made by a member of 
the American Academy of Actuaries or a qualified loss reserve 
specialist, under criteria established by the National 
Association of Insurance Commissioners; 
    (2) a copy of each examination of the risk retention group 
as certified by the commissioner or public official conducting 
the examination; 
    (3) upon request by the commissioner, a copy of an any 
information or document pertaining to any outside audit 
performed with respect to the risk retention group; and 
    (4) the information required to verify its continuing 
qualification as a risk retention group under section 60E.02, 
subdivision 12. 
    Sec. 18.  Minnesota Statutes 1992, section 60E.04, 
subdivision 4, is amended to read: 
    Subd. 4.  [TAXATION.] (a) All premiums paid for coverages 
within this state to risk retention groups are subject to 
taxation at the same rate and subject to the same interest, 
fines, and penalties for nonpayment as that applicable to other 
insurers.  Each risk retention group is liable for the payment 
of premium taxes and taxes on premiums of direct business for 
risks resident or located within this state, and shall report to 
the commissioner the net premiums written for risks resident or 
located within this state.  The risk retention group shall be 
subject to taxation, and any applicable taxation-related fines 
and penalties, on the same basis as a foreign admitted insurer. 
    (b) To the extent agents or brokers are utilized, they 
shall report and pay the taxes for the premiums for risks which 
they have placed with or on behalf of a risk retention group not 
chartered in this state.  The agents or brokers are subject to 
the provisions of sections 60A.195 to 60A.209.  To the extent 
licensed agents or brokers are utilized pursuant to section 
60E.12, they shall report to the commissioner the premiums for 
direct business for risks resident or located within this state 
which the licensees have placed with or on behalf of a risk 
retention group not chartered in this state. 
    (c) To the extent agents or brokers are not utilized or 
fail to pay the tax, each risk retention group shall pay the tax 
for risks insured within the state.  Each risk retention group 
shall report all premiums paid to it for risks insured within 
the state and shall be subject to the same interest, fines, and 
penalties for nonpayment as that applicable to foreign admitted 
insurers.  To the extent that insurance agents or brokers are 
utilized pursuant to section 60E.12, each agent or broker shall 
keep a complete and separate record of all policies procured 
from each risk retention group, which shall be open to 
examination by the commissioner, as provided in section 
60A.031.  These records shall, for each policy and each kind of 
insurance provided, include the following: 
    (1) the limit of liability; 
    (2) the time period covered; 
    (3) the effective date; 
    (4) the name of the risk retention group which issued the 
policy; 
    (5) the gross premium charged; and 
    (6) the amount of return premiums, if any. 
    Sec. 19.  Minnesota Statutes 1992, section 60E.04, 
subdivision 7, is amended to read: 
    Subd. 7.  [EXAMINATION REGARDING FINANCIAL CONDITION.] A 
risk retention group must submit to an examination by the 
commissioner to determine its financial condition if the 
commissioner of the jurisdiction in which the group is chartered 
and licensed has not initiated an examination or does not 
initiate an examination within ten business 60 days after a 
request by the commissioner of commerce.  The examination must 
be coordinated to avoid unjustified repetition and conducted in 
an expeditious manner and in accordance with the National 
Association of Insurance Commissioner's Examiner Handbook. 
    Sec. 20.  Minnesota Statutes 1992, section 60E.04, 
subdivision 8, is amended to read: 
    Subd. 8.  [NOTICE TO PURCHASERS.] An application form for 
insurance from a risk retention group and the front and 
declaration pages of a policy issued by a risk retention group 
must contain in 10 point type on the front page and the 
declaration page, the following notice: 

                                 NOTICE 
 This policy is issued by your risk retention group.  Your 
risk retention group may not be subject to all of the 
insurance laws and rules of your state.  State insurance 
insolvency guaranty funds are not available for your risk 
retention group. 
    Sec. 21.  Minnesota Statutes 1992, section 60E.04, 
subdivision 11, is amended to read: 
    Subd. 11.  [PROHIBITED COVERAGE.] No risk retention group 
may offer The terms of an insurance policy issued by a risk 
retention group shall not provide, or be construed to provide, 
coverage prohibited by the insurance laws or rules of this state 
statute or declared unlawful by the highest court of this the 
state whose law applies to the policy. 
    Sec. 22.  Minnesota Statutes 1992, section 60E.04, is 
amended by adding a subdivision to read: 
    Subd. 13.  [PENALTIES.] A risk retention group that 
violates any provision of this chapter is subject to fines and 
penalties including revocation of its right to do business in 
this state, applicable to licensed insurers generally. 
    Sec. 23.  Minnesota Statutes 1992, section 60E.05, is 
amended to read: 
    60E.05 [COMPULSORY ASSOCIATIONS.] 
    No risk retention group shall be required or permitted to 
join or contribute financially to an insurance insolvency 
guaranty fund, or similar mechanism, in this state, nor shall 
any risk retention group, or its insureds, or claimants against 
its insureds receive a benefit from the fund for claims arising 
out of the operations of the risk retention group. 
    A risk retention group shall participate in this state's 
joint underwriting associations and mandatory liability pools as 
provided by chapters 60A to 72A and 340A.  When a purchasing 
group obtains insurance covering its members' risks from an 
insurer not authorized in this state or a risk retention group, 
no such risks, wherever resident or located, shall be covered by 
any insurance guaranty fund or similar mechanism in this state. 
    When a purchasing group obtains insurance covering its 
members' risks from an authorized insurer, only risks resident 
or located in this state shall be covered by the Minnesota 
guaranty association under chapter 60C. 
    Notwithstanding chapter 62I, the commissioner may require 
or exempt a risk retention group from participation in any 
mechanism established or authorized under the law of this state 
for the equitable apportionment among insurers of liability 
insurance losses and expenses incurred on policies written 
through this mechanism, and the risk retention group shall 
submit sufficient information to the commissioner to enable the 
commissioner to apportion on a nondiscriminatory basis the risk 
retention group's proportionate share of these losses and 
expenses. 
    Sec. 24.  Minnesota Statutes 1992, section 60E.07, is 
amended to read: 
    60E.07 [PURCHASING GROUPS; EXEMPTION FROM CERTAIN LAWS 
RELATING TO THE GROUP PURCHASE OF INSURANCE.] 
    A purchasing group meeting the criteria established under 
the Federal Liability Risk Retention Act of 1986 is exempt from 
any law of this state relating to the creation of groups for the 
purchase of insurance, prohibition of group purchasing or any 
law that would discriminate against a purchasing group or its 
members.  In addition, an insurer is exempt from any law of this 
state that prohibits providing, or offering to provide, to a 
purchasing group or its members advantages based on their loss 
and expense experience not afforded to other persons with 
respect to rates, policy forms, coverages, or other matters.  A 
purchasing group is subject to all other applicable laws of this 
state. and its insurer or insurers are subject to all applicable 
laws of this state, except that a purchasing group and its 
insurer or insurers are exempt, in regard to liability insurance 
for the purchasing group, from any law that would: 
    (1) prohibit the establishment of a purchasing group; 
    (2) make it unlawful for an insurer to provide or offer to 
provide insurance on a basis providing, to a purchasing group or 
its members, advantages based on their loss and expense 
experience not afforded to other persons with respect to rates, 
policy forms, coverages, or other matters; 
    (3) prohibit a purchasing group or its members from 
purchasing insurance on a group basis described in clause (2); 
    (4) prohibit a purchasing group from obtaining insurance on 
a group basis because the group has not been in existence for a 
minimum period of time or because any member has not belonged to 
the group for a minimum period of time; 
    (5) require that a purchasing group must have a minimum 
number of members, common ownership or affiliation, or certain 
legal form; 
    (6) require that a certain percentage of a purchasing group 
must obtain insurance on a group basis; 
    (7) otherwise discriminate against a purchasing group or 
any of its members; or 
    (8) require that any insurance policy issued to a 
purchasing group or any of its members be countersigned by an 
insurance agent or broker residing in this state. 
    Sec. 25.  Minnesota Statutes 1992, section 60E.08, is 
amended to read: 
    60E.08 [NOTICE AND REGISTRATION REQUIREMENTS OF PURCHASING 
GROUPS.] 
    Subdivision 1.  [NOTICE TO COMMISSIONER.] A purchasing 
group that intends to do business in this state shall, prior to 
doing business, furnish notice to the commissioner on forms 
prescribed by the NAIC which shall: 
    (1) identify the state in which the group is domiciled; 
    (2) identify all other states in which the group intends to 
do business; 
    (3) specify the lines and classifications of liability 
insurance which the purchasing group intends to purchase; 
    (3) (4) identify the insurance company or companies from 
which the group intends to purchase its insurance and the 
domicile of the company; 
    (4) (5) specify the method by which, and the person or 
persons, if any, through whom insurance will be offered to its 
members whose risks are resident or located in this state; 
    (6) identify the principal place of business of the group; 
and 
    (5) (7) provide other information required by the 
commissioner to verify that the purchasing group is qualified 
under section 60E.02, subdivision 11. 
    Subd. 2.  [NOTICE OF CHANGE.] A purchasing group shall, 
within ten days, notify the commissioner of any changes in any 
items set forth in subdivision 1. 
    Subd. 3.  [SERVICE OF PROCESS.] The purchasing group shall 
register with and designate the commissioner or other 
appropriate authority as its agent solely for the purpose of 
receiving service of legal documents or process for which a 
filing fee shall be determined by the commissioner.  These 
requirements do not apply to a purchasing group that only 
purchases insurance that was authorized under the federal 
Product Liability Risk Retention Act of 1981, and that in any 
state of the United States: 
    (1) was domiciled before April 2, 1986, and is domiciled on 
and after October 27, 1986, in any state of the United States; 
    (2) before October 27, 1986, purchased insurance from an 
insurance carrier licensed in any state, and since October 27, 
1986, purchased its insurance from an insurance carrier licensed 
in any state; and 
    (3) was a purchasing group under the requirements of the 
federal Product Liability Retention Act of 1981 before October 
27, 1986; and 
    (4) does not purchase insurance that was not authorized for 
purposes of an exemption under the act referred to in clause 
(3), as in effect before October 27, 1986. 
    Subd. 4.  [ADDITIONAL INFORMATION.] Each purchasing group 
that is required to give notice pursuant to subdivision 1 shall 
also furnish information required by the commissioner to: 
    (1) verify that the entity qualifies as a purchasing group; 
    (2) determine where the purchasing group is located; and 
    (3) determine appropriate tax treatment. 
    Sec. 26.  Minnesota Statutes 1992, section 60E.09, is 
amended to read: 
    60E.09 [RESTRICTIONS ON INSURANCE PURCHASED BY PURCHASING 
GROUPS.] 
    A purchasing group may not purchase insurance from a risk 
retention group that is not chartered in a state or from an 
insurer not admitted in the state in which the purchasing group 
is located, unless the purchase is effected through a licensed 
agent or broker acting pursuant to the surplus lines laws and 
regulations of the state. 
    A purchasing group which obtains liability insurance from 
an insurer not admitted in this state or a risk retention group 
shall inform each of the members of the group which have a risk 
resident or located in this state that the risk is not protected 
by an insurance insolvency guaranty fund in this state, and that 
the risk retention group or insurer may not be subject to all 
insurance laws and regulations of this state. 
    No purchasing group may purchase insurance providing for a 
deductible or self-insured retention applicable to the group as 
a whole, however, coverage may provide for a deductible or 
self-insured retention applicable to individual members. 
    Purchases of insurance by purchasing groups are subject to 
the same standards regarding aggregate limits which are 
applicable to all purchases of group insurance. 
    Sec. 27.  [60E.095] [PURCHASING GROUP TAXATION.] 
    Premium taxes and taxes on premiums paid for coverage of 
risks resident or located in this state by a purchasing group or 
any members of the purchasing groups shall be: 
    (1) imposed at the same rate and subject to the same 
interest, fines, and penalties as that applicable to premium 
taxes and taxes on premiums paid for similar coverage from a 
similar insurance source by other insureds; and 
    (2) paid first by the insurance source, and if not by the 
source by the agent or broker for the purchasing group, and if 
not by the agent or broker then by the purchasing group, and if 
not by the purchasing group then by each of its members. 
    Sec. 28.  Minnesota Statutes 1992, section 60E.10, is 
amended to read: 
    60E.10 [ADMINISTRATIVE AND PROCEDURAL AUTHORITY REGARDING 
RISK RETENTION GROUPS AND PURCHASING GROUPS.] 
    The commissioner of commerce may use any of the powers 
established under the insurance laws and rules of this state to 
enforce the laws and rules of this state so long as those powers 
are not specifically preempted by the Product Liability Risk 
Retention Act of 1981, as amended by the Risk Retention 
Amendments of 1986.  This includes, but is not limited to, the 
commissioner's administrative authority to investigate, issue 
subpoenas, conduct depositions and hearings, issue orders, and 
impose penalties, and seek injunctive relief.  With regard to an 
investigation, administrative proceedings, or litigation, the 
commissioner can rely on the procedural law and rules laws of 
the state.  The injunctive authority of the commissioner in 
regard to risk retention groups is restricted by the requirement 
that an injunction be issued by a court of competent 
jurisdiction. 
    Sec. 29.  Minnesota Statutes 1992, section 60E.12, is 
amended to read: 
    60E.12 [DUTY ON AGENTS OR BROKERS TO OBTAIN LICENSE.] 
    A person acting, or offering to act, as an agent or broker 
for a risk retention group or purchasing group, that solicits 
members, sells insurance coverage, purchases coverage for its 
members located within the state or otherwise does business in 
this state shall, before commencing this activity, obtain a 
license from the commissioner. Subdivision 1.  [RISK RETENTION 
GROUPS.] No person, firm, association, or corporation shall act 
or aid in any manner in soliciting, negotiating, or procuring 
liability insurance in this state from a risk retention group 
unless the person, firm, association, or corporation is licensed 
as an insurance agent or broker in accordance with chapter 60K. 
    Subd. 2.  [PURCHASING GROUPS.] (a) No person, firm, 
association, or corporation shall act or aid in any manner in 
soliciting, negotiating, or procuring liability insurance in 
this state for a purchasing group from an authorized insurer or 
a risk retention group chartered in a state unless the person, 
firm, association, or corporation is licensed as an insurance 
agent or broker in accordance with chapter 60K. 
    (b) No person, firm, association, or corporation shall act 
or aid in any manner in soliciting, negotiating, or procuring 
liability insurance coverage in this state for any member of a 
purchasing group under a purchasing group's policy unless the 
person, firm, association, or corporation is licensed as an 
insurance agent or broker in accordance with chapter 60K. 
    (c) No person, firm, association, or corporation shall act 
or aid in any manner in soliciting, negotiating, or procuring 
liability insurance from an insurer not authorized to do 
business in this state on behalf of a purchasing group located 
in this state unless the person, firm, association, or 
corporation is licensed as a surplus lines agent or excess line 
broker in accordance with sections 60A.195 to 60A.209. 
    Subd. 3.  [AGENT OR BROKER RESIDENCE REQUIREMENT.] For 
purposes of acting as an agent or broker for a risk retention 
group or purchasing group pursuant to subdivisions 1 and 2, the 
requirement of residence in this state does not apply. 
    Subd. 4.  [NOTICE TO INSUREDS.] Every person, firm, 
association, or corporation licensed pursuant to chapter 60A, on 
business placed with risk retention groups or written through a 
purchasing group, shall inform each prospective insured of the 
provisions of the notice required by section 60E.04, subdivision 
8, in the case of a risk retention group and section 60E.09 in 
the case of a purchasing group. 
    Sec. 30.  Minnesota Statutes 1992, section 60E.13, is 
amended to read: 
    60E.13 [BINDING EFFECT OF ORDERS ISSUED IN UNITED STATES 
DISTRICT COURT.] 
    An order issued by any district court of the United States 
enjoining a risk retention group from soliciting or selling 
insurance, or operating, in a state, or in all states or in a 
territory or possession of the United States, upon a finding 
that the group is in a hazardous financial condition or 
financially impaired condition shall be enforceable in the 
courts of the state. 
    Sec. 31.  Minnesota Statutes 1992, section 79.252, 
subdivision 1, is amended to read: 
    Subdivision 1.  [PURPOSE.] The purpose of the assigned risk 
plan is to provide workers' compensation coverage to employers 
rejected by two nonaffiliated a licensed insurance 
companies, company pursuant to subdivision 2.  Each rejection 
must be in writing and must be obtained within 60 days before 
the date of application to the assigned risk plan.  In addition, 
the rejections must also show the name of the insurance company 
and the representative contacted. 
    Sec. 32.  [TRANSITIONAL PROVISIONS.] 
    (a) In addition to complying with the requirements of 
Minnesota Statutes, section 60E.04, a risk retention group 
operating in this state before the effective date of this act 
shall, within 30 days after that date, comply with the 
provisions of Minnesota Statutes, section 60E.04, subdivision 2, 
paragraph (a). 
    (b) A purchasing group which was doing business in this 
state before the enactment of this act shall, within 30 days 
after the effective date of this act, furnish notice to the 
commissioner pursuant to Minnesota Statutes, section 60E.08, 
subdivision 1, and furnish the information required pursuant to 
Minnesota Statutes, section 60E.08, subdivisions 2 and 3. 
    Sec. 33.  [REPEALER.] 
    Minnesota Statutes 1992, sections 60A.07, subdivision 5d; 
60A.12, subdivision 10; 60A.13, subdivision 3a; 60B.24; and 
60E.11, are repealed.  Minnesota Rules, parts 2710.0100; 
2710.0200; 2710.0300; 2710.1100; 2710.1200; 2710.1300; 
2710.1400; 2710.1500; 2710.1600; 2710.1700; 2710.1800; 
2710.1900; 2710.2000; 2710.2100; 2710.3100; 2710.3200; and 
2710.3300, are repealed. 
    Presented to the governor May 17, 1993 
    Signed by the governor May 20, 1993, 2:17 p.m.